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As filed with the Securities and Exchange Commission on June 16, 2005
Registration Statement No. 333-124718

SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549

AMENDMENT NO. 1
TO
 FORM S-1
 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

GENCO SHIPPING & TRADING LIMITED
 (Exact name of registrant as specified in its charter)

Republic of the Marshall Islands 
(State or other jurisdiction of
incorporation or organization)	 	4412 
(Primary Standard Industrial
Classification Code Number)	 	N/A 
(I.R.S. Employer
Identification No.)	

Genco Shipping & Trading Limited
35 West 56 th Street
New York, New York 10019
(646) 443-8550 
(Address and telephone number
of Registrant's principal executive offices)	

 	
Seward & Kissel LLP
Attention: Gary J. Wolfe, Esq.
One Battery Park Plaza
New York, New York 10004
(212) 574-1200 
(Name, address and telephone
number of agent for service)	

 	
Copies to:	

Gary J. Wolfe, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
(212) 574-1200 (telephone number)
 (212) 480-8421 (facsimile number)	 	 	 	Ted W. Paris, Esq.
Baker Botts L.L.P.
3000 One Shell Plaza
910 Louisiana
Houston, Texas 77002
(713) 229-1234 (telephone number)
 (713) 229-1522 (facsimile number)	

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

CALCULATION OF REGISTRATION FEE

Title of Each Class of
Securities to be Registered	 	Proposed Maximum
Aggregate
Offering Price (2) (3)	 	Amount of
Registration Fee (5)	
	
Common Stock par value $0.01 (1)	 	$350,000,000	 	$41,195 (6)	
	
Preferred Stock Purchase Rights (4)	 	—	 	—	
	
(1)
In accordance with Rule 457(o) of the Securities Act, the number of shares of Common Stock being registered and the proposed maximum offering price per share are not included in this table.

(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933.

(3)
Includes Common Stock, if any, that may be offered and sold by the selling shareholder and pursuant to the underwriters' over-allotment option.

(4)
Rights initially will trade together with the Common Stock. The value attributable to the rights, if any, will be reflected in the market price of the Common Stock.

(5)
Since the preferred stock purchase rights trade together with the Common Stock, the registration fee for the Common Stock also covers the rights.

(6)
Previously paid.

         The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell securities, and we are not soliciting offers to buy these securities, in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED JUNE 16, 2005

             Shares
Common Stock
        Genco Shipping & Trading Limited is offering             shares of its common stock and Fleet Acquisition LLC, the selling shareholder, is offering             shares of our common stock. We have applied for approval for quotation of our common stock on the Nasdaq National Market under the symbol "GSTL." This is our initial public offering and no public market currently exists for our shares. We anticipate the initial public offering price will be between $            and $                   per share.

         Investing in our common stock involves risk.
         See "Risk Factors" beginning on page 12.

 	 	Per Share
	 	Total
	
Public Offering Price	 	$	 	$	
Underwriting Discounts and Commissions	 	$	 	$	
Proceeds to Genco Shipping & Trading Limited	 	$	 	$	
Proceeds to Fleet Acquisition LLC	 	$	 	$	
         Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
        We have granted the underwriters a 30-day option to purchase up to an additional             shares of common stock and the selling shareholder has granted the underwriters a 30-day option to purchase up to an additional             shares of common stock, to cover over-allotments.

Jefferies & Company, Inc.	 	Morgan Stanley	

Dahlman Rose & Company	
The date of this Prospectus is                 , 2005

 
 [ARTWORK]

          We have not authorized anyone to give any information or to make any representations other than those contained in this prospectus. Do not rely upon any information or representations made outside of this prospectus. This prospectus is not an offer to sell, and it is not soliciting an offer to buy, (1) any securities other than shares of our common stock or (2) shares of our common stock in any circumstances in which our offer or solicitation is unlawful. The information contained in this prospectus may change after the date of this prospectus. Do not assume after the date of this prospectus that the information contained in this prospectus is still correct.
TABLE OF CONTENTS

 	 	Page
	
Prospectus Summary	 	1	
Risk Factors	 	12	
Forward-Looking Statements	 	26	
Use of Proceeds	 	27	
Dividend Policy	 	28	
Capitalization	 	29	
Dilution	 	30	
Selected Consolidated Financial and Other Data	 	31	
Management's Discussion and Analysis of Financial Condition
and Results of Operations	 	33	
The International Drybulk Shipping Industry	 	49	
Business	 	64	
New Credit Facility	 	77	
Management	 	78	
Principal and Selling Shareholder	 	81	
Related-Party Transactions	 	82	
Shares Eligible for Future Sale	 	83	
Description of Capital Stock	 	85	
Certain Marshall Islands Company Considerations	 	92	
Tax Considerations	 	96	
Underwriting	 	106	
Legal Matters	 	110	
Drybulk Shipping Industry Data	 	110	
Experts	 	110	
Where You Can Find Additional Information	 	111	
Glossary of Shipping Terms	 	112	
Index to Consolidated Financial Statements	 	F-1	
i

 
 PROSPECTUS SUMMARY
         This summary highlights information contained elsewhere in this prospectus. Before investing in our common stock, you should carefully read this entire prospectus, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes, for a more complete understanding of our business and this offering.
         Except where we or the context otherwise indicate, the information presented in this prospectus assumes (1) an initial public offering price of $                per share which is the midpoint of the estimated initial public offering price range, (2) that the underwriters will not exercise their option to purchase additional shares and (3) no issuance of any of the shares of our common stock reserved for issuance under our equity incentive plan. Unless we state otherwise, or the context otherwise indicates, in this prospectus references to "we," "us," "our company" and "our" refer to Genco Shipping & Trading Limited and its subsidiaries. We refer in this prospectus to the 16 drybulk carriers that we currently own as "our fleet."
 
 Our Company
        We are a newly formed New York City-based company, incorporated in the Marshall Islands. We transport iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. Our fleet consists of 16 drybulk carriers which we acquired from a subsidiary of The China National Cereals Oil and Foodstuffs Corp., or COFCO, a Chinese conglomerate, in December 2004 and during the first six months of 2005. Fourteen of the 16 vessels in our fleet are on long-term time charters, with an average remaining life of 1.6 years as of March 31, 2005. Currently, the Genco Leader and the Genco Trader are on short-term time charters that are scheduled to expire in July 2005. All of our vessels are chartered to reputable charterers, including Lauritzen Bulkers A/S, or Lauritzen Bulkers, Cargill International S.A., or Cargill, BHP Billiton Marketing AG, or BHP, NYK Bulkship Europe, or NYK Europe, and Hyundai Merchant Marine Co. Ltd., or HMMC. All of our present charterers have been approved by the lenders under our current credit facility. Due to the length and the average remaining life of our time charters, we expect these time charters to provide us with stable revenues for the next 12 to 18 months.
        We intend to grow our fleet through timely and selective acquisitions of vessels in a manner that is accretive to our cash flow. In connection with this growth strategy, we intend to use the net proceeds of this offering to repay a significant portion of our existing indebtedness. We are also negotiating a new credit facility that we expect to use to refinance our existing indebtedness and to acquire additional vessels that will be employed either in the spot or period charter market.
 
 Our Fleet
        Our fleet consists of five Panamax, six Handymax and five Handysize drybulk carriers, with an aggregate carrying capacity of approximately 790,000 dwt. As of March 31, 2005, the average age of our fleet was eight years, as compared to the average age for the world fleet of approximately 16 years for the drybulk shipping segments in which we compete. See "The International Drybulk Shipping Industry." All of the vessels in our fleet were built in Japanese shipyards with a reputation for constructing high-quality vessels. Our fleet contains three groups of sister ships, which are vessels of virtually identical sizes and specifications.
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        The following table summarizes information about our fleet:

Vessel Name
	 	Class
	 	Dwt
	 	Year Built
	 	Charterer
	 	Time Charter
Rate (1)
	 	Charter
Expiration (2)
	
Genco Beauty  (3)	 	Panamax	 	73,941	 	1999	 	Cargill	 	$29,000	 	January 2007	
Genco Knight  (3)	 	Panamax	 	73,941	 	1999	 	BHP	 	  29,000	 	January 2007	
Genco Leader  (3)	 	Panamax	 	73,941	 	1999	 	Cargill	 	  27,500  (4)	 	July 2005	
Genco Vigour  (3)	 	Panamax	 	73,941	 	1999	 	BHP	 	  29,000	 	December 2006	
Genco Trader	 	Panamax	 	69,388	 	1990	 	STX Pan Ocean	 	  17,350	 	July 2005	

Genco Success  (5)	
 	
Handymax	
 	
47,186	
 	
1997	
 	
KLC	
 	
  23,850	
 	
January 2007	
Genco Carrier  (5)	 	Handymax	 	47,180	 	1998	 	DBCN, Panama	 	  24,000	 	December 2006	
Genco Prosperity  (5)	 	Handymax	 	47,180	 	1997	 	DS Norden	 	  23,000	 	February 2007	
Genco Wisdom  (5)	 	Handymax	 	47,180	 	1997	 	HMMC	 	  24,000	 	December 2006	
Genco Marine	 	Handymax	 	45,222	 	1996	 	NYK Europe	 	  26,000  (6)	 	January 2007	
Genco Glory	 	Handymax	 	41,062	 	1984	 	E D F Man Shipping	 	  18,250	 	December 2006	

Genco Explorer  (7)	
 	
Handysize	
 	
29,952	
 	
1999	
 	
Lauritzen Bulkers	
 	
  17,250	
 	
August 2006	
Genco Pioneer  (7)	 	Handysize	 	29,952	 	1999	 	Lauritzen Bulkers	 	  17,250	 	August 2006	
Genco Progress  (7)	 	Handysize	 	29,952	 	1999	 	Lauritzen Bulkers	 	  17,250  (8)	 	August 2006	
Genco Reliance  (7)	 	Handysize	 	29,952	 	1999	 	Lauritzen Bulkers	 	  17,250	 	August 2006	
Genco Sugar  (7)	 	Handysize	 	29,952	 	1998	 	Lauritzen Bulkers	 	  17,250	 	August 2006	

(1)
Time charter rates presented are the gross daily charterhire rates before the payments of brokerage commissions ranging from 1.25% to 5% to unaffiliated third parties. In a time charter, the charterer is responsible for voyage expenses such as bunkers, port expenses, agents' fees and canal dues.

(2)
The dates presented on this table represent the earliest dates that our charters may be terminated. Except with respect to the Genco Trader and Genco Leader charters, under the terms of the contracts, charterers are entitled to extend time charters from two to four months in order to complete the vessel's final voyage plus any time the vessel has been off-hire.

(3)
Each vessel is a sister ship of the other indicated vessels.

(4)
Rate is $27,500 if discharge is between Singapore and Japan or $27,000 if discharge is elsewhere in Southeast Asia, that is, Indonesia, Malaysia, the Philippines or Thailand.

(5)
Each vessel is a sister ship of the other indicated vessels.

(6)
The time charter rate is $26,000 until March 2006 and $18,000 thereafter.

(7)
Each vessel is a sister ship of the other indicated vessels.

(8)
The time charter rate was $21,560 through March 2005 and $17,250 thereafter.
 
 Fleet Management
        Our management team and other employees are responsible for the commercial and strategic management of our fleet. Commercial management involves negotiating charters for vessels, managing the mix of various types of charters, such as time charters and voyage charters, and monitoring the performance of our vessels under their charters. Strategic management involves locating, purchasing, financing and selling vessels. Our management team is led by our President, Robert Gerald Buchanan, who has 40 years of experience in the shipping industry and most recently served as the managing director of Wallem.
        We intend to use the services of reputable independent technical managers for the technical management of our fleet. We currently contract with Wallem Shipmanagement Limited of Hong Kong, or Wallem, an independent technical manager, for our technical management. Technical management involves the day-to-day management of vessels, including performing routine maintenance, attending to vessel
2

operations and arranging for crews and supplies. Members of our New York City-based management team oversee the activities of our independent technical manager. The head of our technical management team has over 30 years of experience in the shipping industry.
 
 Industry Trends
        The drybulk shipping industry is an essential link in international trade because it is the only practical and cost effective means of transporting large volumes of many essential commodities between the continents and across the seas. It is a global industry whose demand is closely tied to the level of economic activity in the world. According to Drewry Shipping Consultants Limited, or Drewry, since the fourth quarter of 2002, the shipping industry has experienced the highest charter rates and vessel values in its modern history. These high charter rates and vessel values are due to the favorable imbalance between the supply of and demand for ships. For drybulk shipping, this imbalance is currently a function of:
        Supply:
•
Shipyards where new ships are constructed are at capacity until 2008, limiting the number of new vessels that will enter the market in coming years; and

•
Port congestion worldwide as a result of increased shipping activity, lack of adequate rail, road and other intermodal transportation infrastructure and the implementation of stringent security measures at certain ports have effectively reduced the supply of vessels that is available for hire at any particular time.
        Demand:
•
Increasing global production and consumption and international trade have driven the strong demand for ships; and

•
China and India have helped drive demand for drybulk carriers as they continue to:

•
expand iron ore and coking coal imports to increase steel production;

•
become net importers of coal; and

•
increase their grain inventories.
        However, vessel charter rates and values have historically been extremely volatile and are affected by numerous variables including demand for commodities that are transported by sea, many of which are outside of our control. We cannot predict or offer assurances as to charter rates or vessel values in any period or that the industry trends described above will continue.
 
 Our Competitive Strengths
        We believe that we possess a number of strengths that provide us with a competitive advantage in the drybulk shipping industry, including the following:
•
We own a modern, high-quality fleet of drybulk carriers .    We have a modern fleet consisting of vessels with an average age of eight years as of March 31, 2005 as compared to the average age of approximately 16 years for the world fleet. All of our vessels were built in Japanese shipyards with a reputation for constructing high-quality vessels. We believe that owning a modern, high-quality fleet reduces operating costs and fuel consumption, allows us to secure favorable financing terms and makes our fleet more reliable, which improves utilization. All of these factors provide us with a competitive advantage in securing favorable time charters.

•
Our fleet includes three groups of sister ships .    We believe that maintaining a fleet that includes sister ships increases our revenue generating potential by improving our operational and scheduling flexibility and reduces costs by creating economies of scale in the maintenance, supply and crewing of our vessels.
3

•
Our Chairman and board of directors have substantial experience in the shipping industry .    Peter C. Georgiopoulos, the Chairman of our board of directors, is the founder of General Maritime Corp. (NYSE: GMR), a large, publicly-traded supplier of international seaborne crude oil transportation services. Mr. Georgiopoulos oversaw the growth of General Maritime from a single-vessel privately owned company to a publicly traded owner and operator of 47 tankers. Including Mr. Georgiopoulos, three of the five members of our board have extensive maritime experience, including managing publicly traded shipping companies.

•
We have an experienced U.S.-based management team .    Our management team will be based in New York City and includes several executives with extensive experience in the shipping industry who have demonstrated substantial ability in managing the commercial, technical and financial aspects of our business. Our management team is led by our President, Robert Gerald Buchanan, who has 40 years of experience in the shipping industry and most recently served as the managing director of Wallem. Mr. Buchanan has a broad range of experience, most recently as a senior executive involved in
ship management operations and engineering. Our Chief Financial Officer, John C. Wobensmith, has over 11 years of experience in the shipping industry, with a concentration in shipping finance.
•
We benefit from strong relationships with members of the shipping and financial industries .    We have developed strong relationships with major international charterers, shipbuilders and financial institutions that we believe are the direct result of the quality and experience of our management team. In addition, we have developed a strong relationship with our technical manager, Wallem, an international vessel management company with over 35 years of experience. Wallem currently manages 211 vessels with a carrying capacity totaling in excess of 16 million dwt while meeting strict quality control standards. We believe that these relationships will lead to greater charter opportunities for our vessels.

•
We have a strong balance sheet and will have limited indebtedness outstanding immediately after the completion of the offering .    We expect to repay a significant portion of our outstanding indebtedness with the net proceeds of this offering. We expect this reduction in outstanding indebtedness, along with our proposed new credit facility, will increase our borrowing ability, which together with the free cash flow from our operations, will allow us to fund future vessel acquisitions and, consistent with our strategy, will enhance our ability to make dividend payments.

•
We will maintain commercial management of our fleet in - house .    We intend to retain the commercial management of our fleet in-house, thereby benefiting from the substantial experience of our management team in the shipping industry while avoiding brokerage commissions to related parties. It also serves to prevent conflicts of interest because, unlike transactions involving brokers, our employees do not have a personal financial interest in the charter contracts.
 
 Our Business Strategy
        Our strategy is to manage and expand our fleet in a manner that enables us to pay dividends to our shareholders. To accomplish this objective, we intend to:
•
Strategically expand the size of our fleet .    We intend to acquire additional modern, high-quality drybulk carriers through timely and selective acquisitions of vessels in a manner that is accretive to our cash flow. We expect to fund acquisitions of additional vessels using cash reserves set aside for this purpose and amounts borrowed under our new credit facility.

•
Continue to operate a high-quality fleet .    We intend to maintain a modern, high-quality fleet that meets or exceeds stringent industry standards and complies with charterer requirements through our technical manager's rigorous and comprehensive maintenance program. In addition, our
4

technical managers maintain the quality of our vessels by carrying out regular inspections, both while in port and at sea.
•
Pursue an appropriate balance of time and spot charters .    All of our vessels, with the exception of the Genco Leader and the Genco Trader, are under long-term charters with an average remaining life of 1.6 years as of March 31, 2005. These charters provide us with relatively stable revenues and a high fleet utilization. We may in the future pursue other market opportunities for our vessels to capitalize on favorable market conditions, including arranging longer charter periods and entering into short-term time and voyage charters.

•
Maintain low-cost, highly efficient operations .    We intend to outsource technical management of our fleet to third-party technical managers at a lower cost than we could achieve by performing the function in-house. Our management team will actively monitor and control vessel operating expenses incurred by these independent technical managers by overseeing their activities. Finally, we will maintain low-cost, highly efficient operations by capitalizing on the cost savings and economies of scale that result from operating sister ships.

•
Capitalize on our management team's reputation .    We intend to capitalize on our management team's reputation for high standards of performance, reliability and safety, and maintain strong relationships with major international charterers, many of whom consider the reputation of a vessel owner and operator when entering into time charters. We believe that our management team's track record improves our relationships with high quality shipyards and financial institutions, many of which consider reputation to be an indicator of creditworthiness.
 
 Dividend Policy
        Our policy is to declare quarterly distributions to shareholders by each February, May, August and November substantially equal to our available cash from operations during the previous quarter after cash expenses and reserves for scheduled drydockings, intermediate and special surveys, funding of future acquisitions and other purposes as our board of directors may determine are required, after taking into account contingent liabilities, the terms of our indebtedness, our growth strategy, other cash needs and the requirements of Marshall Islands law. We expect to declare our first quarterly distribution of $            in            2005 (based on the first three calendar months of our operations after the offering). Please see the section of this prospectus entitled "Dividend Policy" for additional information regarding dividend payments generally.
        We believe that under current law, our dividend payments from earnings and profits will constitute "qualified dividend income" and, as such, will generally be subject to a 15% U.S. federal income tax rate with respect to non-corporate individual U.S. shareholders (through 2008). Distributions in excess of our earnings and profits will be treated first as a non-taxable return of capital to the extent of a U.S. shareholder's tax basis in its common stock on a dollar-for-dollar basis and, thereafter, as capital gain. For more information about the tax consequences of payment of dividends, please read "Tax Considerations."
 
 Principal Executive Offices
        Genco Shipping & Trading Limited is a holding company incorporated under the laws of the Marshall Islands. We maintain our principal executive offices at 35 West 56 th Street, New York, New York 10019. Our telephone number at that address is (646) 443-8550.
5

 
 
 The Offering

Common stock offered by Genco Shipping & Trading Limited	
 	
                 shares	

Common stock offered by the selling shareholder	
 	
                 shares	

Common stock to be outstanding immediately after this offering (1)	
 	
                 shares	

Underwriters' over-allotment option	
 	
                 shares	

Use of proceeds	
 	
We estimate that we will receive net proceeds of approximately $                     million from the issuance of shares of common stock in this offering, after deducting underwriting discounts and commissions and estimated expenses payable by us. We expect to use the net proceeds of this offering to repay $         million of our outstanding indebtedness. We intend to apply any amounts not used for this purpose for working capital and general corporate purposes. See "Use of Proceeds."	

 	
We will not receive any of the proceeds from the sale of shares of our common stock by the selling shareholder.	

Nasdaq National Market listing	
 	
We have applied for approval for quotation of our common stock on the Nasdaq National Market under the symbol "GSTL."	

(1)
Does not include shares reserved for issuance under our intended equity incentive plan.
 
 Risk Factors
        Investing in our common stock involves substantial risks. These risks include, among others:
•
We cannot assure you that we will pay dividends which could reduce the return on your investment in us . Our ability to pay dividends will depend on, among other things, our earnings and cash flow, cash reserves, our ability to obtain financing on terms acceptable to us, our ability to satisfy the covenants contained in our financing arrangements and our compliance with relevant provisions of Marshall Islands law.

•
We will depend to a significant degree upon third-party managers to provide the technical management of our fleet. Any failure of these technical managers to perform their obligations could adversely affect our business. We intend to use the services of reputable independent technical managers for the technical management of our fleet. The failure of these technical managers to perform their obligations could materially and adversely affect our business, results of operations, cash flows, financial condition and ability to pay dividends. Although we may have rights against a third-party manager if it defaults on its obligations to us, our shareholders will share that recourse only indirectly to the extent that we recover funds.
6

•
The international drybulk shipping industry is cyclical and volatile, which may lead to reductions and volatility in our charter rates, vessel values and results of operations . If we enter into new charters when charter hire rates are low, our earnings, the value of our vessels and our ability to pay dividends may be adversely affected.

•
The shipping industry has inherent operational risks which may adversely affect our business. The shipping industry has inherent operational risks, including loss of vessels, environmental accidents, piracy and terrorist attacks. Although we insure our vessels against those types of risks commonly insured against by vessel owners and operators, we cannot assure you that we are adequately insured against all risks.
        This is not a comprehensive list of risks to which we are subject, and you should carefully consider all of the information in this prospectus before investing in our common stock. In particular, we urge you to consider carefully the additional factors set forth in the section of this prospectus entitled "Risk Factors" beginning on page 12.
7

 
 
 Summary Consolidated Financial and Other Data
         The following table sets forth our summary consolidated financial and other data. The selected consolidated financial data in the table as of and for the three months ended March 31, 2005 and as of and for the period from September 27, 2004 (date of inception) through December 31, 2004 are derived from our consolidated financial statements included in this prospectus. We refer you to the footnotes in our consolidated financial statements for a discussion of the basis on which our consolidated financial statements are presented. The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the related notes included in this prospectus. We were incorporated on September 27, 2004, and our operations began on December 6, 2004, with the delivery of our first vessel. Accordingly, our results of operations for the period ended December 31, 2004 do not reflect the results for a full twelve months of operation. In accordance with standard shipping industry practice, we did not obtain from the seller historical operating data for the vessels that we acquired, as that data was not material to our decision to purchase the vessels. Accordingly, we have not included any historical financial data relating to the results of operations of our vessels from the period before our acquisition of them. Please see the section of this prospectus entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Lack of Historical Operating Data for Vessels Before their Acquisition."

 	 	As of and for the
three months ended
March 31, 2005
	 	As of and for the period
September 27, 2004
through
December 31, 2004
	 	
 	 	(U.S. dollars in thousands,
except for per share amounts)
	 	
Income Statement Data:	 	 	 	 	 	 	 	
Revenues	 	$	21,399	 	$	1,887	 	

Operating Expenses:	

 	

 	
 	
 	Voyage expenses	 	 	890	 	 	44	 	
 	Vessel operating expenses	 	 	2,016	 	 	141	 	
 	General and administrative expenses	 	 	591	 	 	140	 	
 	Depreciation	 	 	3,981	 	 	421	 	
 	 		 		 	
 	 	Total operating expenses	 	 	7,478	 	 	746	 	
 	 		 		 	
Operating income	 	 	13,921	 	 	1,141	 	

Net interest expense	

(2,537	
)	
 	
(234	
)	
 	 		 		 	
 	 	Net income	 	$	11,384	 	$	907	 	
 	 		 		 	
 	 	Earnings per share—Basic (1)	 	$	22,768	 	$	1,814	 	
 	 		 		 	
 	 	Earnings per share—Pro forma (2)	 	 	 	 	 	 	 	
 	 		 		 	
Balance Sheet Data:	 	 	 	 	 	 	 	
Cash	 	$	17,330	 	$	7,431	 	
Restricted cash	 	 	7,108	 	 	—	 	
Total assets	 	 	408,121	 	 	201,628	 	
Total debt (current and long-term)	 	 	318,673	 	 	125,766	 	
Total shareholder's equity	 	 	84,758	 	 	73,374	 	

Cash Flow Data:	

 	

 	
 	
Net cash flow provided by operating activities	 	$	17,675	 	$	2,718	 	
Net cash flow used in investing activities	 	 	(193,270	)	 	(189,414	)	
Net cash provided by financing activities	 	 	185,494	 	 	194,127	 	

EBITDA (3)	
 	
$	
17,902	
 	
$	
1,562	
 	
8

 
 	 	For the
three months ended
March 31, 2005
	 	For the period
September 27, 2004
through
December 31, 2004
	
 	 	(U.S. dollars, except for fleet data)
	
Fleet Data:	 	 	 	 	 	 	
Average number of vessels (4)	 	 	11.0	 	 	2.7	
Number of vessels at end of period	 	 	14.0	 	 	6.0	

Average age of fleet (in years)	

 	

 	
 	Panamax	 	 	5.7	 	 	5.2	
 	Handymax	 	 	10.5	 	 	13.8	
 	Handysize	 	 	6.0	 	 	5.8	
 	 	
Fleet average	

7.6	

8.3	

Ownership days (5)	

 	

 	
 	Panamax	 	 	230.7	 	 	15.5	
 	Handymax	 	 	320.7	 	 	26.7	
 	Handysize	 	 	435.9	 	 	41.8	
 	 		 		
 	 	Total	 	 	987.3	 	 	84.0	
 	 		 		
Available days (6)	 	 	 	 	 	 	
 	Panamax	 	 	227.6	 	 	15.5	
 	Handymax	 	 	318.5	 	 	26.7	
 	Handysize	 	 	435.0	 	 	41.8	
 	 		 		
 	 	Total	 	 	981.1	 	 	84.0	
 	 		 		
Operating days (7)	 	 	 	 	 	 	
 	Panamax	 	 	221.5	 	 	15.5	
 	Handymax	 	 	317.2	 	 	26.7	
 	Handysize	 	 	435.0	 	 	41.8	
 	 		 		
 	 	Total	 	 	973.7	 	 	84.0	
 	 		 		
Fleet utilization (8)	 	 	 	 	 	 	
 	Panamax	 	 	97.3%	 	 	100.0%	
 	Handymax	 	 	99.6%	 	 	100.0%	
 	Handysize	 	 	100.0%	 	 	100.0%	
 	 	
Fleet average	

99.2%	

100.0%	

Average Daily Results:	

 	

 	
Time Charter Equivalent (9)	 	 	 	 	 	 	
 	Panamax	 	$	28,234	 	$	41,367	
 	Handymax	 	 	20,877	 	 	18,166	
 	Handysize	 	 	17,091	 	 	17,191	
 	 	
Fleet average	

20,904	

21,960	

Daily vessel operating expenses (10)	

 	

 	
 	Panamax	 	$	2,503	 	$	2,101	
 	Handymax	 	 	1,917	 	 	1,577	
 	Handysize	 	 	1,893	 	 	1,597	
 	 	
Fleet average	

2,042	

1,683	

(1)
Based on the weighted average of 500 shares outstanding for the period.
9

(2)
Pro forma earnings per share gives effect to our issuance of            common stock at an assumed offering price of $            per share (representing the mid-point of the price range set forth on the cover of this prospectus), reflecting the portion of the shares of common stock sold, the proceeds of which are being used for debt repayment. Interest expense of $2,620 and $242 for the three months ended March 31, 2005 and the period ended December 31, 2004, respectively, has been removed from this calculation.

(3)
EBITDA represents net income plus net interest expense, income tax expense, depreciation and amortization. EBITDA is included because it is used by management and certain investors as a measure of operating performance. EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers. Our management uses EBITDA as a performance measure in consolidating monthly internal financial statements and it is presented for review at our board meetings. EBITDA is also used by our lenders in certain loan covenants. For these reasons, we believe that EBITDA is a useful measure to present to our investors. EBITDA is not an item recognized by the generally accepted accounting principals in the United States of America, or U.S. GAAP, and should not be considered as an alternative to net income, operating income or any other indicator of a company's operating performance required by U.S. GAAP. EBITDA is not a source of liquidity or cash flows as shown in our consolidated statement of cash flows. The definition of EBITDA used here may not be comparable to that used by other companies.

 	 	For the
three months ended
March 31, 2005
	 	For the period
September 27, 2004
through
December 31, 2004
	
 	 	(U.S. dollars in thousands)

 	

 	

 	

Net income	
 	
$	
11,384	
 	
$	
907	
Net interest expense	 	 	2,537	 	 	234	
Income tax expense	 	 	—	 	 	—	
Depreciation	 	 	3,981	 	 	421	
 	 		 		
 	EBITDA	 	$	17,902	 	$	1,562	
 	 		 		
(4)
Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in the period.

(5)
Ownership days are the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.

(6)
Available days are the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues.

(7)
Operating days are the number of available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.

(8)
We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to
10

measure a company's efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
(9)
Time Charter Equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per-voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing revenues (net of voyage expenses) by available days.

(10)
Daily vessel operating expenses, which include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance (excluding drydocking), the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, are calculated by dividing vessel operating expenses by ownership days for the relevant period.
11

 
 RISK FACTORS
         Any investment in our common stock involves a high degree of risk. You should consider carefully the following information about risks, together with the other information contained in this prospectus, before making an investment in our common stock. Any of these risk factors could significantly and negatively affect our business, financial condition or operating results and the trading price of our stock. If any of the circumstances or events described below actually arises or occurs, our business, results of operations, cash flows, financial condition and ability to pay dividends could be materially adversely affected. As a result of any of these risks, you may lose all or part of your investment.
Industry Specific Risk Factors
         The international drybulk shipping industry is cyclical and volatile, which may lead to reductions and volatility in our charter rates, vessel values and results of operations.
        The international drybulk shipping industry is cyclical and volatile. Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried by marine vessels internationally. The factors affecting supply and demand for vessels and supply and demand for products or materials transported by drybulk carriers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.
        The factors that influence demand for drybulk carriers include:
•
supply of and demand for drybulk products;

•
the distance drybulk products are to be moved by sea;

•
the globalization of manufacturing;

•
global and regional economic and political conditions;

•
changes in global production of drybulk cargoes;

•
developments in international trade;

•
changes in seaborne and other transportation patterns;

•
environmental and other regulatory developments; and

•
currency exchange rates.
        The factors that influence the supply of drybulk carriers include:
•
the number of newbuilding deliveries;

•
the scrapping rate of older vessels;

•
the costs of building new vessels and drydocking vessels for repair;

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

•
the number of vessels that are out of service; and

•
port or canal congestion.
        Our ability to recharter our drybulk carriers upon the expiration or termination of their current time charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, the then current state of the drybulk carrier market. If the drybulk carrier market is in a period of depression when our vessels' charters expire or we are trying to charter newly acquired vessels, we may be forced to charter them at reduced rates or even possibly a rate whereby we incur a loss, which may reduce our earnings or make our earnings volatile.
12

        In addition, because the market value of our vessels may fluctuate significantly, we may incur losses when we sell vessels, which may adversely affect our earnings. If we sell vessels at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the vessel's carrying amount on our financial statements, resulting in a loss and a reduction in earnings.
         Charter rates for drybulk carriers have recently been at historically high levels and future growth will depend on continued growth in the world economy.
        During the past year, charter rates for drybulk carriers have been at historically high levels. We anticipate that future demand for our drybulk carriers and drybulk charter rates will be dependent upon continued economic growth in the Asia Pacific region and the rest of the world, seasonal and regional changes in demand and changes to the capacity of the world fleet. The capacity of the world fleet seems likely to increase and there can be no assurance that economic growth will continue. Adverse economic, political, social or other developments could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
         An economic slowdown in the Asia Pacific region could have a material adverse effect on our business, financial position and results of operations.
        A significant number of the port calls made by our vessels involve the loading or discharging of raw materials and semi-finished products in ports in the Asia Pacific region. As a result, a negative change in economic conditions in any Asia Pacific country, and particularly in China or Japan, may have an adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. In particular, in recent years, China has been one of the world's fastest growing economies in terms of gross domestic product. We cannot assure you that such growth will be sustained or that the Chinese economy will not experience negative growth in the future. Moreover, any slowdown in the economies of the United States, the European Union or certain Asian countries may adversely affect economic growth in China and elsewhere. Our business, results of operations, cash flows, financial condition and ability to pay dividends will likely be materially and adversely affected by an economic downturn in any of these countries.
         We are subject to regulation and liability under environmental and operational safety laws that could require significant expenditures and affect our cash flows and net income.
        Our business and the operation of our vessels are materially affected by government regulation in the form of international conventions and treaties, national, state and local environmental and operational safety laws and regulations in force in the jurisdictions in which our vessels operate, including those described below, as well as in the country or countries of their registration. Because such conventions, treaties, laws and regulations are often revised, we cannot predict the ultimate cost of compliance or the impact thereof on the resale price or useful life of our vessels. Additional conventions, treaties, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates and other authorizations with respect to our operations, and some of the conditions imposed by such governments and agencies to obtain or renew such authorizations may include requirements outside of our control.
        The operation of our vessels is affected by the requirements set forth in the International Maritime Organization's, or IMO's, International Management Code for the Safe Operation of Ships and Pollution Prevention, or the ISM Code. The ISM Code requires ship owners and bareboat charterers to develop and maintain 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 safe operation and describing procedures for dealing with emergencies. Any failure on our part to comply with the ISM Code may subject us to increased liability, may decrease available
13

insurance coverage for the affected vessels, and may result in a denial of access to, or detention in, certain ports.
        Although the United States is not a party, 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 of 1969, as amended (the "CLC"), and the Convention for the Establishment of an International Fund for Oil Pollution of 1971, as amended. 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. Many of the countries that have ratified the CLC have increased the liability limits through a 1992 Protocol to the CLC. The right to limit liability is also forfeited under the CLC where the spill is caused by the owner's actual fault or privity and, under the 1992 Protocol, where the spill is caused by the owner's intentional or reckless conduct. Vessels trading to contracting states must provide evidence of insurance coverage. 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.
        The United States Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in U.S. waters. OPA allows for potentially unlimited liability without regard to fault of vessel owners, operators and bareboat charterers for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel), in U.S. waters. OPA also expressly permits individual states to impose their own liability regimes with regard to hazardous materials and oil pollution materials occurring within their boundaries.
        While we do not carry oil as cargo, we do carry bunkers in our drybulk carriers. We currently maintain, for each of our vessels, pollution liability coverage insurance of $1 billion per incident. Damages from a catastrophic spill exceeding our insurance coverage could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
         Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
        International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination. Inspection procedures can result in the seizure of the contents of our vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against us.
        It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Furthermore, changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
         The shipping industry has inherent operational risks which may adversely affect our business.
        Our vessels and their cargoes are at risk of being damaged or lost, and our business may be interrupted, because of events such as marine disasters, bad weather, mechanical failures, human error, war, terrorism, piracy and other circumstances or events. All these hazards can result in death or injury to persons, increased costs, loss of revenues, loss or damage to property (including cargo), environmental damage, higher insurance rates, damage to our customer relationships, harm to our reputation as a safe and reliable operator and delay or rerouting.
        If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. We may have to pay drydocking costs that our insurance does not cover in full. The loss of earnings while these vessels are being repaired and
14

repositioned, as well as the actual cost of these repairs, would decrease our earnings. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or we may be forced to travel to a drydocking facility that is distant from the relevant vessel's position. The loss of earnings while vessels are forced to wait for space or to travel to more distant drydocking facilities would decrease our earnings. If one of our vessels were involved in an accident with the potential risk of environmental contamination, the resulting media coverage could damage our reputation as a safe and reliable vessel operator and could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
         Terrorist attacks and international hostilities could adversely affect our results of operations and financial condition.
        Terrorist attacks, the threat of attacks and the response of the United States and other countries to these attacks could adversely affect (1) global trading conditions and, consequently, the demand for drybulk carrier transportation and (2) borrowing conditions in the global financial markets and, consequently, our ability to obtain additional financing on terms acceptable to us or at all. Terrorists have specifically targeted vessels in the past, and there can be no assurance they will not do so in the future. The recent conflict in Iraq may lead to additional acts of terrorism, regional conflict and other armed conflict around the world, which could result in increased volatility of the financial markets and have a negative effect on the U.S. and global economy. Any future terrorist attack could have a direct or indirect adverse impact on our business, results of operations, cash flows, financial condition and ability to pay dividends.
         Compliance with safety and other vessel requirements imposed by classification societies may be very costly and could reduce our net cash flows and net income.
        The hull and machinery of every commercial vessel must be certified as being "in class" by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention. Our vessels are currently enrolled with the American Bureau of Shipping, or ABS, which is a member of the International Association of Classification Societies.
        A vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel's machinery may be placed on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Our 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, intermediate or special survey, the vessel will be unable to trade between ports and will be unemployable and we could be in violation of certain covenants in our credit facility, which would negatively impact our business, results of operations, cash flows, financial condition and ability to pay dividends.
         Labor interruptions could disrupt our business.
        Our vessels are manned by masters, officers and crews that are employed by third parties. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out normally and could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
         The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
        We expect that our vessels will call in ports in South America and other areas where smugglers attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew
15

members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims which could have an adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
         Maritime claimants could arrest our vessels, which could interrupt our cash flow.
        Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against 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 our vessels could interrupt our cash flow and require us to pay large sums of money 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 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 our fleet for claims relating to another of our vessels.
         Governments could requisition our vessels during a period of war or emergency, resulting in loss of earnings.
        A government of a vessel's registry could requisition for title or seize our vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. A government could also requisition our vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of our vessels may negatively impact our business, results of operations, cash flows, financial condition and ability to pay dividends.
         Rising fuel prices may adversely affect our profits.
        While we currently have no charters under which we are bearing the cost of fuel (bunkers), fuel is a significant, if not the largest, expense for many of our shipping operations when our vessels are under voyage charter. However, upon redelivery of vessels at the end of a time charter, we are obligated to repurchase the fuel on board at prevailing market prices, which could be materially higher than fuel prices at the inception of the time charter period. As a result, an increase in the price of fuel may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.
Company Specific Risk Factors
         Our earnings may be adversely affected if we do not successfully employ our vessels.
        All of the vessels in our fleet, with the exception of the Genco Leader and the Genco Trader, whose charters are scheduled to expire in July 2005, are presently engaged under long-term time charters that expire between August 2006 and June 2007. Although time charters provide relatively steady streams of revenues, our vessels committed to time charters may not be available for spot voyages during periods of increasing charterhire rates, when spot voyages might be more profitable. While current charterhire rates for drybulk carriers are high (relative to historical periods), the market is volatile, and in the past charterhire rates for drybulk carriers have declined below operating costs of vessels. If our vessels become available for employment in the spot market or under new time charters during periods when market prices have fallen, we may have to employ our vessels at depressed market
16

prices, which would lead to reduced or volatile earnings. We cannot assure you that future charterhire rates will enable us to operate our vessels profitably.
         We depend upon a small number of charterers for a large part of our revenues. The loss of one or more of these charterers could adversely affect our financial performance.
        We have derived a significant part of our revenues from a small number of charterers. As of March 31, 2005, all of our revenues were derived from ten charterers. If we were to lose any of these charters, or if any of these charterers significantly reduced its use of our services or was unable to make charter payments to us, our results of operations, cash flows and financial condition could be adversely affected.
         Our practice of purchasing and operating previously owned vessels may result in increased operating costs and vessels off-hire, which could adversely affect our earnings.
        All of our drybulk carriers were previously owned by a third party. Our current business strategy includes additional growth through the acquisition of previously owned vessels. While we normally inspect previously owned vessels before purchase, this does not provide us with the same knowledge about their condition that we would have had if these vessels had been built for and operated exclusively by us. Accordingly, we may not discover defects or other problems with such vessels before purchase. Any such hidden defects or problems, when detected, may be expensive to repair, and if not detected, may result in accidents or other incidents for which we may become liable to third parties. Also, when purchasing previously owned vessels, we do not receive the benefit of any builder warranties if the vessels we buy are older than one year.
        In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel-efficient than more recently constructed vessels due to improvements in engine technology.
        Governmental regulations, safety and other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to some of our vessels and may restrict the type of activities in which these vessels may engage. We cannot assure you that, as our vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.
         We will depend to a significant degree upon third-party managers to provide the technical management of our fleet. Any failure of these technical managers to perform their obligations could adversely affect our business.
        We intend to subcontract the technical management of our fleet, including crewing, maintenance and repair services, to third-party technical management companies. The failure of these technical managers to perform their obligations could materially and adversely affect our business, results of operations, cash flows, financial condition and ability to pay dividends. Although we may have rights against a third-party manager if it defaults on its obligations to us, our shareholders will share that recourse only indirectly to the extent that we recover funds.
         We cannot assure you that we will pay dividends, which could reduce the return on your investment in us and the market value of our common stock.
        We will make dividend payments to our shareholders only if our board of directors, acting in its sole discretion, determines that such payments would be in our best interest and in compliance with relevant legal and contractual requirements. The principal business factors that our board of directors expects to consider when determining the timing and amount of dividend payments will be our earnings, financial condition and cash requirements at the time. Currently, the principal contractual and legal restrictions on our ability to make dividend payments are those contained in our loan agreements and those created by Marshall Islands law. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon
17

the payment of such dividends. We expect that our new credit facility will not prohibit us from paying dividends so long as an event of default has not occurred and we are not, and after giving effect to the payment of the dividend would not be, in breach of a covenant.
        We may incur other expenses or liabilities that would reduce or eliminate the cash available for distribution as dividends. We may also enter into new agreements or the Marshall Islands or another jurisdiction may adopt laws or regulations that place additional restrictions on our ability to pay dividends. Consequently, we cannot assure you that dividends will be paid with the frequency indicated in this prospectus or at all. If for any reason we are unable or elect not to pay dividends, the return on your investment in us may be reduced below what it would have been had such dividends been paid.
         We may not be able to grow or effectively manage our growth, which could cause us to incur additional indebtedness and other liabilities and adversely affect our business.
        A principal focus of our business strategy is to grow by expanding our business. Our future growth will depend on a number of factors, some of which we can control and some of which we cannot. These factors include our ability to:
•
identify vessels for acquisition;

•
consummate acquisitions or establish joint ventures;

•
integrate acquired vessels successfully with our existing operations;

•
expand our customer base; and

•
obtain required financing for our existing and new operations.
        Growing any business by acquisition presents numerous risks, including undisclosed liabilities and obligations, difficulty obtaining additional qualified personnel, managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. Future acquisitions could result in the incurrence of additional indebtedness and liabilities that could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. In addition, competition from other buyers for vessels could reduce our acquisition opportunities or cause us to pay a higher price than we might otherwise pay. We cannot assure you that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with these plans.
Any issuance of additional shares of common stock could dilute your interest in our company.
        If we issue additional shares of common stock to support our growth strategy or reduce debt, your interest in our company will be diluted.
         A decline in the market value of our vessels could lead to a default under our proposed new credit facility and the loss of our vessels, which would adversely affect our business.
        If the market value of our fleet declines, we may not be in compliance with certain provisions of our proposed new credit facility, and we may not be able to refinance our debt or obtain additional financing. If we are unable to pledge additional collateral, our lenders could accelerate our debt and foreclose on our fleet. For instance, if the market value of our vessels declines below approximately 130% of the aggregate amount outstanding under the proposed new credit facility, we will not be in compliance with certain provisions of the facility, and we may not be able to refinance our debt or obtain additional financing. The market value of our fleet is currently above the minimum market value that will initially be required by our new credit facility. However, should our charter rates or vessel values materially decline in the future due to any of the reasons discussed in the risk factors set forth above or otherwise, we may be required to take action to reduce our debt or to act in a manner contrary to our business objectives to satisfy these provisions. Events beyond our control, including changes in the economic and business conditions in the shipping industry, may affect our ability to
18

comply with these covenants. We cannot assure you that we will satisfy all our debt covenants in the future or that our lenders will waive any failure to do so.
         We cannot assure you that we will be able to borrow amounts under our proposed new credit facility. In addition, restrictive covenants in that credit facility may impose financial and other restrictions on us which could negatively impact our growth and adversely affect our operations.
        We are currently negotiating a new credit facility that we expect will provide us with funds to refinance our existing indebtedness, for the acquisition of additional vessels and for working capital. Our ability to borrow amounts under this credit facility will be subject to the execution of definitive documentation relating to the facility, including security documents, the satisfaction of certain customary conditions precedent and compliance with terms and conditions included in the loan documents. To the extent that we are not able to satisfy these requirements, we may not be able to draw down the full amount under the credit facility without obtaining a waiver or consent from the lender. In addition, the covenants in the new credit facility are expected to require us, among other things, to:
•
ensure that the fair market value of our collateral vessels is not less than 130% of our outstanding indebtedness;

•
maintain a ratio of total indebtedness to total capitalization of not more than 0.70 to 1.00 for the first five years and 0.60 to 1.00 thereafter;

•
maintain a ratio of our earnings before interest, taxes, depreciation and amortization to interest expense of not less than 2.00 to 1.00;

•
maintain working capital liquidity in an amount not less than $500,000 per vessel financed under the facility; and

•
maintain a minimum shareholder's equity of $            or no less than 80% of our shareholder's equity at the end of the last fiscal quarter preceding the completion of this offering on a pro forma basis assuming completion of this offering.
We cannot assure you that we will be able to satisfy these covenants in the future.
        Our proposed new credit facility will impose operating and financial restrictions on us. These restrictions may limit our ability to:
•
incur additional indebtedness on satisfactory terms or at all;

•
incur liens on our assets;

•
sell our vessels or the capital stock of our subsidiaries;

•
make investments;

•
engage in mergers or acquisitions;

•
pay dividends (following an event of default or our breach of a covenant);

•
employ our vessels for periods greater than 12 months;

•
make capital expenditures;

•
compete effectively to the extent our competitors are subject to less onerous financial restrictions; and

•
change the management of our vessels or terminate or materially amend the management agreement relating to each vessel.
Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions. Our lenders' interests may be different from ours, and we cannot guarantee that we will be
19

able to obtain our lenders' permission when needed. This may prevent us from taking actions that are in our best interest and from executing our business strategy of growth through acquisitions.
         If we are unable to fund our capital expenditures, we may not be able to continue to operate some of our vessels, which would have a material adverse effect on our business and our ability to pay dividends.
        In order to fund our capital expenditures, we may be required to incur borrowings or raise capital through the sale of debt or equity securities. Our ability to borrow money and access the capital markets through future offerings may be limited by our financial condition at the time of any such offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for necessary future capital expenditures would limit our ability to continue to operate some of our vessels and could have a material adverse effect on our business, results of operations, financial condition and ability to pay dividends. Even if we are successful in obtaining such funds through financings, the terms of such financings could further limit our ability to pay dividends.
         We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations or to make dividend payments.
        We are a holding company and our subsidiaries, which are all wholly owned by us, either directly or indirectly, conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our wholly owned subsidiaries. As a result, our ability to satisfy our financial obligations and to pay dividends to our shareholders depends on the ability of our subsidiaries to distribute funds to us. If we are unable to obtain funds from our subsidiaries, we may be unable or our board of directors may determine that is not in our best interest to pay dividends.
         Our ability to obtain additional debt financing may depend on the performance of our then existing charters and the creditworthiness of our charterers.
        The actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain additional financing at all or at a higher than anticipated cost may adversely affect our business, results of operations, cash flows, financial condition and ability to pay dividends.
         If our independent auditor is unable to provide us with an unqualified attestation report as to the adequacy of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002 when that requirement becomes applicable to us, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.
        Under Section 404 of the Sarbanes-Oxley Act of 2002, we will be required to include in each of our future annual reports on Form 10-K a report containing our management's assessment of the effectiveness of our internal control over financial reporting and a related attestation of our independent auditors. This requirement will first apply to us with respect to our annual report on Form 10-K for the fiscal year ending December 31, 2006. After the completion of this offering, we will undertake a comprehensive effort in preparation for compliance with Section 404. This effort will include the documentation, testing and review of our internal controls under the direction of our management. We cannot be certain at this time that all our controls will be considered effective. Therefore, we can give no assurances that our internal control over financial reporting will satisfy the new regulatory requirements when they become applicable to us. If our independent auditor is unable to provide us with an unqualified attestation report on a timely basis as required by Section 404, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.
20

         If we are unable to operate our financial and operations systems effectively or to recruit suitable employees as we expand our fleet, our performance may be adversely affected.
        Our current financial and operating systems may not be adequate as we implement our plan to expand the size of our fleet, and our attempts to improve those systems may be ineffective. In addition, as we expand our fleet, we will have to rely on our outside technical managers to recruit suitable additional seafarers and shore-based administrative and management personnel. We cannot assure you that our outside technical managers will be able to continue to hire suitable employees as we expand our fleet.
         We may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively affect the effectiveness of our management and our results of operations.
        Our success depends to a significant extent upon the abilities and efforts of our management team and our ability to hire and retain key members of our management team. The loss of any of these individuals could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining personnel could adversely affect our business, results of operations, cash flows, financial condition and ability to pay dividends. We do not intend to maintain "key man" life insurance on any of our officers. We intend to enter into employment contracts with our President, Robert Gerald Buchanan, and our Chief Financial Officer, John Wobensmith.
         We may not have adequate insurance to compensate us if we lose our vessels or to compensate others.
        We carry hull and machinery insurance, protection and indemnity insurance (which includes environmental damage and pollution insurance coverage), and war risk insurance for our fleet. We currently maintain insurance against loss of hire, which covers business interruptions that result in the loss of use of a vessel. We cannot assure you that we are adequately insured against all risks. We may not be able to obtain adequate insurance coverage for our fleet in the future.
        We cannot assure you that we will be able to renew our insurance policies on the same or commercially reasonable terms, or at all, in the future. For example, more stringent environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. A catastrophic oil spill or marine disaster could exceed our insurance coverage. In addition, our insurance may be voidable by the insurers as a result of certain of our actions, such as our ships failing to maintain certification with applicable maritime self-regulatory organizations. Further, we cannot assure you that our insurance policies will cover all losses that we incur, or that disputes over insurance claims will not arise with our insurance carriers. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. In addition, our insurance policies are subject to limitations and exclusions, which may increase our costs or lower our revenues.
        Any uninsured or underinsured loss may adversely affect our business, results of operations, cash flows, financial condition and ability to pay dividends.
         We are subject to funding calls by our protection and indemnity clubs, and our clubs may not have enough resources to cover claims made against them.
        We are indemnified for legal liabilities incurred while operating our vessels through membership in protection and indemnity associations, or P&I clubs. P&I clubs are mutual insurance clubs whose members must contribute to cover losses sustained by other club members. The objective of a P&I club is to provide mutual insurance based on the aggregate tonnage of a member's vessels entered into the club. Claims are paid through the aggregate premiums of all members of the club, although members remain subject to calls for additional funds if the aggregate premiums are insufficient to cover claims submitted to the club. Claims submitted to the club may include those incurred by members of the club, as well as claims submitted to the club from other P&I clubs with which our P&I club has entered into interclub agreements. We cannot assure you that the P&I clubs to which we belong will remain viable or that we will not become subject to additional funding calls which could adversely affect us.
21

         We will continue to be controlled by Fleet Acquisition LLC after this offering, which may limit your ability to influence our actions.
        Assuming that the underwriters do not exercise their over-allotment option, Fleet Acquisition LLC, or Fleet Acquisition, will own    % of the outstanding shares of our common stock immediately following this offering. As a result of this share ownership and for so long as Fleet Acquisition owns a significant percentage of our outstanding common stock, Fleet Acquisition will be able to influence the outcome of any shareholder vote, including the election of directors, the adoption or amendment of provisions in our articles of incorporation or bylaws and possible mergers, corporate control contests and other significant corporate transactions. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, merger, consolidation, takeover or other business combination involving us. This concentration of ownership could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our common stock.
We may have to pay tax on U.S. source income, which would reduce our earnings.
        Under the United States Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source shipping income and such income is subject to a 4% U.S. federal income tax without allowance for any deductions, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury regulations promulgated thereunder in August of 2003. We currently anticipate that we should be eligible to qualify for this statutory tax exemption after the offering. However, our eligibility to qualify for exemption is dependent on certain circumstances related to the ownership of our common stock which are beyond our control and on our interpretation of existing Treasury regulations, and we can therefore give no assurance that we will be eligible to qualify for exemption under Section 883 after the offering. If we are subject to the tax, from commencement of our operations through March 31, 2005 our potential tax liability in connection with U.S. source shipping income would be $10,220. Since the movement of our vessels is generally controlled by the charterers, future liability resulting from U.S. source shipping income cannot be predicted with certainty.
        In addition, changes in the Code, the Treasury regulations or the interpretation thereof by the Internal Revenue Service or the courts could adversely affect our ability to take advantage of the exemption under Section 883.
        If we or our subsidiaries are not entitled to this exemption under Section 883 for any taxable year, we or our subsidiaries would be subject for those years to a 4% U.S. federal income tax on our U.S. source shipping income. The imposition of this tax could have a negative effect on our business and would result in decreased earnings available for distribution to our 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, as defined in the Treasury Regulations. 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
22

income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
        Based on our proposed method of operation, we do not believe that we will be a PFIC with respect to any taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income. Accordingly, we believe that our income from our time chartering activities does not constitute "passive income," and the assets that we own and operate in connection with the production of that income do not constitute passive assets.
        There is, however, no direct legal authority under the PFIC rules addressing our 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 our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of our operations.
        If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders will face adverse U.S. tax consequences. 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 highest applicable income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common stock, as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of our common stock. See "Tax Considerations—U.S. Federal Income Taxation of U.S. Holders" for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders if we are treated as a PFIC.
         Because we generate all of our revenues in U.S. dollars but incur a portion of our expenses in other currencies, exchange rate fluctuations could hurt our results of operations.
        We generate all of our revenues in U.S. dollars, but we may incur drydocking costs and special survey fees in other currencies. If our expenditures on such costs and fees were significant, and the U.S. dollar were weak against such currencies, our business, results of operations, cash flows, financial condition and ability to pay dividends could be adversely affected.
         We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate law and may make it more difficult for our shareholders to protect their interests.
        Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act, or BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. The rights and fiduciary responsibilities of directors under the law of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions and there have been few judicial cases in the Marshall Islands interpreting the BCA. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public shareholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction. For more information with respect to how shareholder rights under Marshall Islands law compares with shareholder rights under Delaware law, we refer you to our discussion under the heading "Marshall Islands Company Considerations."
23

         Provisions in our organizational documents, our credit facilities and our shareholder's rights plan make it difficult for our shareholders to replace or remove our current board of directors and could prevent, discourage or delay a merger or acquisition, which could adversely affect the market price of our common stock .
        Several provisions of our articles of incorporation and our bylaws could make it difficult for our shareholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, our articles of incorporation and bylaws contain provisions that may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable.
        These provisions include:
•
authorizing our board of directors to issue "blank check" preferred stock without shareholder approval;

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

•
prohibiting cumulative voting in the election of directors;

•
authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2 / 3 % of the outstanding shares of our capital stock entitled to vote for those directors, which means that our majority shareholder, Fleet Acquisition, must approve the removal;

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

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

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

        Our ability to enter into a merger or consolidation or to sell all or substantially all of the collateral securing our credit facility is also expected to be restricted under the terms of our proposed new credit facility.
        These provisions in our new credit facility, articles of incorporation and bylaws could substantially impede the ability of our shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock. In addition, we have entered into a shareholder rights agreement that makes it more difficult for a third party to acquire us without the support of our board of directors.
Offering Specific Risk Factors
         There is no guarantee that an active and liquid public market for our common stock will develop, which may cause shares of our common stock to trade at a discount and make it difficult to sell the shares of common stock you purchase.
        Before this offering, there has not been a public market for our common stock. A liquid trading market for our common stock may not develop. If an active, liquid trading market does not develop, you may have difficulty selling any shares of our common stock you buy. The initial public offering price will be determined in negotiations between the representatives of the underwriters and us and may not be indicative of prices that will prevail in the trading market.
24

        The price of our common stock after this offering may be volatile and may fluctuate due to factors such as:
•
actual or anticipated fluctuations in quarterly and annual results;

•
mergers and strategic alliances in the shipping industry;

•
market conditions in the shipping industry;

•
changes in government regulation;

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

•
announcements concerning us or our competitors;

•
the general state of the securities market; and

•
other developments affecting us, our industry or our competitors.
        Additionally, a lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of our common stock and limit the number of investors who are able to buy our common stock. The drybulk sector of the shipping industry has been highly unpredictable and volatile. The market price of our common stock may be similarly volatile. As a consequence of these factors, you may not be able to sell shares of our common stock at prices equal to or greater than those paid by you in this offering.
         You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
        If you purchase common stock in this offering, you will pay more for your shares of common stock than the amounts paid by our existing shareholder for its shares. As a result, you will incur immediate and substantial dilution of $            per share, representing the difference between the initial public offering price and our pro forma as adjusted net tangible book value per share at                        , 2005, after giving effect to this offering. In addition, purchasers of our common stock in this offering will have contributed approximately            % of the aggregate price paid by all purchasers of our common stock, but will own only approximately            % of the shares outstanding after this offering. For more information, please see "Dilution."
         Future sales of shares could depress the market price for our common stock.
        Upon consummation of our offering, Fleet Acquisition will own approximately            %, of our outstanding common stock, which may be resold subject to the volume, manner of sale and notice requirements of Rule 144 under the Securities Act of 1933, as amended, as a result of its status as our "affiliate." Furthermore, shares held by our present shareholder as well as our officers and directors will be subject to a 180 day lock-up agreement. Following the expiration of the lock-up, we have agreed to register the shares held by Fleet Acquisition for resale on demand by the shareholder. For more information, please see "Shares Eligible for Future Sale" and "Underwriting—Lock-up Agreements." Sales or the possibility of sales of substantial amounts of shares of our common stock by Fleet Acquisition in the public markets could adversely affect the market price of our common stock. These sales, or the perception that these sales could occur, could also adversely impact our ability to sell equity securities in the future at a time and price that we deem appropriate to raise funds through future equity offerings.
25

 
 
 FORWARD-LOOKING STATEMENTS
        Our disclosure and analysis in this prospectus concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in developing and expanding our business, include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "will," "may," "should," and similar expressions are forward-looking statements.
        Forward-looking statements in this prospectus include, but are not limited to statements about:
•
our future operating or financial results;

•
our pending or recent acquisitions, our business strategy and our expected capital spending or operating expenses, including drydocking and insurance costs;

•
shipping market trends, including charter rates, vessel values and factors affecting supply and demand;

•
our ability to obtain additional financing;

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

•
our expectations of the availability of vessels to purchase, the time that it may take to construct new vessels, or vessels' useful lives.
        Many of these statements are based on our assumptions about factors that are beyond our ability to control or predict and are subject to risks and uncertainties that are described more fully under the "Risk Factors" section of this prospectus. Any of these factors or a combination of these factors could materially affect future results of operations and the ultimate accuracy of the forward-looking statements. Factors that might cause future results to differ include, but are not limited to, the following:
•
changes in governmental rules and regulations or actions taken by regulatory authorities;

•
changes in economic and competitive conditions affecting our business;

•
potential liability from future litigation;

•
length and number of off-hire periods and dependence on third party managers; and

•
other factors discussed under the "Risk Factors" section of this prospectus.
        You should not place undue reliance on forward-looking statements contained in this prospectus, because they are statements about events that are not certain to occur as described or at all. All forward-looking statements in this prospectus are qualified in their entirety by the cautionary statements contained in this prospectus. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.
        Except to the extent required by applicable law or regulation, we undertake no obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
26

 
 
 USE OF PROCEEDS
        We estimate the net proceeds to us of this offering will be approximately $             million after deducting underwriting discounts and commissions and estimated expenses related to this offering. This estimate is based on an assumed public offering price of $            per share, representing the mid-point of the price range shown on the cover of this prospectus.
        We intend to use the net proceeds of this offering to repay $             million of our indebtedness under our current credit facility and the balance, if any, for working capital and general corporate purposes.
        The indebtedness being repaid bears interest at LIBOR plus 1.375% per year until repayment of $100 million and LIBOR plus 1.250% per year thereafter, and is scheduled to mature on April 1, 2010. This indebtedness was incurred to fund, in part, the acquisition of our fleet.
        We will not receive any proceeds from the sale of shares of our common stock by the selling shareholder. See "Principal and Selling Shareholder."
27

 
 DIVIDEND POLICY
        Our policy is to declare quarterly distributions to shareholders by each February, May, August and November substantially equal to our available cash from operations during the previous quarter, less cash expenses for that quarter (principally vessel operating expenses and debt service) and any reserves our board of directors determines we should maintain. These reserves may cover, among other things, drydocking, repairs, claims, liabilities and other obligations, interest expense and debt amortization, acquisitions of additional assets and working capital. While we cannot assure you that we will do so, and subject to the limitations set forth below, we expect to declare a dividend per share of $            in            2005 (based on the first three calendar months of our operations after the offering). However, we may incur other expenses or liabilities that would reduce or eliminate the cash available for distribution as dividends.
        The declaration and payment of any dividend will be subject to the discretion of our board of directors. The timing and amount of dividend payments will depend on our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of distributions to shareholders and other factors. Our board of directors may review and amend our dividend policy from time to time in light of our plans for future growth and other factors. See "Risk Factors—We cannot assure you that we will pay dividends, which could reduce the return on your investment in us and the market value of our common stock" for a discussion of the risks related to our ability to pay dividends.
        We believe that under current law, our dividend payments from earnings and profits will constitute "qualified dividend income" and, as such, will generally be subject to a 15% U.S. federal income tax rate with respect to non-corporate U.S. shareholders (through 2008). Distributions in excess of our earnings and profits will be treated first as a non-taxable return of capital to the extent of a U.S. shareholder's tax basis in its common stock on a dollar-for-dollar basis and, thereafter, as capital gain. For more information about the tax consequences of payment of dividends, please read "Tax Considerations."
28

 
 
 CAPITALIZATION
        The following table sets forth our consolidated capitalization as of March 31, 2005:
•
on an actual basis;

•
on an adjusted basis giving effect to our incurrence of $38.3 million of long-term debt before the closing of this offering to finance purchase prices for two drybulk carriers that have been delivered to us since March 31, 2005; and

•
on a further as adjusted basis giving effect to the change in our indebtedness described above, our issuance and sale of             shares of common stock in this offering at an assumed initial public offering price of $             per share (representing the midpoint of the price range shown on the cover of this prospectus) and the application of the net proceeds of this offering as described under "Use of Proceeds."
        You should read this table in conjunction with our consolidated financial statements and the related notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Use of Proceeds" included in this prospectus.

 	 	At March 31, 2005 (unaudited)
	
 	 	Actual
	 	As Adjusted for
Subsequent Events
	 	As Adjusted
for Subsequent Events
and this Offering
	
 	 	(U.S. dollars in thousands)
	
Debt:	 	 	 	 	 	 	 	 	 	
 	Current portion of long-term debt	 	$	75,857	 	$	82,500	 	$	 	
 	Total long-term debt, net of current portion	 	 	242,816	 	 	274,500	 	 	 	
 	 		 		 		
 	 	Total debt	 	$	318,673	 	$	357,000	 	$	 	
 	 		 		 		
Shareholder's equity:	 	 	 	 	 	 	 	 	 	
 	Common stock, par value $0.01; 500 shares authorized; 500 shares issued and outstanding	 	$	—	 	$	—	 	$	 	
 	Paid-in capital	 	 	72,467	 	 	72,467	 	 	 	
 	Retained earnings	 	 	12,291	 	 	12,291	 	 	 	
 	 		 		 		
 	 	Total shareholder's equity	 	$	84,758	 	$	84,758	 	$	 	
 	 		 		 		
Total capitalization	 	$	403,431	 	$	441,758	 	$	 	
 	 		 		 		
29

 
 
 DILUTION
        If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. Dilution results from the fact that the per share offering price of the common stock is in excess of the net tangible book value per share for the common stock outstanding before this offering.
        At March 31, 2005, we had net tangible book value of $            million, or $            per share. After giving effect to our sale of            shares of common stock at a price of $            per share, which is the mid point of the estimated initial public offering price range of $            to $            per share in this offering, deducting the estimated underwriting discounts and commissions and estimated offering expenses, and assuming that the underwriters' over-allotment option is not exercised, the pro forma net tangible book value at March 31, 2005 would have been $             million, or $            per share. This represents an immediate appreciation in net tangible book value of $            per share to our existing shareholder and an immediate dilution of net tangible book value of $            per share to new investors. The following table illustrates the pro forma per share dilution and appreciation at March 31, 2005:

Initial public offering price per share	 	$	 	
 	 		
Net tangible book value per share as of March 31, 2005	 	$	 	
 	 		
Increase in net tangible book value per share attributable to new investors in this offering	 	$	 	
 	 		
Pro forma net tangible book value per share after giving effect to this offering	 	$	 	
 	 		
Dilution per share to new investors	 	$	 	
 	 		
        Net tangible book value per share of our common stock is determined by dividing our tangible net worth, which consists of tangible assets less liabilities, by the number of shares of our common stock outstanding. Dilution is determined by subtracting the net tangible book value per share of common stock after this offering from the public offering price per share. Dilution per share to new investors would be $            if the underwriters exercise in full their over-allotment option.
        The following table summarizes, on a pro forma basis as at March 31, 2005, the differences between the number of shares of common stock purchased in this offering, the total amount paid and the average price per share paid by the existing holder of shares of common stock and by you in this offering, based upon the assumed initial public offering price of $             per share.

 	 	Pro Forma Shares Outstanding
	 	 	 	 	 	 	
  			 	Total Consideration
	 	 	
 					 	Average Price
Per Share
	
 	 	Number
	 	Percent
	 	Amount
	 	Percent
			
Existing shareholder	 	 	 	 	%	$	 	 	 	%	$	 	
 	 		 		 		 		 		
New investors	 	 	 	 	%	$	 	 	 	%	$	 	
 	 		 		 		 		 		
 	Total	 	 	 	 	%	$	 	 	 	%	$	 	
 	 		 		 		 		 		
30

 
 
 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
         The following table sets forth our selected consolidated financial data and other data. The selected consolidated financial data in the table as of and for the three months ended March 31, 2005 and as of and for the period from September 27, 2004 (date of inception) through December 31, 2004 are derived from our consolidated financial statements included in this prospectus. We refer you to the footnotes in our consolidated financial statements for a discussion of the basis on which our consolidated financial statements are presented. The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included in this prospectus. We were incorporated on September 27, 2004, and our operations began on December 6, 2004, with the delivery of our first vessel. Accordingly, our results of operations for the period ended December 31, 2004 do not reflect the results for a full twelve months of operation. In accordance with standard shipping industry practice, we did not obtain from the seller historical operating data for the vessels that we acquired, as that data was not material to our decision to purchase the vessels. Accordingly, we have not included any historical financial data relating to the results of operations of our vessels from the period before our acquisition of them. Please see the section of this prospectus entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Lack of Historical Operating Data for Vessels Before their Acquisition."

 	 	As of and for the
three months ended
March 31, 2005
	 	As of and for the period
September 27, 2004
through
December 31, 2004
	 	
 	 	(U.S. dollars in thousands, except for
per share amounts)
	 	
Income Statement Data:	 	 	 	 	 	 	 	
Revenues	 	$	21,399	 	$	1,887	 	

Operating Expenses:	

 	

 	
 	
 	Voyage expenses	 	 	890	 	 	44	 	
 	Vessel operating expenses	 	 	2,016	 	 	141	 	
 	General and administrative expenses	 	 	591	 	 	140	 	
 	Depreciation	 	 	3,981	 	 	421	 	
 	 		 		 	
 	 	Total operating expenses	 	 	7,478	 	 	746	 	
 	 		 		 	
Operating income	 	 	13,921	 	 	1,141	 	

Net interest expense	

(2,537	
)	
 	
(234	
)	
 	 		 		 	
 	 	Net income	 	$	11,384	 	$	907	 	
 	 		 		 	
 	 	Earnings per share—Basic (1)	 	$	22,768	 	$	1,814	 	
 	 		 		 	
 	 	Earnings per share—Pro forma (2)	 	 	 	 	 	 	 	
 	 		 		 	
Balance Sheet Data:	 	 	 	 	 	 	 	
Cash	 	$	17,330	 	$	7,431	 	
Restricted cash	 	 	7,108	 	 	—	 	
Total assets	 	 	408,121	 	 	201,628	 	
Total debt (current and long-term)	 	 	318,673	 	 	125,766	 	
Total shareholder's equity	 	 	84,758	 	 	73,374	 	

Cash Flow Data:	

 	

 	
 	
Net cash flow provided by operating activities	 	$	17,675	 	$	2,718	 	
Net cash flow used in investing activities	 	 	(193,270	)	 	(189,414	)	
Net cash provided by financing activities	 	 	185,494	 	 	194,127	 	

EBITDA (3)	
 	
$	
17,902	
 	
$	
1,562	

(1)
Based on the weighted average of 500 shares outstanding for the period.
31

(2)
Pro forma earnings per share gives effect to our issuance of          common stock at an assumed offering price of $            per share (representing the mid-point of the price range set forth on the cover of this prospectus), reflecting the portion of the shares of common stock sold, the proceeds of which are being used for debt repayment. Interest expense of $2,620 and $242 for the three months ended March 31, 2005 and the period ended December 31, 2004, respectively, has been removed from this calculation.

(3)
EBITDA represents net income plus net interest expense, income tax expense, depreciation and amortization. EBITDA is included because it is used by management and certain investors as a measure of operating performance. EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers. Our management uses EBITDA as a performance measure in consolidating monthly internal financial statements and it is presented for review at our board meetings. EBITDA is also used by our lenders in certain loan covenants. For these reasons, we believe that EBITDA is a useful measure to present to our investors. EBITDA is not an item recognized by the generally accepted accounting principals in the United States of America, or U.S. GAAP, and should not be considered as an alternative to net income, operating income or any other indicator of a company's operating performance required by U.S. GAAP. EBITDA is not a source of liquidity or cash flows as shown in our consolidated statement of cash flows. The definition of EBITDA used here may not be comparable to that used by other companies.

 	 	For the
three months ended
March 31, 2005
	 	For the period
September 27, 2004
through
December 31, 2004
	
 	 	(U.S. dollars in thousands)

Net income	 	$	11,384	 	$	907	
Net interest expense	 	 	2,537	 	 	234	
Income tax expense	 	 	—	 	 	—	
Depreciation	 	 	3,981	 	 	421	
 	 		 		
 	EBITDA	 	$	17,902	 	$	1,562	
 	 		 		
32

 
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
         The following management's discussion and analysis should be read in conjunction with our historical consolidated financial statements and the related notes included in this prospectus. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, such as those set forth in the following discussion and in the sections entitled "Risk Factors" and "Forward-Looking Statements."
General
        We are a newly formed Marshall Islands company incorporated in September 2004 to transport iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. Half of the vessels in our fleet are younger than six years old. Our fleet consists of five Panamax, six Handymax and five Handysize drybulk carriers, with an aggregate carrying capacity of approximately 790,000 dwt. The average age of our fleet was eight years as of March 31, 2005 as compared to the average age for the world fleet of approximately 16 years for the drybulk shipping segments in which we compete. See "The International Drybulk Shipping Industry." All of the vessels in our fleet are on time charters to reputable charterers, including Lauritzen Bulkers, Cargill, HMMC, BHP and NYK Europe. With the exception of the Genco Leader and the Genco Trader, our vessels are fixed on long-term time charters for terms greater than one year that expire (assuming the option periods in the time charters are not exercised) between August 2006 and February 2007. All of our present charters have been approved by the lenders under our current credit facility.
        We acquired our fleet of 16 drybulk carriers from a subsidiary of COFCO. All vessels were acquired free of any existing time charter. Each vessel in our fleet was delivered to us on the date specified in the following chart:

Vessel Name
	 	Delivery Date
	 	Class

Genco Reliance	
 	
12/6/04	
 	
Handysize	
Genco Glory	 	12/8/04	 	Handymax	
Genco Vigour	 	12/15/04	 	Panamax	
Genco Explorer	 	12/17/04	 	Handysize	
Genco Carrier	 	12/28/04	 	Handymax	
Genco Sugar	 	12/30/04	 	Handysize	
Genco Pioneer	 	1/4/05	 	Handysize	
Genco Progress	 	1/12/05	 	Handysize	
Genco Wisdom	 	1/13/05	 	Handymax	
Genco Success	 	1/31/05	 	Handymax	
Genco Beauty	 	2/7/05	 	Panamax	
Genco Knight	 	2/15/05	 	Panamax	
Genco Leader	 	2/16/05	 	Panamax	
Genco Marine	 	3/29/05	 	Handymax	
Genco Prosperity	 	4/4/05	 	Handymax	
Genco Trader	 	6/7/05	 	Panamax	
33

        We intend to grow our fleet through timely and selective acquisitions of vessels in a manner that is accretive to our cash flow. In connection with this growth strategy, we are negotiating a new credit facility that we will use to refinance the outstanding indebtedness under our current credit facility remaining after application of a portion of the net proceeds of this offering as described in "Use of Proceeds" above, and to acquire additional drybulk carriers that will be employed either in the spot or period charter market.
        Our management team and our other employees are responsible for the commercial and strategic management of our fleet. Commercial management includes the negotiation of charters for vessels, managing the mix of various types of charters, such as time charters and voyage charters and monitoring the performance of our vessels under their charters. Strategic management includes locating, purchasing, financing and selling vessels. We intend to use the services of reputable independent technical managers for the technical management of our fleet. We currently contract with Wallem, an independent technical manager, to provide technical management at a lower cost than we believe would be possible in-house. Technical management involves the day-to-day management of vessels including performing routine maintenance, attending to vessel operations and arranging for crews and supplies. Members of our New York City-based management team oversee the activities of our independent technical manager.
        We acquired all of the vessels in our fleet from a subsidiary of COFCO, a Chinese conglomerate unrelated to us. All vessels were purchased free of charters. We understand that COFCO used the vessels while in its ownership for the carriage of its own cargoes and for cargoes of third parties which resulted in a different commercial and technical management structure from ours. Accordingly, historical financial statement information was not relevant to us when we negotiated the purchase of the 16 vessels.
Factors Affecting Our Results of Operations
        We believe that the important measures for analyzing trends in our results of operations consist of the following:
•
Ownership days .    We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.

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

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

•
Fleet utilization .    We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilization to measure a company's efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
34

•
TCE rates .    We define TCE rates as our revenues (net of voyage expenses) divided by the number of our available days during the period, which is consistent with industry standards. TCE rate is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charterhire rates for vessels on voyage charters are generally not expressed in per-day amounts while charterhire rates for vessels on time charters generally are expressed in such amounts.

•
Daily vessel operating expenses .    We define daily vessel operating expenses to include crew wages and related costs, the cost of insurance expenses relating to repairs and maintenance (excluding drydocking), the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Daily vessel operating expenses are calculated by dividing vessel operating expenses by ownership days for the relevant period.
        The following table reflects our ownership days, available days, operating days, fleet utilization, TCE rates and daily vessel operating expenses as of and for the period from September 27, 2004 (date of inception) through December 31, 2004 and for the three months ended March 31, 2005. Because all of our vessels have operated on time charters, our TCE rates equal our time charter rates less any brokerage commissions paid by us to unaffiliated parties.

 	 	As of and for the
three months ended
March 31, 2005
	 	As of and for the period
September 27, 2004
through
December 31, 2004
	
Fleet Data:	 	 	 	 	
Ownership days	 	 	 	 	
 	Panamax	 	230.7	 	15.5	
 	Handymax	 	320.7	 	26.7	
 	Handysize	 	435.9	 	41.8	
 	 		 		
 	 	Total	 	987.3	 	84.0	
 	 		 		
Available days	 	 	 	 	
 	Panamax	 	227.6	 	15.5	
 	Handymax	 	318.5	 	26.7	
 	Handysize	 	435.0	 	41.8	
 	 		 		
 	 	Total	 	981.1	 	84.0	
 	 		 		
Operating days	 	 	 	 	
 	Panamax	 	221.5	 	15.5	
 	Handymax	 	317.2	 	26.7	
 	Handysize	 	435.0	 	41.8	
 	 		 		
 	 	Total	 	973.7	 	84.0	
 	 		 		
Fleet utilization	 	 	 	 	
 	Panamax	 	97.3%	 	100.0%	
 	Handymax	 	99.6%	 	100.0%	
 	Handysize	 	100.0%	 	100.0%	
 	 	
Fleet average	
 	
99.2%	
 	
100.0%	
35

 
 	 	As of and for the
three months ended
March 31, 2005
	 	As of and for the period
September 27, 2004
through
December 31, 2004
	
 	 	(U.S. dollars)
	
Average Daily Results:	 	 	 	 	 	 	
Time Charter Equivalent	 	 	 	 	 	 	
 	Panamax	 	$	28,234	 	$	41,367	
 	Handymax	 	 	20,877	 	 	18,166	
 	Handysize	 	 	17,091	 	 	17,191	
 	 	
Fleet average	

20,904	

21,960	

Daily vessel operating expenses	

 	

 	
 	Panamax	 	$	2,503	 	$	2,101	
 	Handymax	 	 	1,917	 	 	1,577	
 	Handysize	 	 	1,893	 	 	1,597	
 	 	
Fleet average	

2,042	

1,683	
Lack of Historical Operating Data for Vessels Before their Acquisition
        Consistent with shipping industry practice, other than inspection of the physical condition of the vessels and examinations of classification society records, there is no historical financial due diligence process when we acquire vessels. We do not obtain the historical operating data for the vessels from the sellers because that information is not material to our decision to make acquisitions, nor do we believe it would be helpful to potential investors in our common stock in assessing our business or profitability. Most vessels are sold under a standardized agreement, which, among other things, provides the buyer with the right to inspect the vessel and the vessel's classification society records. The standard agreement does not give the buyer the right to inspect, or receive copies of, the historical operating data of the vessel. Prior to the delivery of a purchased vessel, the seller typically removes from the vessel all records, including past financial records and accounts related to the vessel. In addition, the technical management agreement between the seller's technical manager and the seller is automatically terminated and the vessel's trading certificates are revoked by its flag state following a change in ownership.
        To date, we have acquired all of our vessels free of charter. Although vessels are generally acquired free of charter, we may in the future acquire some vessels with time charters. Consistent with shipping industry practice, we treat the acquisition of a vessel (whether acquired with or free of charter) as the acquisition of an asset rather than a business. Where a vessel has been under a voyage charter, the vessel is delivered to the buyer free of charter, and it is rare in the shipping industry for the last charterer of the vessel in the hands of the seller to continue as the first charterer of the vessel in the hands of the buyer. In most cases, when a vessel is under time charter and the buyer wishes to assume that charter, the vessel cannot be acquired without the charterer's consent and the buyer's entering into a separate direct agreement with the charterer to assume the charter. The purchase of a vessel itself does not transfer the charter, because it is a separate service agreement between the vessel owner and the charterer.
        We have entered into new charter contracts with our customers that commenced upon delivery of the vessels to us. In purchasing each vessel, we were required to take the following steps before the vessel could commence operations:

•
arrange for a new crew for the vessel;
36

•
replace all hired equipment on board, such as gas cylinders and communications equipment;

•
negotiate and enter into new insurance contracts for the vessel through our insurance brokers;

•
register the vessel under a flag state and perform the related inspections in order to obtain new trading certificates from the flag state;

•
implement a new planned maintenance program for the vessel; and

•
assure that the new technical manager obtains new certificates for compliance with the safety and vessel security regulations of the flag state.
        The following discussion is intended to help you understand how acquisitions of vessels affect our business and results of operations.
        Our business is comprised of the following main elements:

•
employment and operation of our Handysize, Handymax and Panamax drybulk carriers; and

•
management of the financial, general and administrative elements involved in the conduct of our business and ownership of our drybulk carriers.
        The employment and operation of our vessels require the following main components:

•
vessel maintenance and repair;

•
crew selection and training;

•
vessel spares and stores supply;

•
contingency response planning;

•
onboard safety procedures auditing;

•
accounting;

•
vessel insurance arrangements;

•
vessel chartering;

•
vessel hire management;

•
vessel surveying; and

•
monitoring of vessel performance.

        The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels requires the following main components:

•
management of our financial resources, including banking relationships, that is, administration of bank loans and bank accounts;

•
management of our accounting system and records and financial reporting;

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

•
management of relationships with our service providers and customers.
37

        The principal factors that affect our profitability, cash flows and shareholders' return on investment include:

•
rates and periods of charterhire;

•
levels of vessel operating expenses;

•
depreciation expenses; and

•
financing costs.
Principal Factors that Affect Our Business
        The principal factors that affect our financial position, results of operations and cash flows include:

•
charter market rates, which have recently experienced historic highs, and periods of charterhire;

•
vessel operating expenses and voyage costs, which are incurred primarily in U.S. dollars;

•
depreciation expenses, which are a function of the cost of our vessels, significant vessel improvement costs and our vessels' estimated useful lives; and

•
financing costs related to our indebtedness, which is expected to be approximately $          million immediately following the closing of this offering.
        The amounts estimated below are not intended to constitute pro forma financial information within the meaning of regulations promulgated by the Securities and Exchange Commission, but in our view, have been determined on a reasonable basis, and reflect our best currently available estimates and judgements. These estimates do not represent actual results and should not be relied upon as being necessarily indicative of future results, and investors are cautioned not to place undue reliance on this information. This financial information was not prepared with a view toward compliance with published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.
        This forward-looking financial information has been prepared by us, and is our responsibility. Deloitte & Touche LLP has neither examined nor compiled the accompanying prospective financial information and, accordingly, Deloitte & Touche LLP does not express an opinion or any other form of assurance with respect to this forward-looking information. The Deloitte & Touche LLP report included in this prospectus relates to our historical financial information and does not extend to the forward-looking information presented below.
        You should read the following discussion together with the information contained in the table of vessel information under "Business—Our Charters." The daily charter hire rates detailed in that table under "Time Charter Rate" are fixed rates and all detailed vessels are employed under time charters. Revenues from long-term charters are stable over the duration of the charter, provided there are no unexpected off-hire periods and no performance claims from the charterer or charterer defaults. We cannot guarantee that actual results will be as anticipated.
        Our strategy is to employ vessels on time charters in order to generate stable cash flow over a period of time. As of March 31, 2005, the average remaining term under our existing time charters on 14 out of 16 vessels in our fleet is approximately 1.6 years with fixed charter hire rates. We carry loss of hire insurance for our fleet.
38

        Our total daily revenue under existing charter agreements for our 16 vessel fleet is $357,200 per day. Two of our current charters are short-term with expiration dates during July 2005. We estimate that our vessels operate 360 days per year which is a level commonly used as an industry average for modern vessels. The five days of non-operation per year are to provide for time spent in drydock and off-hire time. Should a vessel be operational for 350 days, instead of 360 days in any year, charter income for that vessel would decrease by 2.78%. An average 2.78% decrease for the vessels comprising our fleet would result in an annualized decrease of revenues (including the two current short-term charters) by $3.6 million to $125 million.
        Brokers' commissions generally range from 1.25% to 5.00% of the total daily charter hire rate.
        With regard to vessel operating expenses, we have entered into management agreements for each of our vessels with Wallem, our independent technical manager. In conjunction with our management, Wallem has established an operating expense budget for each vessel. These are budgets only. Any actual amounts incurred in excess of the budgeted amounts are for our account.
        The main factors that could increase vessel operating expenses are crew salaries, insurance premiums, which we arrange, spare parts orders, repairs that are not covered under insurance policies and lubricants. We estimate a cost of inflation increase in vessel operating expenses of 2% per annum. We cannot guarantee that increases in vessel operating expenses will be limited to this amount or to the hypothetical amount set forth below.
        Vessel operating expenses consist principally of crewing, consumables, spare parts, repairs and maintenance, classification society surveys and insurance. Including budgeted items provided by Wallem and insurance which we have arranged, we estimate daily operating expense for the fleet of $49,420. A hypothetical 5% increase in operating expenses would result in an annualized increase in vessel operating costs of approximately $0.9 million. Almost all of our expenses are in U.S. dollars.
39

Historical Operating Data
        The following discusses our operating income and net income for the fiscal year ended December 31, 2004, and for the interim period ending March 31, 2005.

 	 	As of and for the
three months ended
March 31, 2005
	 	As of and for the period
September 27, 2004
through
December 31, 2004
	 	
 	 	(U.S. dollars in thousands, except for
per share amounts)
	 	
Income Statement Data:	 	 	 	 	 	 	 	
Revenues	 	$	21,399	 	$	1,887	 	

Operating Expenses:	

 	

 	
 	
 	Voyage expenses	 	 	890	 	 	44	 	
 	Vessel operating expenses	 	 	2,016	 	 	141	 	
 	General and administrative expenses	 	 	591	 	 	140	 	
 	Depreciation	 	 	3,981	 	 	421	 	
 	 		 		 	
 	 	Total operating expenses	 	 	7,478	 	 	746	 	
 	 		 		 	
Operating income	 	 	13,921	 	 	1,141	 	

Net interest expense	

(2,537	
)	
 	
(234	
)	
 	 		 		 	
 	 	Net income	 	$	11,384	 	$	907	 	
 	 		 		 	
 	 	Earnings per share—Basic (1)	 	$	22,768	 	$	1,814	 	
 	 		 		 	
 	 	Earnings per share—Pro forma (2)	 	 	 	 	 	 	 	
 	 		 		 	
Balance Sheet Data:	 	 	 	 	 	 	 	
Cash	 	$	17,330	 	$	7,431	 	
Restricted cash	 	 	7,108	 	 	—	 	
Total assets	 	 	408,121	 	 	201,628	 	
Total debt (current and long-term)	 	 	318,673	 	 	125,766	 	
Total shareholder's equity	 	 	84,758	 	 	73,374	 	

Cash Flow Data:	

 	

 	
 	
Net cash flow provided by operating activities	 	$	17,675	 	$	2,718	 	
Net cash flow used in investing activities	 	 	(193,270	)	 	(189,414	)	
Net cash provided by financing activities	 	 	185,494	 	 	194,127	 	

EBITDA (3)	
 	
$	
17,902	
 	
$	
1,562	

(1)
Based on the weighted average of 500 shares outstanding for the period.

(2)
Pro forma earnings per share gives effect to our issuance of common shares at an assumed offering price of $            per share (representing the mid-point of the price range set forth on the cover of this prospectus), reflecting the portion of the shares of common stock sold the proceeds of which are being used for debt repayment. Interest expense          and           for the three months ended March 31, 2005 and the period ended December 31, 2004, respectively, has been removed from this calculation.

(3)
EBITDA represents net income plus net interest expense, income tax expense, depreciation and amortization. EBITDA is included because it is used by management and certain investors as a measure of operating performance. EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers. Our management uses EBITDA as a performance measure in consolidating monthly internal financial statements and it is presented for review at our board meetings. EBITDA is also used by our lenders in certain loan covenants.
40

For these reasons, we believe that EBITDA is a useful measure to present to our investors. EBITDA is not an item recognized by the generally accepted accounting principals in the United States of America, or U.S. GAAP, and should not be considered as an alternative to net income, operating income or any other indicator of a company's operating performance required by U.S. GAAP. EBITDA is not a source of liquidity or cash flows as shown in our consolidated statement of cash flows. The definition of EBITDA used here may not be comparable to that used by other companies.

 	 	For the
three months ended
March 31, 2005
	 	For the period
September 27, 2004
through
December 31, 2004
	
 	 	(U.S. dollars in thousands)

 	

 	

 	

Net income	
 	
$	
11,384	
 	
$	
907	
Net interest expense	 	 	2,537	 	 	234	
Income tax expense	 	 	—	 	 	—	
Depreciation	 	 	3,981	 	 	421	
 	 		 		
 	EBITDA	 	$	17,902	 	$	1,562	
 	 		 		
Revenues
        Our revenues are driven primarily by the number of vessels in our fleet, the number of days during which our vessels operate and the amount of daily charterhire rates that our vessels earn under charters, that, in turn, are affected by a number of factors, including:
•
the duration of our charters;

•
our decisions relating to vessel acquisitions and disposals;

•
the amount of time that we spend positioning our vessels;

•
the amount of time that our vessels spend in drydock undergoing repairs;

•
maintenance and upgrade work;

•
the age, condition and specifications of our vessels;

•
levels of supply and demand in the drybulk shipping industry; and

•
other factors affecting spot market charter rates for drybulk carriers.
        We are a newly organized company, and acquired our first six vessels in December 2004. The remaining ten vessels of our fleet were acquired in the first six months of 2005. The increase in the size of our fleet is expected to enable us to grow our revenues significantly and to increase our ownership, available and operating days. We believe that the relatively young age of the vessels in our fleet, combined with the effectiveness of the measures that we have undertaken to minimize periods during which our vessels are off-hire, including effective maintenance programs and experienced crew selection, should enable us to maintain relatively high vessel utilization rates.
        For the three-month period ended March 31, 2005, revenues were $21.4 million and consisted of charter payments for our vessels. The average TCE rate for our fleet was $20,904 per day compared to $21,960 for the period ended December 31, 2004. The slightly lower rate for the period ended March 31, 2005 is primarily a result of lower TCE rates for the Panamax vessels. During 2004, we had taken delivery of only one Panamax, the Genco Vigour. Before entering its initial two-year time charter with BHP at a gross rate of $29,000 per day, the vessel performed a 42-day charter with China Steel at
41

a charter rate of $42,500 per day. This short-term time charter led to a higher average TCE rate during the period ended December 31, 2004.
        We took delivery of eight additional vessels during the period ended March 31, 2005 and had a total of 973.7 operating days. Our total fleet utilization was 99.2% compared to 100.0% in 2004. The slightly lower fleet utilization is due to unscheduled offhire incurred from the cleaning of the Genco Beauty's holds in order to prepare it for employment under its initial two-year time charter to Cargill.
        During the period September 27, 2004 through December 31, 2004, revenues were $1.9 million, which consisted of payments made to us under our vessel charters. During the same period, we took delivery of six vessels of our fleet and had a total of 84 operating days. Our fleet utilization in 2004 was 100.0%.
Voyage Expenses
        We incur voyage expenses that include port and canal charges, fuel (bunker) expenses and brokerage commissions payable to unaffiliated parties. Port and canal charges and bunker expenses primarily increase in periods during which vessels are employed on voyage charters because these expenses are for the account of the vessel owner. Currently, we do not incur port and canal charges and bunker expenses as part of our vessels' overall expenses, because all of our vessels are employed under time charters that require the charterer to bear all of those expenses.
        As is common in the shipping industry, we pay brokerage commissions ranging from 1 1 / 4 % to 5% of the total daily charterhire rate of each charter to unaffiliated ship brokers and in-house brokers associated with the charterers, depending on the number of brokers involved with arranging the charter. We believe that the amounts and the structures of our commissions are consistent with industry practices.
        For the three-month period ended March 31, 2005, voyage expenses were $0.9 million and consisted primarily of brokerage commissions paid to unaffiliated parties. We expect that the amount of our total commissions will continue to grow as a result of our acquisition of additional vessels during 2005.
        Voyage expenses for the period September 27, 2004 through December 31, 2004 were $0.04 million and consisted solely of brokerage commissions paid to unaffiliated parties.
Vessel Operating Expenses
        Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. For the three-month period ended March 31, 2005, vessel operating expenses totaled $2.0 million. The daily vessel operating expenses for the fleet were $2,042 per day for the period ended March 31, 2005 compared to $1,683 per day for the period ended December 31, 2004. This increase is due to the delivery of eight additional vessels, including three Panamax vessels which have higher operating costs than Handymax and Handysize vessels, during the period ended March 31, 2005, combined with a longer operating period for the six vessels delivered during the period ended December 31, 2004. We believe daily vessel operating expenses are best measured for comparative purposes over a twelve-month period in order to take into account all of the expenses that each vessel in our fleet will incur over a full year of operation. As such, we believe our daily vessel operating expenses for the period ended March 31, 2005, are not reflective of our future vessel operating expenses due to the short period of operations and will likely increase over a twelve-month operating period.
42

        Based on budgets provided by Wallem, we expect our vessels to have daily vessel operating expenses during 2005 of:

Vessel Type
	 	Average Budgeted Amount
	
Panamax	 	$	3,344	
Handymax	 	 	3,035	
Handysize	 	 	2,898	
        Vessel operating expenses for the period September 27, 2004 through December 31, 2004 were $0.1 million.
        Our vessel operating expenses, which generally represent fixed costs, will increase as a result of the expansion of our fleet. Other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for insurance, may also cause these expenses to increase.
General and Administrative Expenses
        We incur general and administrative expenses, including fees paid to third-party technical management companies, our onshore vessel-related expenses such as legal and professional expenses, and other general vessel expenses. Our general and administrative expenses also include our payroll expenses, including those relating to our executive officers, and rent. For the three-month period ended March 31, 2005, general and administrative expenses were $0.6 million. We expect general and administrative expenses to increase as a result of the expansion of our fleet, costs related to our initial public offering and the costs associated with running a public company, including the preparation of disclosure documents, legal and accounting costs, incremental director and officer liability insurance costs, director and executive compensation, and costs related to compliance with the Sarbanes-Oxley Act of 2002. General and administrative expenses were $0.1 million for the period September 27, 2004 through December 31, 2004.
Depreciation
        We depreciate the cost of our vessels on a straight-line basis over the expected useful life of each vessel. Depreciation is based on the cost of the vessel less its estimated residual value. We estimate the useful life of our vessels to be 25 years, which we believe is common in the drybulk shipping industry. Furthermore, we estimate the residual values of our vessels to be $175 per light weight ton, which we also believe is standard in the drybulk shipping industry. For the three-month period ended March 31, 2005, depreciation charges were $4.0 million.
        Depreciation charges were $0.4 million for the period September 27, 2004 through December 31, 2004. Our depreciation charges will increase due to the expansion of our fleet, which will also lead to an increase of operating days.
Net Interest Expense
        While we expect to use the proceeds of this offering to repay a portion of our outstanding debt, we historically have incurred interest expense and financing costs in connection with vessel specific debt of our subsidiaries. For the three-month period ended March 31, 2005, net interest expense was $2.5 million and consisted of interest payments made under our current credit facility as well as the amortization of bank fees related to our current credit facility.
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        Net interest expense was $0.2 million for the period September 27, 2004 through December 31, 2004. We expect to incur interest expense and financing costs under our proposed new credit facility in connection with debt incurred to finance future acquisitions.
Liquidity and Capital Resources
        To date we have financed our capital requirements with cash flow from operations, equity contributions and bank debt. We have used our funds primarily to fund vessel acquisitions, regulatory compliance expenditures and the repayment of bank debt. We will require capital to fund ongoing operations, acquisitions and debt service. We anticipate that following the completion of this offering and taking into account generally expected market conditions, internally generated cash flow and borrowings under our proposed new credit facility will be sufficient to fund the operations of our fleet, including our working capital requirements, for the next 12 to 18 months.
Cash Flow
        Net cash provided by operating activities for the three-month period ended March 31, 2005, was $17.7 million. Net cash from operating activities was primarily a result of recorded net income of $11.4 million and depreciation charges of $4.0 million. Net cash used in investing activities was $193.3 million and related solely to the acquisition of ten additional vessels. Net cash provided by financing activities was $185.5 million and consisted primarily of $192.9 million in proceeds from our current credit facility used to finance the acquisition of eight additional vessels.
        For the period ended December 31, 2004, net cash provided by operating activities was $2.7 million. Net cash from operating activities was primarily a result of deferred revenue of $1.6 million and recorded net income of $0.9 million. Net cash used in investing activities for the same period was $189.4 million. The significant components of investing activities were $148.5 million for the purchase of vessels and $40.9 million for deposit on future vessels. Net cash provided by financing activities for this period was $194.1 million. The majority sources of the funding from financing activities were the proceeds of $125.8 million from the credit facility and a $72.4 million capital contribution from our shareholder, Fleet Acquisition.
Our Current Credit Facility
        We entered into a credit facility with a group of lenders led by Nordea Bank Finland plc and Citigroup Global Markets Limited, which provides for a borrowing limit of $357 million and a final maturity date of April 1, 2010. The credit facility was used partially to fund the acquisition of our fleet. Assuming full borrowings, the outstanding indebtedness under the facility is scheduled to be paid in eight quarterly installments of $20.6 million beginning June 1, 2005, followed by eleven quarterly installments of $7.5 million, and a final payment of $109.5 million.
        Our current credit facility bears interest at LIBOR plus 1.375% per year until $100 million has been repaid and LIBOR plus 1.250% per year thereafter.
        Our obligations under the credit facility are secured by a first priority mortgage on each of the vessels in our fleet and a first assignment of all associated freights, earnings and insurances.
        The credit facility contains financial covenants requiring us, among other things, to ensure that:
•
the aggregate market value of the vessels in our fleet that secure our obligation under the credit facility exceeds the aggregate principal amount of debt outstanding under the credit facility by 105% before the first anniversary, by 120% on or after the first anniversary and before the
44

second anniversary, and by 135% on or after the second anniversary of the initial borrowing under the credit facility;
•
the earnings before interest, income taxes, depreciation and amortization to interest coverage is maintained at no less than 2.50 to 1.00;

•
the total indebtedness to total capitalization on or after January 1, 2006 and before January 1, 2007 will be no greater than 0.70 to 1.00 and thereafter will be no greater than 0.60 to 1.00; and

•
vessel charterers must be approved by the lenders under the current credit facility. All of the present charterers have been approved by the lenders.
        In addition, the terms of our current credit facility restrict our ability to make dividend payments. We are also obligated under our current credit facility to charter all vessels under a fixed rate charter for a term ending no sooner than 24 months immediately following purchase. Based on the waiver received on May 6, 2005 the charters entered into with respect to each vessel, except for the Genco Leader, shall otherwise be deemed to have complied with this criteria at the time of acquisition. On March 23, 2005, we received a waiver for the Genco Leader which extended the date to meet this criteria until April 22, 2005. Subsequently, we received a second waiver extending the date of compliance to June 30, 2005. In addition, we received a waiver in June 2005 extending the required compliance date for the Genco Trader through July 31, 2005.
        We are also obligated under our current credit facility to receive minimum funding by our sole shareholder, Fleet Acquisition, on the earlier of December 15, 2004 or the date of our purchase of our fourth vessel. After December 15, 2004 and the purchase of our fourth vessel, we were underfunded by $2.7 million by Fleet Acquisition. In May 2005, we received a waiver for the underfunding through May 31, 2005. Subsequently, Fleet Acquisition made the required capital contribution.
        We expect that our current credit facility will be fully repaid, using funds from this offering and from our new credit facility described below, at the close of this offering.
Our New Credit Facility
        We are negotiating a new credit facility that we expect to use to refinance our indebtedness and to acquire additional vessels. The new credit facility will be used partially to repay our current credit facility as well as to fund the acquisition of additional vessels that are accretive to our cash flow. Under the terms of our new credit facility, borrowings shall be used to repay indebtedness under our existing facility approximately $         million. After repayment of such indebtedness, approximately $         million may be used to fund vessel acquisitions. Our new credit facility will also allow us to borrow up to $20 million for working capital purposes.
        The new credit facility will have a term of 10 years. We will be permitted to borrow up to 65% of the value of the vessels that secure our obligations under the new credit facility up to the facility limit, provided that conditions to drawdown are satisfied. The facility limit will be $450 million for a period of six years. Thereafter the facility limit will reduce by an amount equal to 8.125% of the total commitment, semi-annually over a period of four years and reducing to $0 on the 10th anniversary.
        Our obligations under the credit facility will be secured by a first priority mortgage on each of the vessels in our fleet as well as any future vessel acquisitions pledged as collateral and funded by the new credit facility. The new credit facility will also be secured by a first priority security interest in earnings and insurance proceeds related to the collateral vessels. We may grant additional security from time to time.
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        Our ability to borrow amounts under the new credit facility will be subject to customary documentation relating to the facility, including security documents, satisfactory of certain customary conditions precedent and compliance with terms and conditions included in the loan documents. Before each drawdown, we will be required, among other things, to provide to the lenders acceptable valuations of the vessels in our fleet confirming that the loan outstanding under the new credit facility will not exceed 65% of the value of the vessels pledged as collateral. To the extent the vessels in our fleet that secure our obligations under the new credit facility are insufficient to satisfy minimum security requirements at the time of a drawdown or any time thereafter, we will be required to grant additional security or obtain a waiver or consent from the lenders. We will also not be permitted to borrow amounts under the facility if we experience a change in control. Interest on the amounts drawn will be payable at the rate of 0.95% per annum over LIBOR until the fifth anniversary of the closing of the new credit facility and 1.00% per annum thereafter.
        Under the terms of our new credit facility, we will be permitted to pay or declare dividends in accordance with the description under "Dividend Policy" and so long as no default or event of default has occurred and is continuing or would result from such declaration or payment.
        Please see the section of this prospectus entitled "New Credit Facility" for further information concerning our new credit facility.
Contractual Obligations
        The following table sets forth our contractual obligations and their maturity dates:

 	 	Within One
Year
	 	One to Three
Years
	 	Three to Five
Years
	 	More than
Five Years
	 	Total
	
 	 	(U.S. dollars in thousands)
	
Bank loans (1)	 	$	75,857	 	$	100,422	 	$	46,864	 	$	95,530	 	$	318,673	
Vessel purchase agreement (2)	 	$	38,989	 	 	—	 	 	—	 	 	—	 	$	38,989	

(1)
As of March 31, 2005, we had $319 million of indebtedness outstanding under loans from banks. Since March 31, 2005, we have drawn an additional $38.3 million in indebtedness as the two remaining vessels that we agreed to acquire were delivered by the seller. We intend to use $                  of the net proceeds from this offering to repay a portion of this outstanding indebtedness.

(2)
Two of the 16 vessels in our fleet were delivered after March 31, 2005. Under the applicable vessel purchase agreements we were obligated to pay $16.8 million with respect to the Genco Trader, $21.6 million with respect to the Genco Prosperity with an additional $0.7 million funded from working capital.
Capital Expenditures
        We make capital expenditures from time to time in connection with our vessel acquisitions. Our recent vessel acquisitions consist of our fleet of five Panamax drybulk carriers, six Handymax drybulk carriers and five Handysize drybulk carriers. As of March 31, 2005, we have funded the $318.7 million balance of the purchase price for our fleet with borrowings under our current credit facility. We intend to repay a portion of those borrowings with a portion of the net proceeds from this offering.
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        In addition to acquisitions that we may undertake in future periods, we will incur additional capital expenditures due to special surveys and drydockings. We estimate our drydocking costs for our fleet through 2007 to be:

Year
	 	Estimated Drydocking
Cost
	
 	 	(U.S. dollars in millions)
	
2005	 	$	0.3	
2006	 	 	1.7	
2007	 	 	2.1	
        We believe that the funding of these costs will be met with cash we generate from operations.
Off-balance Sheet Arrangements
        We do not have any off-balance sheet arrangements.
Inflation
        Inflation has only a moderate effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, administrative and financing costs.
Qualitative and Quantitative Market Risk
Interest Rates
        We are subject to market risks relating to changes in interest rates because we have significant amounts of floating rate debt outstanding. During 2004, we paid interest on this debt based on LIBOR plus an average spread of 1.35% on our bank loans. A 1% increase in LIBOR would have increased our interest expense for the period ended March 31, 2005 from $2.6 million to $3.2 million.
Currency and Exchange Rates
        We generate all of our revenues in U.S. dollars, but currently incur an immaterial amount of our operating expenses in currencies other than the U.S. dollar.
Critical Accounting Policies
        The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts 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 and conditions.
        Critical accounting policies are those that reflect significant judgments of 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, because they generally involve a comparatively higher degree of judgment in their application. For a description of all our significant accounting policies, see Note 2 to our consolidated financial statements included in this prospectus.
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         Revenue and Voyage Expense Recognition —Revenues are generated from time charter agreements. A time charter involves placing a vessel at the charterer's disposal for a set period of time during which the charterer may use the vessel in return for the payment by the charterer of a specified daily or monthly hire rate. In time charters, operating costs such as for crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. Time charter revenues are recorded over the term of the charter as service is provided. Revenues are recognized on a straight line basis as the average revenue over the term of the respective time charter agreement. Vessel operating expenses are recognized when incurred. We have no significant performance claims under our time charter agreements.
         Depreciation — We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate our drybulk vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from the date of initial delivery from the shipyard. Depreciation is based on cost less the estimated residual scrap value. We estimate the residual values of our vessels to be $175 per lightweight ton. An increase in the useful life of a drybulk vessel or in its residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a drybulk vessel or in its residual value would have the effect of increasing the annual depreciation charge. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, we will adjust the vessel's useful life to end at the date such regulations preclude such vessel's further commercial use.
         Impairment of Long-Lived Assets — We follow Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets , which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset's carrying amount. In the evaluation of the fair value and future benefits of long-lived assets, we perform an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value. Various factors including future charter rates, scrap values, future drydock costs and vessel operating costs are included in this analysis.
        Through March 31, 2005, no impairment charges were recorded, based on the analysis described above.
         Deferred Drydocking Costs — Our vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. We capitalize the costs associated with drydockings as they occur and amortize these costs on a straight-line basis over the period between drydockings. Capitalized drydocking costs include actual costs incurred at the drydock yard; cost of fuel consumed between the vessel's last discharge port before the drydocking and the time the vessel leaves the drydock yard; cost of hiring riding crews to perform drydocking-related activities and cost of parts that are believed to be reasonably likely to reduce the duration or cost of the drydocking; cost of travel, lodging and subsistence of our personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee a drydocking. We believe that these criteria are consistent with U.S. GAAP guidelines and industry practice and that our policy of capitalization reflects the economics and market values of the vessels.
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 THE INTERNATIONAL DRYBULK SHIPPING INDUSTRY
         The information and data in this section relating to the international drybulk shipping industry has been provided by Drewry Shipping Consultants, or Drewry, and is taken from Drewry databases and other sources available in the public domain. Drewry has advised us that it accurately describes the international drybulk shipping industry, subject to the availability and reliability of the data supporting the statistical and graphical information presented. Drewry's methodologies for collecting information and data, and therefore the information discussed in this section, may differ from those of other sources, and does not reflect all or even necessarily a comprehensive set of the actual transactions occurring in the drybulk shipping industry.
Drybulk Carrier Industry Overview
        The marine industry is an essential link in international trade, with ocean-going vessels representing the most efficient, and often the only method of transporting large volumes of basic commodities and finished products. In 2004, approximately 2.5 billion tons of drybulk cargo was transported by sea, comprising more than one-third of all international seaborne trade.
        Drybulk cargo is shipped in large quantities and can be easily stowed in a single hold with little risk of cargo damage. Drybulk cargo is generally categorized as either major bulk or minor bulk. Major bulk cargo constitutes the vast majority of drybulk cargo by weight, and includes, among other things, iron ore, coal and grain. Minor bulk cargo includes products such as agricultural products, mineral cargoes (including metal concentrates), cement, forest products and steel products and represents the balance of the drybulk industry.
        A comparable volume of trade involves the transport of liquids or gases in tanker vessels and includes products such as oil, refined oil products and chemicals. The breakdown of seaborne trade by main commodity type is indicated in the following table.
 
 World Seaborne Trade in 2004

 	 	Volume ( Million tons )
	 	% Total
	 	
All Cargo	 	 	 	 	 	
Drybulk	 	2,456	 	38.3	%	
Liquid (Oils/Gases/Chemicals)	 	2,520	 	39.8	%	
Container Cargo	 	896	 	14.1	%	
Non-Container /General Cargo	 	493	 	7.8	%	
 	 		 		 	
 	Total	 	6,365	 	100.0	%	
 	 		 		 	
Source: Drewry
49

 
 Drybulk Seaborne Trade—2004
         
Source: Drewry
        In terms of seaborne trade volumes (and the shipping ton-miles generated), the dominant influence is that of the major bulk trades, which include coal, iron ore and grains. During 2004, global seaborne trade in major bulks was 1.5 billion tons, representing 61% of total seaborne drybulk trade.
        Over the past decade, Asia has significantly increased its presence as an importer in the drybulk market. Regional growth has been varied, with China providing the fastest growth during this period. During the same period, the U.S. has shown an increase in drybulk imports while Japan and Western Europe experienced a decline in drybulk imports.
        Volume in the global drybulk market has increased from 1.7 billion tons to 2.5 billion tons over the past 10 years, an increase of over 40%. Total drybulk trade in 2004 amounted to over a third of the total international seaborne market.
Steel Related Commodities
Iron Ore
        Iron ore is used as a raw material for the production of steel along with limestone and coking coal. Steel is the most important construction and engineering material in the world. In 2004, approximately 650 million tons of iron ore was exported worldwide, with the main importers being China, the European Union, Japan and South Korea. The main producers and exporters of iron ore are Australia and Brazil.
        As the figures below indicate, Chinese imports of iron ore have grown significantly in the last few years and have been a major driving force in the drybulk sector. Total iron ore imports for 2004 of 208 million tons increased by approximately 40% over 2003 import levels and have increased at a compound annual growth rate of 30% since 1999.
50

 
 Chinese Iron Ore Imports

Year
	 	Volume
( Million tons )
	
1999	 	55.3	
2000	 	70.0	
2001	 	92.5	
2002	 	111.3	
2003	 	148.2	
2004	 	208.1	

Source: Drewry	

        This growth rate in iron ore imports is matched by Chinese steel production. Over the last five years, steel production in China has grown at an average annual rate of almost 17%, compared to global production increasing by an average 5.6% per annum.
 
 Crude Steel Production

 	 	Volume
( Million tons )
	
Year
			
	 	EU
	 	Japan
	 	China
	 	Global
	
1999	 	155.8	 	94.2	 	123.7	 	787.7	
2000	 	163.3	 	106.4	 	127.2	 	829.6	
2001	 	158.5	 	102.9	 	150.9	 	833.8	
2002	 	158.1	 	107.7	 	179.7	 	883.9	
2003	 	159.5	 	110.5	 	219.3	 	944.0	
2004	 	170.0	 	112.7	 	269.3	 	1,033.5	

Source: Drewry	

 	

 	

Coking Coal
        Coal is an abundant commodity. At current production rates, coal reserves would provide approximately 200 years of supply, compared with 41 years for oil and 67 years for natural gas. In addition, coal is mined in more than 50 countries with no world dependence in any one region. Coking (metallurgical) coal is used to produce coke to feed blast furnaces in the production of steel. An increase in seaborne transportation of coking coal has been primarily driven by an increase in steel production. The increase in import activity has occurred in a number of regions. Currently, Asia and Western Europe are major importers of coking coal. Australia and Indonesia provide a significant amount of coking coal to Asia, while South Africa and the United States are major sources for Western Europe.
Steel Products
        Major importers of steel products are China, the United States and South East Asia. Major exporters of steel products are Japan, Russia and Western Europe. Handymax and Handysize vessels are typically preferred for transporting steel products. For voyages that span the Atlantic and Pacific Ocean, Handymax vessels are frequently used on shorter routes involving intra-Asian and intra-European trades.
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Steam Coal
        Steam coal is primarily used for power generation. A number of developing countries have decided to capitalize on the recent dramatic increase in oil and gas prices to build new power plants that utilize coal. This has resulted in significant growth in the steam coal trade. The most dramatic growth has occurred in China and Indonesia, both of which have increased their export capacity in the intra-Asian market. Furthermore, in the global market for steam coal, China is a major importer and Australia is the largest exporter.
        Asian coal is primarily traded in Panamax, Handymax and Handysize vessels. European countries tend to import steam coal from exporters in the Atlantic region using Panamax vessels.
        China's coal exports and imports have increased dramatically over the last five years. Its 73 million tons of exports in 2003 represented an average annual increase of 42% since its 1999 exports of 12.7 million tons, and its 2003 imports of 10.8 million tons, represented an average annual increase of 47% since the 1.6 million tons in 1999.
Grain
        Grains include wheat, coarse grains (corn, barley, oats, rye and sorghum) and oil seeds extracted from different crops such as soybeans and cottonseeds. In general, wheat is used for human consumption, while coarse grains are used as feed for livestock. Oil seeds are used to manufacture vegetable oil for human consumption or for industrial use, while their protein rich residue is used as a raw material in animal feed.
        Total grain production is dominated by the U.S. Argentina is the second largest producer followed by Canada and Australia. In terms of imports, the Asia/Pacific region (excluding Japan) ranks first, followed by Latin America, Africa and the Middle East. The principal vessel classes used in the grain trade are Panamax and Handymax.
Minor Bulks
Forest Products
        Over the past decade, seaborne transportation of forest products has increased by approximately 30 million tons. South America has increased its export market share, with an emphasis on the export of wood pulp and lumber. The emphasis on wood pulp and lumber export can be tied directly not only to the increase in wood pulp and sawmill capacity, but also to plantations that have taken advantage of their large wood reserves, which coincided with higher growth of such raw materials. The largest importers of wood products are China, Japan, the United States and Western Europe. Over the past year, trade in woodchips and wood pellets has demonstrated growth as a result of an increase in the use of wood for energy production.
        The positive trend in the transportation of wood products has benefited Handymax and Handysize vessels, which are the vessels typically employed to transport these products.
Other Minor Bulks
        The balance of drybulk trade is represented by agricultural cargoes, bauxite and alumina, fertilizers and cement. Minor bulks are typically transported by smaller vessels of less than 40,000 dwt. In 2004, total trade in minor bulks amounted to approximately 958 million tons.
Drybulk Carrier Demand
        The demand for drybulk carrier capacity is determined by the underlying demand for commodities transported in drybulk carriers, which in turn is influenced by trends in the global economy. Seaborne
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drybulk trade increased by slightly more than 2% on an average annual basis during the 1980s and 1990s. However, this rate of growth has increased dramatically in recent years. Between 1999 and 2004, trade in all drybulk commodities increased from 2.0 billion tons to 2.5 billion tons, an increase of 25% overall.

                 Drybulk Trade Development	

Source: Drewry
        Generally, growth in gross domestic product and industrial production correlates with peaks in demand for seaborne transportation. Certain economies will act from time to time as the "primary driver" of the drybulk carrier market. In the 1990s, Japan acted as the primary driver due to increased demand for seaborne trade and growth in Japanese industrial production. China has been the main driving force behind the recent increase in seaborne drybulk trades and the demand for drybulk carriers. In addition to coal and iron ore, Chinese imports of steel products have also increased sharply in the last five years, thereby creating additional demand for drybulk carriers.
        The following table illustrates China's gross domestic product growth rate compared to that of the U.S. and global growth during the periods indicated.

 	 	GDP Growth
	
Years
	 	China GDP Growth (%)
	 	U.S. GDP Growth (%)
	 	Global GDP Growth (%)
	
1981-1985	 	10.1	 	2.6	 	2.4	
1986-1990	 	7.8	 	2.6	 	2.8	
1991-1995	 	12.0	 	2.3	 	1.2	
1996-2000	 	8.3	 	4.1	 	3.5	
2001-2003	 	7.9	 	1.9	 	3.2	
2004	 	9.5	 	4.4	 	4.8	
Source: Drewry, Asian Development Bank
Ton-Miles
        The extent to which increases in drybulk trade have affected demand for drybulk carriers is reflected in estimates of ton-mile demand. Ton-mile demand is calculated by multiplying the volume of cargo moved on each route by the distance of the voyage. Between 1999 and 2004, ton-mile demand in the drybulk sector increased by a total of 25% to 11.5 billion ton-miles. For some commodities, there has been over the years a shift in demand due to changing trade routes. For example, the Brazil to China iron ore route became a significant trade route approximately six to eight years ago. Previously,
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the principal iron ore trade route was from Brazil to Japan. The increase in trade on the route to China has increased the demand for shipping due to the length of the voyage. Conversely, as Chinese demand has grown, there has been some shift in the sourcing of iron ore away from Atlantic sources to Pacific regions, such as Australia. However this shift has not yet reached proportions significant enough to affect the ton-mile demand. The table below details the growth in ton-mile demand for the main drybulk commodities.
 
 Ton-Mile Demand by Commodity

 	 	Volume
( in billions )
	 	
 	 	1999
	 	2000
	 	2001
	 	2002
	 	2003
	 	2004
	 	99-04 CAGR
	 	
Iron Ore	 	2,436	 	2,713	 	2,718	 	2,927	 	3,266	 	3,516	 	7.6	%	
Coal	 	2,367	 	2,530	 	2,612	 	2,657	 	2,788	 	2,950	 	4.5	%	
Grain	 	1,138	 	1,194	 	1,260	 	1,183	 	1,156	 	1,241	 	1.7	%	
Bauxite/Alumina	 	192	 	195	 	190	 	197	 	204	 	212	 	2.0	%	
Phosrock	 	112	 	111	 	113	 	113	 	117	 	120	 	1.4	%	
Agribulks	 	434	 	424	 	440	 	436	 	441	 	453	 	0.9	%	
Forest Products	 	615	 	638	 	621	 	632	 	641	 	669	 	1.7	%	
Fertilizers	 	389	 	400	 	386	 	392	 	399	 	415	 	1.3	%	
Minerals	 	156	 	164	 	162	 	170	 	183	 	194	 	4.5	%	
Iron & Steel	 	924	 	984	 	977	 	1,033	 	1,107	 	1,225	 	5.8	%	
Manufactured Products	 	443	 	472	 	479	 	487	 	503	 	516	 	3.1	%	
 	Total Demand	 	9,205	 	9,825	 	9,958	 	10,227	 	10,805	 	11,511	 	4.6	%	
 	 		 		 		 		 		 		 	 	 	
Source: Drewry
        Drybulk carriers can be the most versatile element of the global shipping fleets in terms of employment alternatives. However, drybulk carriers seldom operate on round-trip voyages. Rather, the norm is port-to-port liner service and triangular or multi-leg voyages. This means that every voyage has a ballast leg that must be paid for by the laden or revenue earning leg. Hence, trade distances assume greater importance in the demand equation. The following map represents the major global drybulk trade routes.
 
 Major Drybulk Seaborne Trade Routes
 (2004 approximate values)

Source: Drewry
54

Seasonality
        The three largest commodity drivers of the drybulk industry, iron ore, steam coal and grains, are all affected by seasonal demand fluctuations. Steam coal is linked to the energy markets and in general encounters upswings towards the end of the year in anticipation of the forthcoming winter period as power supply companies try to increase their stocks, or during hot summer periods when increased electricity demand is required for air conditioning and refrigeration purposes. Grain production is highly seasonal and driven by the harvest cycle of the Northern and Southern Hemispheres. However, with four nations and the European Union representing the largest grain producers (the U.S., Canada and the European Union in the northern hemisphere and Argentina and Australia in the southern hemisphere), harvests and crops reach seaborne markets throughout the year.
Drybulk Carrier Supply
        The worldwide drybulk carrier fleet subdivides into four vessel size categories, which are based on cargo carrying capacity.
Capesize —vessels over 80,000 dwt. While this is the traditional definition of a Capesize bulk carrier, in terms of deadweight, the sector is changing. As per the orderbook detailed below, there have been a number of new super-Panamaxes ordered, which are 82,000 to 85,000 dwt, but which are able to transit the Panama Canal with a full cargo. Thus, a more modern definition of Capesize would be based on vessels over 100,000 dwt. The Capesize sector is focused on long haul iron ore and coal trade routes. Due to the size of the vessels there are only a comparatively small number of ports around the world with the infrastructure to accommodate them.
Panamax —vessels between 60,000 dwt and 80,000 dwt. Panamax vessels, defined as those with the maximum beam (width) of 32.2 metres permitted to transit the Panama Canal, carry coal, grain, and to a lesser extent, minor bulks, including steel products, forest products and fertilizers.
Handymax —vessels between 30,000 dwt and 60,000 dwt. The Handymax sector operates in a large number of geographically dispersed global trades, mainly carrying grains and minor bulks including steel products, forest products, and fertilizers. Vessels less than 60,000 dwt are built with on-board cranes that enable them to load and discharge cargo in countries and ports with limited infrastructure.
Handysize— vessels up to 30,000 dwt, which carry exclusively minor bulk cargoes. Historically, the Handysize drybulk carrier sector was seen as the most versatile. Increasingly, however, this has become more of a regional trading, niche sector. The vessels are well suited for small ports with length and draft restrictions and also lacking infrastructure.
55

        The supply of drybulk carriers is a function of the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or loss. The following chart illustrates drybulk carrier fleet development since 1990.
 
 Drybulk Carrier Fleet Development—Deliveries vs. Scrappings

         Source: Drewry
        The chart below shows drybulk carrier fleet development between 1990 and May 2005 and how the orderbook as a percentage of the fleet has fluctuated throughout this period.
 
 Drybulk Carrier Fleet and Orderbook Development

         Source: Drewry
56

        The following tables illustrate the size and composition of the world drybulk carrier fleet as of May 2005.
 
 Drybulk Carrier Fleet—May 2005

 	 	Current Fleet
	 	Orderbook
	 	
 	 	No.
	 	Dwt
(Million)
	 	% of
Fleet
	 	No.
	 	Dwt
(Million)
	 	% of
Fleet
	 	
Capesize	 	689	 	110.4	 	33.2	%	250	 	37.3	 	33.8	%	
Panamax	 	1,183	 	83.9	 	25.2	%	179	 	13.5	 	16.1	%	
Handymax	 	2,242	 	94.7	 	28.5	%	364	 	17.5	 	18.5	%	
Handysize	 	1,926	 	43.6	 	13.1	%	63	 	1.4	 	3.2	%	
 	 		 		 		 		 		 		 	
Total	 	6,040	 	332.5	 	100.0	%	856	 	69.7	 	21.1	%	
 	 		 		 		 		 		 		 	
         Source: Drewry
        The 80,000 to 100,000 sector, included in the Capesize sector in the above table, includes some vessels with a Panamax design.
 
 Historical Drybulk Carrier Fleet and Orderbook 2001 to 2004

 	 	2001
	 	2002
	 	2003
	 	2004
	 	
Capesize (80,000+ dwt)	 	 	 	 	 	 	 	 	 	
No. of Vessels	 	583.0	 	598.0	 	625.0	 	661.0	 	
Dwt (in millions)	 	91.3	 	94.0	 	98.6	 	104.9	 	
Vessels as % of total fleet	 	10.4	%	10.6	%	11.0	%	11.3	%	
Vessels on order	 	70.0	 	89.0	 	129.0	 	206.0	 	
Dwt on order (millions)	 	10.9	 	14.5	 	18.9	 	30.7	 	
% of sector fleet on order	 	12.0	%	15.4	%	19.2	%	29.2	%	

Panamax (60,000 to 80,000 dwt)	

 	

 	

 	
No. of Vessels	 	1040.0	 	1081.0	 	1095.0	 	1170.0	 	
Dwt (in millions)	 	72.4	 	75.7	 	76.7	 	82.1	 	
Vessels as % of total fleet	 	18.6	%	19.1	%	19.3	%	20.0	%	
Vessels on order	 	125.0	 	87.0	 	238.0	 	271.0	 	
Dwt on order (millions)	 	9.1	 	6.1	 	16.8	 	18.5	 	
% of sector fleet on order	 	12.6	%	8.0	%	21.9	%	22.6	%	

Handymax (30,000 to 60,000 dwt)	

 	

 	

 	
No. of Vessels	 	1932.0	 	1989.0	 	2034.0	 	2096.0	 	
Dwt (in millions)	 	79.4	 	82.6	 	85.4	 	87.8	 	
Vessels as % of total fleet	 	34.6	%	35.1	%	35.8	%	35.8	%	
Vessels on order	 	231.0	 	200.0	 	238.0	 	298.0	 	
Dwt on order (millions)	 	10.7	 	9.0	 	10.6	 	13.5	 	
% of sector fleet on order	 	13.5	%	10.9	%	12.4	%	15.3	%	

Handysize (up to 30,000 dwt)	

 	

 	

 	
No. of Vessels	 	2027.0	 	1997.0	 	1924.0	 	1922.0	 	
Dwt (in millions)	 	44.2	 	43.4	 	42.0	 	41.9	 	
Vessels as % of total fleet	 	36.3	%	35.3	%	33.9	%	32.9	%	
Vessels on order	 	73.0	 	45.0	 	60.0	 	58.0	 	
Dwt on order (millions)	 	1.6	 	0.9	 	1.2	 	1.2	 	
% of sector fleet on order	 	3.6	%	2.1	%	2.8	%	3.0	%	

Total	

 	

 	

 	
No. of Vessels	 	5582.0	 	5665.0	 	5678.0	 	5849.0	 	
Dwt (in millions)	 	287.3	 	295.7	 	302.7	 	316.7	 	
Vessels on order	 	499.0	 	421.0	 	665.0	 	833.0	 	
Dwt on order (millions)	 	32.4	 	30.4	 	47.5	 	63.9	 	
% of total fleet on order	 	11.3	%	10.3	%	15.7	%	20.2	%	
         Source: Drewry
        The 80,000 to 100,000 sector, includes some vessels with a Panamax design (as per previous note).
57

        The size of the drybulk carrier orderbook fluctuates over time and in May 2005 amounted to 69.7 million dwt, which was equivalent to 21% of the existing fleet. Most of the vessels on order will be delivered within the next two to three years.
 
 Drybulk Carrier Orderbook—May 2005

 	 	2005
	 	2006
	 	2007
	 	2008+
	 	Total
	
Size
	 	No.
	 	Dwt
(thousand)
	 	No.
	 	Dwt
(thousand)
	 	No.
	 	Dwt
(thousand)
	 	No.
	 	Dwt
(thousand)
	 	No.
	 	Dwt
(thousand)
	 	% of
fleet
	
Capesize	 	46	 	7,259	 	90	 	11,978	 	68	 	9,369	 	46	 	8,668	 	250	 	37,274	 	33.8	
Panamax	 	56	 	4,221	 	56	 	4,240	 	55	 	4,163	 	12	 	913	 	179	 	13,537	 	16.1	
Handymax	 	101	 	4,759	 	134	 	6,427	 	90	 	4,383	 	39	 	1,927	 	364	 	17,496	 	18.5	
Handysize	 	20	 	469	 	27	 	600	 	15	 	315	 	1	 	29	 	63	 	1,413	 	3.2	
 	 		 		 		 		 		 		 		 		 		 		 		
 	Total	 	223	 	16,708	 	307	 	23,245	 	228	 	18,230	 	98	 	11,537	 	856	 	69,720	 	21.0	
 	 		 		 		 		 		 		 		 		 		 		 		
         Source: Drewry
        The 80,000 to 100,000 sector includes 68 vessels with a Panamax design (as per previous note).
        Key elements influencing the supply of drybulk carriers are vessel deliveries and the loss of existing vessels through scrapping or other circumstances requiring removal. A comparison of vessels in each category reveals that Capesize vessels have the largest percentage of current fleet on order when compared to the Panamax, Handymax and Handysize categories.
        The graph below details the age profile of the drybulk carrier fleet as at end May 2005.
 
 Drybulk Carrier Age Profile—May 2005

         Source: Drewry
        The number of ships removed from the fleet in any period is dependent upon prevailing market conditions, scrap prices in relation to current and prospective charter market conditions as well as the age profile of the existing fleet. Generally, as a vessel increases in age its operational efficiency declines due to rising maintenance requirements, to the point where it becomes unprofitable to keep the ship in operation.
58

        The following table indicates the scrapping rates of drybulk carriers for the period 2001 to 2004.
 
 Drybulk Carrier Scrapping

 	 	2001
	 	2002
	 	2003
	 	2004
	
Capesize (80,000 dwt plus)	 	 	 	 	 	 	 	 	
 	Fleet size (million dwt)	 	91.3	 	94.0	 	98.6	 	104.9	
 	Fleet scrapped (no. of vessels)	 	3.0	 	8.0	 	2.0	 	1.0	
 	Fleet scrapped (million dwt)	 	0.4	 	0.9	 	0.3	 	0.1	
 	% of fleet scrapped	 	0.5	 	1.0	 	0.3	 	0.1	
Panamax (60-80,000 dwt)	 	 	 	 	 	 	 	 	
 	Fleet size (million dwt)	 	72.4	 	75.7	 	76.7	 	82.1	
 	Fleet scrapped (no. of vessels)	 	28.0	 	18.0	 	7.0	 	1.0	
 	Fleet scrapped (million dwt)	 	1.9	 	1.2	 	0.5	 	0.1	
 	% of fleet scrapped	 	2.5	 	1.5	 	0.6	 	1.1	
Handymax (35-60,000 dwt)	 	 	 	 	 	 	 	 	
 	Fleet size (million dwt)	 	79.4	 	82.6	 	85.4	 	87.8	
 	Fleet scrapped (no. of vessels)	 	40.0	 	25.0	 	29.0	 	0.0	
 	Fleet scrapped (million dwt)	 	1.5	 	0.9	 	1.1	 	0.0	
 	% of fleet scrapped	 	1.9	 	1.1	 	1.3	 	0.0	
Handysize (up to 35,000 dwt)	 	 	 	 	 	 	 	 	
 	Fleet size (million dwt)	 	44.2	 	43.4	 	42.0	 	41.9	
 	Fleet scrapped (no. of vessels)	 	62.0	 	64.0	 	25.0	 	4.0	
 	Fleet scrapped (million dwt)	 	1.4	 	1.6	 	0.6	 	0.1	
 	% of fleet scrapped	 	3.2	 	3.7	 	1.4	 	0.2	
Total	 	 	 	 	 	 	 	 	
 	Fleet size (million dwt)	 	287.3	 	295.7	 	302.7	 	316.7	
 	Fleet scrapped (no. of vessels)	 	133.0	 	115.0	 	63.0	 	6.0	
 	Fleet scrapped (million dwt)	 	5.2	 	4.7	 	2.4	 	0.3	
 	% of fleet scrapped	 	1.8	 	1.6	 	0.8	 	0.1	
         Source: Drewry
        In the last five years, the average age at which vessels in the drybulk sector have been scrapped (demolished) is 26 years. Even though there has been little variation in the age at which drybulk vessels are scrapped, many well-maintained vessels continue to trade to 30 years or more.
        The supply of drybulk carriers is not only a result of the number of ships in service, but also the operating efficiency of the worldwide fleet. For example, port congestion, which was a feature of the market in 2004, absorbed additional tonnage and therefore tightened the underlying supply/demand balance.
        The international drybulk shipping industry is highly fragmented and is divided among state controlled and independent drybulk vessel owners. The world's active drybulk fleet consists of approximately 6,040 drybulk vessels, representing approximately 332.5 million dwt. As a general principle, the smaller the cargo carrying capacity of a drybulk vessel, the more fragmented is its market, both with regard to charterers and vessel owners/operators. Even among the larger drybulk vessel owners and operators, whose drybulk carriers are mainly the larger vessel types, only three companies have fleets of 100 vessels or more: the Chinese Government (directly and through China Ocean Shipping and China Shipping Group) and the two largest Japanese shipping companies, Mitsui OSK Lines and Nippon Yusen Kaisha. There are no more than 30 owners with fleets of between 20 and 100 vessels. Currently, no single owner or operator exerts substantial influence in the industry, and the largest owner has less than 5% of the total market dwt.
59

        There remains significant potential for industry consolidation within each vessel type, especially in the Handysize, Handymax and Panamax sectors in which we currently operate. No single owner controls more than 5% of any single segment.
 
 Drybulk Fleet Ownership Summary
(As of May 2005)

Source: Drewry
Charter Market
        Drybulk carriers are employed in the market via a number of different chartering options. The general terms typically found in these types of contracts are described below.
A " bareboat charter " involves the use of a vessel usually over longer periods of time ranging over several years. In this case all voyage related costs, including vessel fuel and port dues as well as all vessel-operating expenses such as day-to-day operations, maintenance, crewing and insurance, transfer to the charterer's account. The owner of the vessel receives monthly charter hire payments on a per day basis and is responsible only for the payment of capital costs related to the vessel.
A " time charter " involves the use of the vessel, either for a number of months or years or for a trip between specific delivery and redelivery positions, known as a trip charter. The charterer pays all voyage-related costs. The owner of the vessel receives semi-monthly charter hire payments on a per-day basis and is responsible for the payment of all vessel operating expenses and capital costs of the vessel.
A " voyage charter " or " spot charter " involves the carriage of a specific amount and type of cargo on a load-port to discharge-port basis, subject to various cargo handling terms. Most of these charters are of a single voyage nature, as trading patterns do not encourage round voyage trading. The owner of the vessel receives one payment derived by multiplying the tons of cargo loaded on board times the agreed upon freight rate expressed on a per-ton basis. The owner is responsible for the payment of all expenses including voyage, operating and capital costs of the vessel. Chartering on a single voyage or a trip charter basis may be referred to as spot chartering activity.
A " contract of affreightment " relates to the carriage of multiple cargoes over the same route and enables the coa holder to nominate different ships to perform the individual sailings. Essentially it
60

constitutes a number of voyage charters to carry a specified amount of cargo during the term of the coa, which usually spans a number of years. All of the ship's operating, voyage and capital costs are borne by the ship owner. The freight rate normally is agreed on a per cargo-ton basis.
Charter Rates
        Charter hire rates paid for drybulk carriers are primarily a function of the underlying balance between vessel supply and demand, although at times other factors may play a role. Furthermore, the pattern seen in charter hire rates is broadly mirrored across the different charter types and between the different drybulk carrier categories. However, because demand for larger drybulk vessels is affected by the volume and pattern of trade in a relatively small number of commodities, charter hire rates (and vessel values) of larger ships tend to be more volatile than those for smaller vessels. Conversely, trade in minor bulks drives demand for smaller drybulk carriers. Accordingly, charter hire rates and vessel values for those vessels are subject to less volatility.
        In the time charter market, rates vary depending on the length of the charter period and vessel specific factors such as age, speed and fuel consumption. Short-term time charter hire rates are generally higher than long-term charter hire rates. The market benchmark tends to be a 12-month time charter hire rate, based on a vessel of five to ten years age.
        In the voyage charter market, rates are influenced by cargo size, commodity, port dues and canal transit fees, as well as delivery and redelivery regions. In general, a larger cargo size is quoted at a lower rate per ton than a smaller cargo size. Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit. Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates, because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.
        Within the drybulk shipping industry, the charter hire rate references most likely to be monitored are the freight rate indices issued by the Baltic Exchange. These references are based on actual charter hire rates under charters entered into by market participants as well as daily assessments provided to the Baltic Exchange by a panel of major shipbrokers.
 
 Time Charter Rates—12 month period, prompt delivery

         Source: Drewry
61

        The preceding chart illustrates the one-year time charter rates for Handymax, Panamax and Capesize drybulk carriers between 1994 and May 2005.
        Drybulk charter hire rates for all sizes of vessel followed a similar pattern over the historical period. In 2003 and 2004, rates for all sizes of drybulk carriers strengthened appreciably to historically high levels. The driver of this dramatic upsurge in charter rates was primarily the high level of demand for raw materials imported by China. Rates in 2005 started out at slightly lower levels, but remain relatively high compared to historical levels.
        The following graph details the Baltic Panamax Index. This is a daily Index produced by the Baltic Exchange from a range of spot voyage and trip freight rates. A panel of shipbrokers determines the rates.
 
 Baltic Panamax Index

         Source: Baltic Exchange
Drybulk Carrier Prices
        Market conditions in each of the major sectors in the shipping industry—drybulk carriers, tankers and containerships—have prospered over the past 18 months. This is illustrated from the number of newbuilding resales seen in 2003 and 2004.
        This has helped trigger an upsurge in newbuilding activity across each of these fleet sectors. In addition, newbuilding demand is also strong for Liquefied Natural Gas (LNG) carriers and other specialized ship categories. Consequently, the near-term availability of newbuilding berths for vessel delivery before the end of 2007 is scarce, and after a period of stagnation, newbuilding prices for all vessel types have increased significantly, due to a combination of rising demand, shortage in berth space and rising raw material costs, especially the price of steel. The weakening of the U.S. dollar has also contributed to the recent surge in newbuilding prices, as yards protect themselves from incurring additional currency costs. The trend in indicative newbuilding prices for a series of specific vessels in each size sector is shown in the chart below.
62

 
 Drybulk Carrier Newbuilding Prices

         Source: Drewry
        The steep increase in newbuilding prices and the strength in the charter market have also affected vessel prices in the second-hand market, which have also significantly increased over the last 18 months. The table below shows the historical series for secondhand values for a five- and ten-year-old vessels in each sector of the drybulk fleet.
 
 Drybulk Carrier Secondhand Prices

         Source: Drewry
        With vessel earnings running at high levels and a dearth of available newbuilding berths, demand for ships offering early delivery has been at a premium. In some instances, the market has witnessed second-hand prices for five- and ten-year-old drybulk carriers reaching levels higher than those for comparably sized newbuildings to be delivered later in time.
63

 
 BUSINESS
        We are a newly formed New York City-based company, incorporated in the Marshall Islands. We transport iron ore, coal, grains, steel products and other drybulk cargoes along worldwide shipping routes. Our fleet consists of 16 drybulk carriers, which we acquired from a subsidiary of COFCO in December 2004 and during the first six months of 2005, with the last vessel delivered in June 2005. All of the vessels acquired in this transaction were acquired free of any existing charter. Fourteen of the 16 vessels in our fleet are on long-term time charters, with an average remaining life of 1.6 years as of March 31, 2005. Currently, the Genco Leader and the Genco Trader are on short-term time charters that are scheduled to expire in July 2005. All of our vessels in our fleet are chartered to reputable charterers, including Lauritzen Bulkers, Cargill, BHP, NYK Europe and HMMC. All of our present charterers have been approved by the lenders under our current credit facility. Due to the length and the average remaining life of our time charters, we expect these time charters to provide us with stable revenues for the next 12 to 18 months.
        We intend to grow our fleet through timely and selective acquisitions of vessels in a manner that is accretive to our cash flow. In connection with this growth strategy, we intend to use the net proceeds of this offering to repay a significant portion of our existing indebtedness. We are also negotiating a new credit facility that we expect to use to refinance our existing indebtedness and to acquire additional drybulk carriers that will be employed either in the spot or period charter market.
Our Fleet
        Our fleet consists of five Panamax, six Handymax and five Handysize drybulk carriers with an aggregate carrying capacity of approximately 790,000 dwt. As of March 31, 2005, the average age of our fleet was eight years as compared to the average age for the world fleet of approximately 16 years for the drybulk shipping segments in which we compete. See "The International Drybulk Shipping Industry." All of the vessels in our fleet were built in Japanese shipyards with a reputation for constructing high-quality vessels. Our fleet contains three groups of sister ships, which are vessels of virtually identical sizes and specifications.
        The following table summarizes information about our fleet:

Vessel Name
	 	Class
	 	Dwt
	 	Year Built
	
Genco Beauty (1)	 	Panamax	 	73,941	 	1999	
Genco Knight (1)	 	Panamax	 	73,941	 	1999	
Genco Leader (1)	 	Panamax	 	73,941	 	1999	
Genco Vigour (1)	 	Panamax	 	73,941	 	1999	
Genco Trader	 	Panamax	 	69,388	 	1990	

Genco Success (2)	
 	
Handymax	
 	
47,186	
 	
1997	
Genco Carrier (2)	 	Handymax	 	47,180	 	1998	
Genco Prosperity (2)	 	Handymax	 	47,180	 	1997	
Genco Wisdom (2)	 	Handymax	 	47,180	 	1997	
Genco Marine	 	Handymax	 	45,222	 	1996	
Genco Glory	 	Handymax	 	41,062	 	1984	

Genco Explorer (3)	
 	
Handysize	
 	
29,952	
 	
1999	
Genco Pioneer (3)	 	Handysize	 	29,952	 	1999	
Genco Progress (3)	 	Handysize	 	29,952	 	1999	
Genco Reliance (3)	 	Handysize	 	29,952	 	1999	
Genco Sugar (3)	 	Handysize	 	29,952	 	1998	

(1)
Each vessel is a sister ship of the other indicated vessels.

(2)
Each vessel is a sister ship of the other indicated vessels.

(3)
Each vessel is a sister ship of the other indicated vessels.
64

Fleet Management
        Our management team and other employees are responsible for the commercial and strategic management of our fleet. Commercial management involves negotiating charters for vessels, managing the mix of various types of charters, such as time charters and voyage charters, and monitoring the performance of our vessels under their charters. Strategic management involves locating, purchasing, financing and selling vessels. Our management team is led by our President, Robert Gerald Buchanan, who has 40 years of experience in the shipping industry and most recently served as the managing director of Wallem. Mr. Buchanan has a broad range of experience in ship management operations and engineering.
        We intend to use the services of reputable independent technical managers for the technical management of our fleet. We currently contract with Wallem, an independent technical manager, for our technical management. Technical management involves the day-to-day management of vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplies. However, members of our New York City-based management team oversee the activities of our independent technical manager. The head of our technical management team has over 30 years of experience in the shipping industry.
        Wallem, founded in 1971 and currently based in Hong Kong, is one of the largest ship management companies in the world. As a subsidiary of the Wallem Group, Wallem Shipmanagement is backed by over 35 years of experience in the industry. Wallem, also known worldwide for its agency network, covering all major ports in China, Hong Kong, Japan, Vietnam, Taiwan, Thailand, Malaysia, Indonesia, the Philippines and Singapore, has managed almost 800 vessels of virtually every type and trade over the past 32 years amounting to a total deadweight managed of 55 million tons. The ship management team currently consists of approximately 6,250 people that work on Wallem managed ships and in Wallem offices around the world. It currently manages 211 vessels of all types, including 79 Panamax, Handymax and Handysize drybulk carriers totaling in excess of 16 million dwt and meet strict quality standards including SEPS, ISO 9002, ISO9001, ISO 14001, ISMA 1994/2003, ISM, OHSAS 18001 and the Green Award program.
        Under our technical management agreements, our technical manager is obligated to:
•
Provide personnel to supervise the maintenance and general efficiency of our vessels;

•
Arrange and supervise the maintenance of our vessels to our standards to assure that our vessels comply with applicable national and international regulations and the requirements of our vessels' classification societies;

•
Select and train the crews for our vessels, including assuring that the crews have the correct certificates for the types of vessels on which they serve;

•
Check the compliance of the crews' licenses with the regulations of the vessels' flag states and the International Maritime Organization, or IMO;

•
Arrange the supply of spares and stores for our vessels; and

•
Report expense transactions to us, and make its procurement and accounting systems available to us.
Our Competitive Strengths
        We believe that we possess a number of strengths that provide us with a competitive advantage in the drybulk shipping industry, including the following:
•
We own a modern, high-quality fleet of drybulk carriers . We have a modern fleet consisting of vessels with an average age of eight years as of March 31, 2005 as compared to the average age of approximately 16 years for the world fleet. All of our vessels were built in Japanese shipyards
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with a reputation for constructing high-quality vessels, with 13 of our vessels having been built at the Oshima S.B. Co. shipyard. We believe that owning a modern, high-quality fleet:
—
reduces operating costs and fuel consumption;

—
allows us to secure favorable financing terms by enabling lenders to feel secure with their collateral;

—
makes our fleet more reliable by reducing the likelihood of breakdowns and off-hire;

—
reduces potential liabilities by enabling us to perform charters at the agreed vessel speed; and

—
provides us with a competitive advantage in securing favorable time charters from charterers who prefer vessels that have greater fuel efficiency than older vessels and can serve with fewer interruptions due to breakdowns.

•
Our fleet includes three groups of sister ships . Sister ships can use similar spare parts, and their crews are interchangeable. We believe that maintaining a fleet that includes sister ships increases our revenue generating potential by improving our operational and scheduling flexibility and reduces costs by creating economies of scale in the maintenance, supply and crewing of our vessels. We also believe that having sister ships makes our fleet more attractive to time charterers because they can interchange cargoes among the sister ships.

•
Our Chairman and board of directors have substantial experience in the shipping industry . Peter C. Georgiopoulos, the Chairman of our board of directors, is the founder of General Maritime Corp. (NYSE: GMR), a large, publicly-traded supplier of international seaborne crude oil transportation services. Mr. Georgiopoulos oversaw the growth of General Maritime from a single vessel privately owned company to a publicly traded owner and operator of 47 tankers. Including Mr. Georgiopoulos, three of the five members of our board have extensive experience in managing private and publicly traded shipping companies.

•
We have an experienced U.S.-based management team . Our management team is based in New York City and includes several executives with extensive experience in the shipping industry who have demonstrated substantial ability in managing the commercial, technical and financial aspects of our business. Our management team is led by our President, Robert Gerald Buchanan, who has 40 years
of experience in the shipping industry. Mr. Buchanan has a broad range of experience in the shipping industry and most recently served as the managing direction of Wallem. Our Chief Financial Officer, John C. Wobensmith, has worked in the shipping industry for over 11 years before joining us. He has been involved in a wide range of ship finance projects both in the commercial and investment banking sectors. Our current management team has an average of over 25 years of shipping industry experience.
•
We benefit from strong relationships with members of the shipping and financial industries . We have developed strong relationships with major international charterers, shipbuilders and financial institutions that we believe are the direct result of the quality and experience of our management team. In addition, we have developed a strong relationship with Wallem, an international vessel management company with over 35 years of experience that currently manages 211 vessels with a carrying capacity totaling in excess of 16 million dwt while meeting strict quality control standards. We expect that Wallem will act as our technical manager. We believe that these relationships will lead to greater charter opportunities for our vessels.

•
We have a strong balance sheet and will have limited indebtedness outstanding immediately after the completion of the offering . We expect to repay a significant portion of our outstanding indebtedness with the net proceeds of this offering and to have $                  of outstanding debt on the closing of the offering. We expect this reduction in outstanding indebtedness, along with our proposed new credit facility, will increase our borrowing ability, which together with the free
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cash flow from our operations, will allow us to fund future vessel acquisitions and, consistent with our strategy, will enhance our ability to make dividend payments.
•
We will maintain commercial management of our fleet in - house . We intend to retain the commercial management of our fleet in-house, thereby benefiting from the substantial experience of our management team in the shipping industry while avoiding brokerage commissions to related parties. It also serves to prevent conflicts of interest because, unlike transactions involving brokers, our employees do not have a personal financial interest in the charter contracts.
Our Business Strategy
        Our strategy is to manage and expand our fleet in a manner that enables us to pay dividends to our shareholders. To accomplish this objective, we intend to:
•
Strategically expand the size of our fleet . We intend to acquire additional modern, high-quality drybulk carriers through timely and selective acquisitions of vessels in a manner that is accretive to our cash flow. We expect to fund acquisitions of additional vessels using cash reserves set aside for this purpose and amounts borrowed under our new credit facility. In addition, we will consider future equity offerings to fund significant acquisitions.

•
Continue to operate a high-quality fleet . We intend to maintain a modern, high-quality fleet that meets or exceeds stringent industry standards and complies with charterer requirements that are required before a vessel owner can secure employment for its vessels. In addition, we intend to maintain the high quality of our existing fleet and subsequent acquisitions by maintaining, through our technical manager, a rigorous and comprehensive maintenance program including supervision of our independent third party technical manager by our own staff. Additionally, our technical managers maintain the quality of our vessels by carrying out regular inspections, both while in port and at sea. We believe that this ongoing maintenance program can ultimately reduce periods of off-hire and increase revenues.

•
Pursue an appropriate balance of time and spot charters . With the exception of the Genco Leader and Genco Trader, all of our vessels are under long-term charters with an average remaining life of 1.6 years as of March 31, 2005. These charters provide us with relatively stable revenues and a high fleet utilization. We may in the future pursue other market opportunities for our vessels to capitalize on favorable market conditions, including arranging longer charter periods and entering into short-term time and voyage charters.

•
Maintain low-cost, highly efficient operations . We intend to outsource technical management to third-party technical managers such as Wallem at a lower cost than we could achieve by performing the function in-house. Our management team will actively monitor and control vessel operating expenses incurred by these independent technical managers by overseeing their activities. In addition, we will have our own technical staff that is able to supervise our third-party technical managers. Finally, we will maintain low-cost, highly efficient operations by capitalizing on the cost savings and economies of scale that result from operating sister ships that are able to interchange spare parts and share crews easily.

•
Capitalize on our management team's reputation . Based on our current team of professionals with an average of over 25 years of shipping industry experience, we intend to capitalize on our management team's reputation for high standards of performance, reliability and safety and maintaining relationships with major international charterers, many of whom consider the reputation of a vessel owner and operator when entering into time charters. We believe that our management team's track record improves our relationships with high quality shipyards and financial institutions, many of which consider reputation to be an indicator of creditworthiness.
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Our Charters
        We currently employ our drybulk carriers to customers under time charters. A time charter involves the hiring of a vessel from its owner for a period of time pursuant to a contract under which the vessel owner places its ship (including its crew and equipment) at the disposal of the charterer. Under a time charter, the charterer periodically pays a fixed daily charterhire rate and bears all voyage expenses, including the cost of bunkers, port expenses and canal dues.
        Subject to any restrictions in the contract, the charterer determines the type and quantity of cargo to be carried and the ports of loading and discharging. Our vessels operate worldwide within the trading limits imposed by our insurance terms. The technical operation and navigation of the vessel at all times remains the responsibility of the vessel owner, which is generally responsible for the vessel's operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses.
        Each of our current time charters expires within a range of dates (for example, a minimum of 20 and maximum of 28 months following delivery), with the exact end of the time charter left unspecified to account for the uncertainty of when a vessel will complete its final voyage under the time charter. The charterer may extend the charter period by any time that the vessel is off-hire. If a vessel remains off-hire for more than 30 days, the time charter may be cancelled at the charterer's option.
        In connection with the charter of each of our vessels, we pay commissions ranging from 1 1 / 4 % to 5% of the total daily charterhire rate of each charter to unaffiliated ship brokers and to in-house ship brokers associated with the charterer, depending on the number of brokers involved with arranging the relevant charter.
        We will monitor developments in the drybulk shipping industry on a regular basis and will strategically adjust the charterhire periods for our vessels according to market conditions as they become available for charter.
        The following table sets forth information about the charters for our fleet:

Vessel
	 	Time Charter
Rate (1)
	 	Charterer
	 	Charter Expiration (2)
	
Genco Beauty	 	$	29,000	 	Cargill	 	January 2007	
Genco Knight	 	 	29,000	 	BHP	 	January 2007	
Genco Leader	 	 	27,500	(3)	Cargill	 	July 2005	
Genco Vigour	 	 	29,000	 	BHP	 	December 2006	
Genco Trader	 	 	17,350	 	STX Pan Ocean	 	July 2005	
Genco Success	 	 	23,850	 	KLC	 	January 2007	
Genco Carrier	 	 	24,000	 	DBCN, Panama	 	December 2006	
Genco Prosperity	 	 	23,000	 	DS Norden	 	February 2007	
Genco Wisdom	 	 	24,000	 	HMMC	 	December 2006	
Genco Marine	 	 	26,000	(4)	NYK Europe	 	January 2007	
Genco Glory	 	 	18,250	 	E D F Man Shipping	 	December 2006	
Genco Explorer	 	 	17,250	 	Lauritzen Bulkers	 	August 2006	
Genco Pioneer	 	 	17,250	 	Lauritzen Bulkers	 	August 2006	
Genco Progress	 	 	17,250	(5)	Lauritzen Bulkers	 	August 2006	
Genco Reliance	 	 	17,250	 	Lauritzen Bulkers	 	August 2006	
Genco Sugar	 	 	17,250	 	Lauritzen Bulkers	 	August 2006	

(1)
Time charter rates presented are the gross daily charterhire rates before the payments of brokerage commissions ranging from 1.25% to 5% to unaffiliated third parties. In a time charter, the charterer is responsible for voyage expenses such as bunkers, port expenses, agents' fees and canal dues.

(2)
The dates presented on this table represent the earliest dates that our charters may be terminated. Except with respect to the Genco Trader and Genco Leader charters, under the terms of the
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contracts, charterers are entitled to extend time charters from two to four months in order to complete the vessel's final voyage plus any time the vessel has been off-hire.
(3)
Rate is $27,500 if discharge is between Singapore and Japan or $27,000 if discharge is elsewhere in Southeast Asia, that is, Indonesia, Malaysia, the Philippines or Thailand.

(4)
The time charter rate is $26,000 until March 2006 and $18,000 thereafter.

(5)
The time charter rate was $21,560 through March 2005 and $17,250 thereafter.
Our Customers
        Our assessment of a charterer's financial condition and reliability is an important factor in negotiating employment for our vessels. We generally charter our vessels to major trading houses (including commodities traders), major producers and government-owned entities rather than to more speculative or undercapitalized entities. Our customers include national, regional and international companies, such as Lauritzen Bulkers, Cargill, BHP, NYK Europe and HMMC. During the three months ended March 31, 2005, two of our charterers, Lauritzen Bulkers and BHP, each accounted for more than 10% of our revenues. All of our present charterers have been approved by the lenders under our current credit facility.
Competition
        Our business fluctuates in line with the main patterns of trade of the major drybulk cargoes and varies according to changes in the supply and demand for these items. We operate in markets that are highly competitive and based primarily on supply and demand. We compete for charters on the basis of price, vessel location and size, age and condition of the vessel, as well as on our reputation as an owner and operator. We compete with other owners of drybulk carriers in the Panamax, Handymax and Handysize class sectors some of whom may also charter our vessels as customers. Ownership of drybulk carriers is highly fragmented and is divided among approximately 1,500 independent drybulk carrier owners.
Crewing and Shore Employees
        Each of our vessels is crewed primarily with 23 officers and seamen. Our technical managers are responsible for locating and retaining qualified officers for our vessels. The crewing agencies handle each seaman's training, travel and payroll, and ensure that all the seamen on our vessels have the qualifications and licenses required to comply with international regulations and shipping conventions. We typically man our vessels with more crew members than are required by the country of the vessel's flag in order to allow for the performance of routine maintenance duties.
        As of March 31, 2005, when we had 14 drybulk carriers, we had three shore-based personnel and there were approximately 325 seagoing personnel on our vessels. As of the date of this prospectus, we employ approximately ten shore-based personnel and there are approximately 375 seagoing personnel on our vessels.
Permits and Authorizations
        We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates and other authorizations with respect to our vessels. The kinds of permits, licenses, certificates and other authorizations required for each vessel depend upon several factors, including the commodity transported, the waters in which the vessel operates, the nationality of the vessel's crew and the age of the vessel. We believe that we have all material permits, licenses, certificates and other authorizations necessary for the conduct of our operations. However, additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of our doing business.
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Environmental and Other Regulations
        Government regulation significantly affects the ownership and operation of our vessels. We are subject to international conventions and treaties, national, state and local laws and regulations related to environmental protection and operational safety in force in the countries in which our vessels may operate or are registered.
        A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include, but are not necessarily limited to local port authorities (U.S. Coast Guard, harbor master or equivalent), classification societies, flag state administrations (country of registry) and charterers, particularly terminal operators, in the jurisdictions in which our vessels operate or are registered. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary authorizations could require us to incur substantial costs or temporarily suspend the operation of one or more of our vessels.
        We believe that the heightened level of environmental and operational safety concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and could accelerate the scrapping of older vessels throughout the drybulk shipping industry.
        Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We are required to maintain operating standards for our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international laws and regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental and health and safety laws and regulations applicable to us as of the date of this prospectus. We are unaware of any pending or threatened material litigation or other material administrative or arbitration proceedings against us based on alleged non-compliance with or liability under such laws or regulations. The risks of substantial costs, liabilities, penalties and other sanctions for the release of oil or hazardous substances into the environment or non-compliance are, however, inherent in marine operations, and there can be no assurance that significant costs, liabilities, penalties or other sanctions will not be incurred by or imposed on us in the future.
International Maritime Organization
        The IMO (the United Nations agency for maritime safety and the prevention of marine pollution by ships) has adopted the International Convention for the Prevention of Marine Pollution, 1973, as modified by the related Protocol of 1978, which has been updated through various amendments, or the "MARPOL Convention." The MARPOL Convention establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms. The IMO adopted regulations that set forth pollution-prevention requirements applicable to drybulk carriers. These regulations, which have been adopted by over 150 nations, including many of the jurisdictions in which our vessels operate.
        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, took effect on May 19, 2005. Annex VI set limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibit deliberate emissions of ozone depleting substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. Annex VI regulations pertaining to nitrogen oxide emissions apply to diesel engines on vessels built on or after January 1, 2000 or diesel engines undergoing major conversions after such date. We believe that all our vessels comply in all
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material respects with Annex VI as of the effective date. Additional or new conventions, laws and regulations may be adopted that could adversely affect our business, results of operations, cash flows 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 Convention standards are revised periodically. We believe that all our vessels are in substantial compliance with SOLAS Convention 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.
        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 we have all material requisite documents of compliance for our offices and safety management certificates for the vessels in our fleet for which certificates are required by the IMO. We review these compliance and safety management certificates annually.
        Noncompliance with the ISM Code and other IMO regulations may subject the ship owner to 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. As of the date of this prospectus, each of our vessels is ISM Code-certified. However, there can be no assurance that such certificates will be maintained.
        Many countries have ratified and follow the liability plan adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended. Under this convention and depending on whether the country in which the damage results is a party to the 1992 Protocol to the International Convention on Civil Liability for Oil Pollution Damage, a vessel's registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain 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 ship owner 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 (such as the United States), 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.
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The United States Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act
        The United States Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in U.S. waters, which includes U.S. territorial sea and its 200 nautical mile exclusive economic zone. The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, whether on land or at sea. Both OPA and CERCLA impact our operations.
        Under OPA, vessel owners, operators and bareboat charterers are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and cleanup costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include:
•
natural resources damage and the costs of assessment thereof;

•
real and personal property damage;

•
net loss of taxes, royalties, rents, fees and other lost revenues;

•
lost profits or impairment of earning capacity due to property or natural resources damage; and

•
net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
        OPA limits the liability of responsible parties to the greater of $600 per gross ton or $0.5 million per drybulk vessel that is over 300 gross tons (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 do not apply if an incident was directly caused by violation of applicable U.S. federal safety, construction or operating regulations or by a 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 oil removal activities.
        We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and results of operation.
        OPA requires owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet their potential liabilities under OPA. In December 1994, the U.S. Coast Guard implemented regulations requiring evidence of financial responsibility in the amount of $1,500 per gross ton, which includes the OPA limitation on liability of $1,200 per gross ton and the CERCLA liability limit of $300 per gross ton. Under those regulations, vessel owners and operators may evidence their financial responsibility by showing proof of insurance, surety bond, self-insurance or guaranty. Under OPA, an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessels in the fleet having the greatest maximum liability under OPA.
        The U.S. Coast Guard regulations concerning certificates of financial responsibility provide, in accordance with OPA, that claimants may bring suit directly against an insurer or guarantor that furnishes certificates of financial responsibility. If such an insurer or guarantor is sued directly, it is prohibited from asserting any contractual 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 organizations, which had typically provided certificates of financial responsibility under pre-OPA laws, including the major
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protection and indemnity organizations, have 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.
        The U.S. Coast Guard's financial responsibility regulations may also be satisfied by evidence of surety bond, guaranty or by self-insurance. Under the self-insurance provisions, the ship owner or operator must have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable amount of financial responsibility. We have complied with the U.S. Coast Guard regulations by providing certificates of responsibility from third-party entities that are acceptable to the U.S. Coast Guard evidencing sufficient self-insurance.
        OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states which have enacted such legislation, have not yet issued implementing regulations defining vessels owners' responsibilities under these laws. We are in substantial compliance with all applicable existing state requirements. In addition, we intend to comply with all future applicable state regulations in the ports where our vessels call.
        We manage our exposure to losses through the operation of well-maintained, well-managed, and well-equipped vessels, and the development and implementation of safety and environmental programs, including a maritime compliance program and our insurance program. We believe that we will be able to accommodate reasonably foreseeable environmental regulatory changes. However, there can be no assurance that any new regulations or requirements will not have a material adverse effect on us.
Other Environmental Initiatives
        The European Union is considering legislation that will affect the operation of vessels and the liability of owners and operators for oil pollution. It is difficult to predict what legislation, if any, may be promulgated by the European Union or any other country or authority.
        The United States Clean Water Act or 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. The CWA complements the remedies available under the more recent OPA and CERCLA, discussed above. A recent U.S. federal court decision could result in a requirement for vessels to obtain CWA permits for the discharge of ballast water in U.S. ports. Currently, under U.S. Environmental Protection Agency, or EPA, regulations, vessels are exempt from this permit requirement. However, in Northwest Environmental Advocates v. EPA, N.D. Cal., No. 03-05760 SI, March 31, 2005, the U.S. District Court for the Northern District of California ordered EPA to repeal the exemption. Under the court's ruling, owners and operators of vessels visiting U.S. ports would be required to comply with the CWA permitting program or face penalties. Although EPA will likely appeal this decision, if the exemption is repealed, we will incur certain costs to obtain CWA permits for our vessels. While we do not believe that the costs associated with obtaining such permits would be material, it is difficult to predict the overall impact of CWA permitting requirements on the drybulk shipping industry.
        The United States National Invasive Species Act, or 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 or 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 on
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board 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 cost of compliance could increase for ocean carriers. Although we do not believe that the costs of compliance with a mandatory mid-ocean ballast exchange would be material, it is difficult to predict the overall impact of such a requirement on the drybulk shipping industry.
        Our operations occasionally generate and require the transportation, treatment and disposal of both hazardous and non-hazardous solid wastes that are subject to the requirements of the U.S. Resource Conservation and Recovery Act, or RCRA, or comparable state, local or foreign requirements. In addition, from time to time we arrange for the disposal of hazardous waste or hazardous substances at offsite disposal facilities. If such materials are improperly disposed of by third parties, we might still be liable for clean up costs under applicable laws.
Vessel Security Regulations
        Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the United States Maritime Transportation Security Act of 2002, or the MTSA, came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments to the SOLAS Convention, created a new chapter of the convention dealing specifically with maritime security. The new chapter came into effect in July 2004 and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created International Ship and Port Facilities Security Code, or ISPS Code. Among the various requirements are:
•
on-board installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications;

•
on-board installation of ship security alert systems;

•
the development of vessel security plans; and

•
compliance with flag state security certification requirements.
        The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt non-United States vessels from MTSA vessel security measures, provided such vessels have on board a valid International Ship Security Certificate that attests to the vessel's compliance with SOLAS Convention security requirements and the ISPS Code. We have implemented the various security measures addressed by the MTSA, SOLAS Convention and the ISPS Code.
Inspection by Classification Societies
        Every seagoing vessel must be "classed" by a classification society. The classification society certifies that the vessel is "in class," signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.
        The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and /or to the regulations of the country concerned.
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        For maintenance of the class, regular and extraordinary surveys of hull, machinery (including the electrical plant) and any special equipment classed are required to be performed as follows:
•
Annual Surveys. For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant and where applicable for special equipment classed, at intervals of 12 months from the date of commencement of the class period indicated in the certificate.

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

•
Class Renewal Surveys. Class renewal surveys, also known as special surveys, are carried out for the ship's hull, machinery (including the electrical plant) and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey, the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a ship owner has the option of arranging with the classification society for the vessel's hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. At an owner's application, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal.
        All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years.
        Most vessels are also drydocked every 30 to 36 months for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a "recommendation" which must be rectified by the ship owner within prescribed time limits.
        Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as "in class" by a classification society which is a member of the International Association of Classification Societies. All the vessels in our fleet are certified as being "in class" by ABS American Bureau of Shipping, Lloyds Register of Shipping or Nippon Kaiji Kyokai (NKClass). The additional vessels that we have agreed to purchase must be certified before their delivery under our purchase contracts. If the vessel is not certified on the date of closing, we have no obligation to take delivery of the vessel.
Risk of Loss and Liability Insurance
General
        The operation of any drybulk vessel includes risks such as mechanical failure, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon owners, operators and demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and operators trading in the U.S. market.
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        While we maintain hull and machinery insurance, war risks insurance, protection and indemnity cover, and freight, demurrage and defense cover and loss of hire insurance for our fleet in amounts that we believe to be prudent to cover normal risks in our operations, we may not be able to achieve or maintain this level of coverage throughout a vessel's useful life. Furthermore, while we believe that our present insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.
Hull and Machinery and War Risks Insurance
        We maintain marine hull and machinery and war risks insurance, which covers the risk of actual or constructive total loss, for all of our vessels. Our vessels are each covered up to at least fair market value with deductibles of $60,000 per vessel per incident for Genco Glory and our Handysize vessels and $75,000 per vessel per incident for the rest of our fleet.
Protection and Indemnity Insurance
        Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, which insure our third-party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses resulting from the injury or death of crew, passengers and other third parties, the loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or "clubs." Subject to the "capping" discussed below, our coverage, except for pollution, is unlimited.
        Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The 14 P&I Associations that comprise the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on the group's claim records as well as the claim records of all other members of the individual associations and members of the pool of P&I Associations comprising the International Group.
Loss of Hire Insurance
        We maintain loss of hire insurance which covers business interruptions and related losses that result from the loss of use of a vessel. Our loss of hire insurance has a 14 day deductible and provides claim coverage for up to 90 days.
Legal Proceedings
        We have not been involved in any legal proceedings which may have, or have had a significant effect on our business, financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.
Properties
        We do not own any real property. As of June 2005, we lease an office of 10,000 square feet at 35 West 56 th Street, New York, New York, at a monthly rate of $55,000 on a month-to-month basis.
Exchange Controls
        Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common stock. However, we cannot assure you that the Marshall Islands will not enact restrictions on the export or import of capital in the future.
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 NEW CREDIT FACILITY
        Upon the closing of this offering, we will enter into a new credit facility with a group of lenders. The new credit facility will be used to refinance existing indebtedness, to fund future vessel acquisitions, and for working capital requirements.
        The new credit facility has a facility limit of $450 million, and a term of ten years. We will be permitted to borrow up to the entire principal amount to refinance existing indebtedness and to fund future vessel acquisitions, and up to $20 million for working capital purposes. The facility limit will be $450 million, for a period of six years from the date of the loan agreement. Thereafter the facility limit will reduce by an amount equal to 8.125% of the total committment, semi-annually over a period of four years and reducing to $0 on the 10 th anniversary.
        Our obligations under the new credit facility will be secured by a first priority mortgage on each of the vessels in our fleet and such other vessels pledged as collateral that we may from time to time include with the approval of our lenders, a first assignment of all associated freights, earnings, and insurances. We may grant additional security from time to time.
        Our ability to borrow amounts under the credit facility will be subject to the execution of customary documentation relating to the facility, including security documents, satisfaction of certain customary conditions precedent and compliance with terms and conditions included in the loan documents. Before each drawdown, we will be required, among other things, to provide to the lenders acceptable valuations of the vessels in our fleet confirming that the loan outstanding under the new credit facility will not exceed 65% of the value of the vessels pledged as collateral. To the extent that the vessels in our fleet that secure our obligations under the new credit facility are insufficient to satisfy minimum security requirements at the time of a drawdown or any time thereafter, we will be required to grant additional security or obtain a waiver or consent from our lenders. We will also not be permitted to borrow amounts under the facility if we undergo a change in control. Interest on the amounts drawn will be payable at the rate of 0.95% per annum over LIBOR until the fifth anniversary of the closing of the new credit facility and 1.00% per annum thereafter.
        The covenants in our new credit facility are expected to require us, among other things, to:
•
ensure that the fair market value of our collateral vessels is not less than 130% of our outstanding indebtedness;

•
maintain a ratio of total indebtedness to total capitalization of not more than 0.70 to 1.00 for the first five years and 0.60 to 1.00 thereafter;

•
maintain a ratio of our earnings before interest, taxes, depreciation and amortization to interest expense of not less than 2.00 to 1.00;

•
maintain working capital liquidity in an amount not less than $500,000 per vessel financed under the facility; and

•
maintain a minimum shareholders' equity of $                                           or no less than 80% of our shareholder's equity at the end of the last fiscal quarter preceding the completion of this offering on a pro forma basis assuming completion of this offering.
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 MANAGEMENT
Directors and Executive Officers
        Set forth below are the names, ages (as of June 1, 2005) and positions of our directors and executive officers. Our board of directors is elected annually on a staggered basis, and each director elected holds office for a three-year term. Officers are appointed from time to time by our board of directors and hold office until a successor is appointed or their employment is terminated.

Name
	 	Age
	 	Position
	
Peter C. Georgiopoulos	 	44	 	Class III Director and Chairman	
Robert Gerald Buchanan	 	56	 	President	
John C. Wobensmith	 	35	 	Chief Financial Officer, Principal Accounting Officer, Secretary and Treasurer	
Stephen A. Kaplan*	 	46	 	Class III Director	
Nathaniel C. A. Kramer*	 	44	 	Class II Director	
Mark F. Polzin*	 	59	 	Class II Director	
Rear Admiral Robert C. North, USCG (ret.)*	 	61	 	Class I Director	

*
Have agreed to serve on our board of directors effective on the closing of the offering.

        The term of our Class I directors expires in 2006, the term of our Class II directors expires in 2007 and the term of our Class III directors expires in 2008. Our Class II and Class III directors have agreed to serve as directors effective as of the closing of this offering.
        The business address of each officer and director is the address of our principal executive offices, which are located at 35 West 56 th Street, New York, New York 10019.
        Biographical information with respect to each of our directors and executive officers is set forth below.
         Peter C. Georgiopoulos has served as Chairman and as a member of our Board of Directors since our inception. Since 1997, Peter C. Georgiopoulos served as Chairman and CEO of General Maritime Corporation, a company he founded. Under the leadership of Mr. Georgiopoulos, General Maritime Corporation, grew from a single ship ownership company to what today ranks as the second largest midsize oil tanker company in the world. From 1991 to 1997, he was the principal of Maritime Equity Management a ship-owning and investment company that he founded in 1991. From 1990 to 1991, he was affiliated with Mallory Jones Lynch & Associates, an oil tanker brokerage firm. From 1987 to 1990, Mr. Georgiopoulos was an investment banker at Drexel Burnham Lambert. Before entering the investment banking business, he had extensive experience in the sale, purchase and chartering of vessels while working for shipowners in New York and Piraeus, Greece. Mr. Georgiopoulos is a member of the American Bureau of Shipping. He holds an MBA from Dartmouth College.
         Robert Gerald Buchanan serves as our President. Mr. Buchanan has 40 years of shipping experience, holding various senior operating, engineering and management positions. Before joining our company, Mr. Buchanan spent eight years as a Managing Director of Wallem, a leading technical management company. As the senior executive at Wallem, Mr. Buchanan was responsible for the safe and efficient operations of close to 200 vessels, as well as management of approximately 500 onshore and seagoing staff. From 1990 to 1996, Mr. Buchanan was Technical Director of Canada Steamships Lines of Montreal, overseeing a fleet of bulk carriers. Before this, Mr. Buchanan managed an oceanographic research vessel for NATO from 1986 to 1990, was Superintendent Engineer of Denholm Ship Management's United Kingdom office from 1982 to 1986, and Chief Engineer of Denholm Ship Management from 1969 to 1982. Mr. Buchanan was educated at Glasgow Nautical College and obtained a First Class Engineers license for the both steam and motor ships. Among his industry
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affiliations, Mr. Buchanan was a member of the International Committee for Gard Protection & Indemnity Association.
         John C. Wobensmith serves as our Chief Financial Officer and Principal Accounting Officer and is responsible for overseeing our accounting and financial matters. Mr. Wobensmith has over 11 years of experience in the shipping industry, with a concentration in shipping finance. Before becoming our Chief Financial Officer, Mr. Wobensmith served as a Senior Vice President with American Marine Advisors, Inc., an investment bank focused on the shipping industry. While at American Marine Advisors, Inc., Mr. Wobensmith was involved in mergers and acquisitions, equity fund management, debt placement and equity placement in the shipping industry. From 1993 through 2000, he worked in the international maritime lending group of The First National Bank of Maryland as a vice president from 1998. He has a bachelors degree in economics from St. Mary's College of Maryland and holds the Chartered Financial Analyst designation.
         Stephen A. Kaplan has agreed to serve on our board of directors effective on the closing of the offering. From 2001 to the present, he has served as a director of General Maritime. Since 1995, Mr. Kaplan has been a principal of Oaktree Capital Management, LLC, a private investment management firm, where he co-manages Oaktree's Principal Activities Group which invests in majority and significant minority positions in both private and public companies. Mr. Kaplan currently has in excess of $3.5 billion in assets under his management. Since 1993, he has served as portfolio manager of all of Oaktree's Principal Opportunities Funds, including Oaktree Principal Opportunities III Fund, L.P. and Oaktree Principal Opportunities Fund III A, L.P., which collectively owns approximately 66.5% of Fleet Acquisition our sole shareholder. From 1993 to 1995, Mr. Kaplan was a Managing Director of Trust Company of the West. Before joining the Trust Company of the West, Mr. Kaplan was a partner of the law firm of Gibson, Dunn & Crutcher. Mr. Kaplan currently serves as a director of numerous private and public companies.
         Nathaniel C. A. Kramer has agreed to serve on our board of directors effective on the closing of the offering. Mr. Kramer is a principal at Mercantile Capital Group LLC, a private equity firm with offices in New York and Chicago, and Managing Director of his firm's New York office from 1999 to present. He brings over 20 years of investment experience in both the public and private capital markets. He started his career with Allen and Company, a private equity firm, and recently served as its Vice President. Mr. Kramer has led investments in a wide range of industries including telecommunications, wireless infrastructure, waste management, data communications, B2B commerce and Internet infrastructure sectors. Mr. Kramer also serves on the boards of MoveOnIn, Inc. and Environmental Asset Management.
         Mark F. Polzin has agreed to serve on our board of directors effective on the closing of the offering. Since 1995, Mr. Polzin has served as the President and Chief Executive Officer of Moreland Management Co., a private asset management company for the Leonard, Jeffrey and Horvitz families. The Moreland Management Co. has over 100 separate investments, including a broad range of buyout funds and real estate funds. Prior to joining Moreland, he served for 18 years as an executive and director of several Mid-western community banking organizations. Mr. Polzin is also a charter member of the Wealth Management Advisory Board of the Northern Trust Company, Chicago and a founding member, director, and officer of the Center for the Study of Taxation, Costa Mesa, California. He holds a B.S. in Economics from the University of Wisconsin-Milwaukee and a J.D. from Marquette University Law School.
         Rear Admiral Robert C. North, USCG (ret.) has agreed to serve on our board of directors effective on the closing of the offering. Since his retirement from the active duty with the U.S. Coast Guard in April of 2001, Mr. North has served as the president of North Star Maritime, Inc., a marine industry consulting firm, specializing in international and domestic maritime safety, security and environmental protection issues. While on active duty with the U.S. Coast Guard, Mr. North reached
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the title of Assistant Commandant for Marine Safety, Security and Environmental Protection, where he directed national and international programs for commercial vessel safety, merchant mariner licensing and documentation, port safety and security and waterways management. He is a graduate of the Baltimore Polytechnic Institute, State University of New York Maritime College at Fort Schuyler and the U.S. Army War College.
Board Practices
        Upon the closing of this offering, we will establish an Audit Committee comprised of three board members, which will be responsible for reviewing our accounting controls and the engagement of our outside auditors. Each member will be an independent director. In addition, we will establish a Compensation Committee comprised of three independent directors, which will be responsible for establishing executive officers' compensation and benefits. The initial members of the Audit Committee will be                  ,                   and                  and the initial members of the Compensation Committee will be                  ,                   and                  . We also expect to establish a Nominating and Corporate Governance Committee whose initial members will be                  ,                   and                  .
Compensation of Directors and Senior Management
        We paid no compensation to members of our senior management for the year ended December 31 2004. Non-employee directors will receive annual fees in the amount of $            , plus reimbursement of their out-of-pocket expenses. We expect to pay our senior management aggregate compensation during 2005, before bonuses, of $            .
Equity Incentive Plan
        We expect to adopt an equity incentive plan, which will entitle our officers, key employees and directors to receive options to acquire shares of our common stock, restricted shares and stock appreciation rights. We will reserve a total of            shares of common stock for issuance under the plan. Our board of directors will administer the plan. Under the terms of the plan, our board of directors will be able to grant new options exercisable at a price per share to be determined by our board of directors. We expect that the per share exercise price for the first options granted under the plan will be equal to the higher of the offering price per share in this offering or the fair market value of a share of our common stock on the date the options are granted. Any shares of common stock received on exercise of the options may not be sold until three years after the closing of this offering. All options will expire 10 years from the date of grant. The plan will expire five years from the closing of this offering.
Employment Agreements
        We expect to enter into employment agreements with each of Messrs. Buchanan and Wobensmith.
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 PRINCIPAL AND SELLING SHAREHOLDER
        The following table sets forth information regarding (1) our sole beneficial shareholder, Fleet Acquisition, (2) the persons who may be deemed to be beneficial owners of more than 5% of our common stock as a result of the membership of such persons on the management committee of Fleet Acquisition and (3) the total amount of common stock deemed to be beneficially owned by our officers and directors, individually and as a group, in each case as of May 31, 2005 and after giving effect to this offering.

Identity of Person or
Group
	 	Number of
Shares Owned
	 	Percent of Class
before Offering
	 	Number of
Shares to be Sold
	 	Percent of Class
after Offering
	 	
Fleet Acquisition LLC	 	 	 	100	%	 	 	 	%	
Peter C. Georgiopoulos(1)	 	 	 	100	%	 	 	 	%	
Stephen A. Kaplan(1)	 	 	 	100	%	 	 	 	%	
B. James Ford(1)	 	 	 	100	%	 	 	 	%	
John P. Tavlarios(1)	 	 	 	100	%	 	 	 	%	
All officers and directors as a group(2)	 	 	 	100	%	 	 	 	%	

(1)
The members of the Management Committee of Fleet Acquisition, our sole shareholder, are Peter C. Georgiopoulos, Stephen A. Kaplan, B. James Ford and John P. Tavlarios. While each of Messrs. Kaplan, Ford, Georgiopoulos, and Tavlarios disclaims beneficial ownership of the shares owned by Fleet Acquisition, each may be deemed to have shared power of voting or disposition of those shares. The business address of Messrs. Kaplan and Ford is 333 South Grand Avenue, 28 th Floor, Los Angeles, CA 90071. The business address of Messrs. Georgiopoulos and Tavlarios is 299 Park Avenue, New York, NY 10171. The business address of Fleet Acquisition LLC is 35 West 56 th Street, New York, NY 10019. Oaktree Principal Opportunities III Fund L.P. and Oaktree Principal Opportunities Fund III A, L.P., of which Mr. Kaplan serves as portfolio manager, owns approximately 66.5% of the selling shareholder, and Peter C. Georgiopoulos owns approximately 26.6% of the selling shareholder.

(2)
Includes shares held by Fleet Acquisition by reason of our Chairman, Mr. Georgiopoulos, being on the Management Committee of Fleet Acquisition. Mr. Georgiopoulos disclaims beneficial ownership of those shares.
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 RELATED-PARTY TRANSACTIONS
Registration Rights Agreement
        We intend to enter into a registration rights agreement immediately before the closing of this offering with Fleet Acquisition, pursuant to which we will grant it, its affiliates and certain of its transferees, the right, under specified circumstances and subject to specified restrictions, including restrictions included in the lock-up agreements to which Fleet Acquisition is a party, to require us to register under the Securities Act shares of our common stock held by it. Under the registration rights agreement, these persons will have the right to request us to register the sale of shares held by them on their behalf and may require us to make available shelf registration statements permitting sales of shares into the market from time to time over an extended period. In addition, these persons will have the ability to exercise certain piggyback registration rights in connection with registered offerings requested by shareholders or initiated by us. Immediately after this offering, Fleet Acquisition will own                        shares entitled to these registration rights, assuming the underwriters do not exercise their over-allotment option.
Transactions with Investors, our Chairman and His Affiliates
        We are reimbursing General Maritime Corporation, of which Peter C. Georgiopoulos, our Chairman, is Chairman and Chief Executive Officer, for services provided by certain General Maritime employees in connection with this offering. These charges are estimated at $25,000 through December 31, 2004. In addition, as of June 2005 we rent 10,000 sq. feet of office space at 35 West 56 th Street in New York from Genmar Realty LLC, which is owned by Peter C. Georgiopoulos. Our office lease is on a month-to-month basis through March 2006, and we currently pay $55,000 per month. We believe that this amount is at least as favorable as we could obtain from a third party lessor.
        In addition, we employ the legal services of Constantine P. Georgiopoulos, Peter C. Georgiopoulos's father. We paid Constantine Georgiopoulos $190,000 for legal services performed for us through March 31, 2005.
        Finally, Leeds & Leeds Company, Inc., an investor with a limited stake in Fleet Acquisition, currently provides insurance brokerage services for our vessels.
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 SHARES ELIGIBLE FOR FUTURE SALE
        Upon completion of this offering, we will have            shares of common stock outstanding. Of these shares, the            shares sold in this offering, or            shares assuming the underwriters exercise their over-allotment option in full, will be freely transferable in the United States without restriction under the Securities Act, except for any shares acquired by one of our "affiliates" as defined under Rule 144. Immediately after completion of this offering, our Fleet Acquisition will continue to own             shares of common stock, or            shares assuming the underwriters exercise their over-allotment option in full. Those shares were acquired in private transactions not involving a public offering and will therefore be treated as "restricted securities" for purposes of Rule 144. The restricted securities held by our current shareholders will be subject to the underwriter's 180-day lock-up agreement as described below. Restricted securities may not be resold except in compliance with the registration requirements of the Securities Act or under an exemption from those registration requirements, such as the exemptions provided by Rule 144 and Regulation S under the Securities Act. The preferred stock purchase rights being registered in this offering are attached to our common stock and are subject to the same requirements for resale as the shares of common stock to which they are attached.
        In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who owns shares that were acquired from the issuer or an affiliate at least one year ago would be entitled to sell within any three-month period a number of shares that does not exceed the greater of either of the following:
•
1% of the then outstanding shares of our common stock, which will be approximately            shares immediately after this offering; or

•
an amount equal to the average weekly reported volume of trading in shares of our common stock on all national securities exchanges and/or reported through the automated quotation system of registered securities associations during the four calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission.
Sales in reliance on Rule 144 are also subject to other requirements regarding the manner of sale, notice and availability of current public information about us. A person (or persons whose shares are aggregated) who is not deemed to have been one of our affiliates at any time during the 90 days immediately preceding the sale may sell restricted securities in reliance on Rule 144(k) without regard to the limitations described above, provided that two years have expired since the later of the date on which the same restricted securities were acquired from us or one of our affiliates. As defined in Rule 144, an "affiliate" of an issuer is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the issuer.
        We and our executive officers, directors and current shareholders have entered into agreements with the underwriters of this offering which, subject to certain exceptions, generally restrict us and our executive officers, directors and current shareholders from directly or indirectly offering, selling, pledging, hedging or otherwise disposing of our equity securities, restricted securities or any security that is convertible into or exercisable or exchangeable for our equity securities and from engaging in certain other transactions relating to such securities for a period of 180 days after the date of this prospectus without the prior written consent of Jefferies & Company, Inc. and Morgan Stanley & Co. Incorporated. There are no existing agreements with Jefferies & Company, Inc. or Morgan Stanley & Co. Incorporated providing consent to the sale of shares before the expiration of the lock-up period.
        We will enter into a registration rights agreement immediately before the closing of this offering with our sole shareholder pursuant to which we will grant it, its affiliates and certain of their transferees, the right, under certain circumstances and subject to certain restrictions, including restrictions included in the lock-up agreements described above, to require us to register under the
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Securities Act shares of our common stock held by them. Shares of common stock, when registered under any registration statement, will be available for sale in the open market unless restrictions apply. See "Related Party Transactions—Registration Rights Agreement." In addition, all of these shares would be available for sale into the public market after one year pursuant to Rule 144, Regulation S and other exemptions under the Securities Act, as described above.
        As a result of the lock-up agreements and rules of the Securities Act, the restricted shares will be available for sale in the public market, subject to certain volume and other restrictions, as mentioned above, as follows:

Days After the Date of this Prospectus
	 	Number of Shares
Eligible for Sale
	 	Comment
	
Date of prospectus	 	None	 	Shares not locked up and eligible for sale freely or under Rule 144	
180 days	 	None	 	Lock-up released; shares eligible for sale under Rule 144	
        Before this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that future sales or the availability of shares for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock in the public market, including shares issued upon the exercise of options that may be granted under any employee stock option or employee stock award plan of ours, or the perception that those sales may occur, could adversely affect prevailing market prices for our common stock.
84

 
 DESCRIPTION OF CAPITAL STOCK
        The following is a description of the material terms of our amended and restated articles of incorporation and bylaws that will be in effect immediately before the consummation of this offering. We refer you to our amended and restated articles of incorporation and bylaws, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part.
Purpose
        Our purpose, as stated in our amended and restated articles of incorporation, is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Marshall Islands Business Corporations Act, or the BCA. Our amended and restated articles of incorporation and bylaws do not impose any limitations on the ownership rights of our shareholders.
Authorized Capitalization
        Under our amended and restated articles of incorporation, as of June     , 2005, our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.01 per share, of which 500 shares are issued and outstanding, and 25,000,000 shares of preferred stock, par value $0.01 per share, of which no shares were issued and outstanding. Upon consummation of this offering, we will have outstanding            shares of common stock and no shares of preferred stock. All of our shares of stock are in registered form.
Common Stock
        Each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of shares of common stock are entitled to receive, ratably, all dividends, if any, declared by our board of directors out of funds legally available for dividends. Upon our dissolution or liquidation or the sale of all or substantially all our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of our common stock will be entitled to receive, pro rata, our remaining assets available for distribution. Holders of our common stock do not have conversion, redemption or preemptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of our common stock are subject to the rights of the holders of any shares of our preferred stock which we may issue in the future.
Preferred Stock
        Our amended and restated articles of incorporation authorize our board of directors to establish one or more series of preferred stock and to determine, with respect to any series of preferred stock, the terms and rights of that series, including:
•
the designation of the series;

•
the number of shares of the series;

•
the preferences and relative, participating, optional or other special rights, if any, of the series, and any qualifications, limitations or restrictions applicable to such rights; and

•
the voting rights, if any, of the holders of the series.

Directors
        Our directors are elected by a plurality of the votes cast by shareholders entitled to vote. There is no provision for cumulative voting.
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        Our board of directors must consist of at least three members. Shareholders may change the number of directors only by the affirmative vote of holders of a majority of the outstanding common stock. The board of directors may change the number of directors only by a majority vote of the entire board.
        Each director is elected to serve until the next annual meeting of shareholders and until his successor is duly elected and qualified, except in the event of his death, resignation, removal or the earlier termination of his term of office. Our board of directors has the authority to fix the amounts payable to the members of the board of directors for attendance at any meeting or for services rendered to us.
Shareholder Meetings
        Under our bylaws, annual shareholder meetings will be held at a time and place selected by our board of directors. The meetings may be held in or outside of the Marshall Islands. Special meetings may be called by shareholders holding not less than one-fifth of all the outstanding shares entitled to vote at such meeting. Our board of directors may set a record date between 15 and 60 days before the date of any meeting to determine the shareholders who will be eligible to receive notice and vote at the meeting.
Dissenters' Rights of Appraisal and Payment
        Under the BCA, our shareholders have the right to dissent from various corporate actions, including any merger or consolidation sale of all or substantially all of our assets not made in the usual course of our business, and receive payment of the fair value of their shares. In the event of any further amendment of our amended and restated articles of incorporation, a shareholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those shares. The dissenting shareholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting shareholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the high court of the Marshall Islands or in any appropriate court in any jurisdiction in which our shares are primarily traded on a local or national securities exchange.
Shareholder's Derivative Actions
        Under the BCA, any of our shareholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the shareholder bringing the action is a holder of common stock both at the time the derivative action is commenced and at the time of the transaction to which the action relates.
Limitations on Liability and Indemnification of Officers and Directors
        The BCA authorizes corporations to limit or eliminate the personal liability of directors and officers to corporations and their shareholders for monetary damages for breaches of directors' fiduciary duties. Our bylaws include a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director to the fullest extent permitted by applicable law.
        Our bylaws provide that we must indemnify our directors and officers to the fullest extent authorized by applicable law. We are also expressly authorized to advance certain expenses (including attorneys' fees and disbursements and court costs) to our directors and officers and carry directors' and officers' insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.
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        The limitation of liability and indemnification provisions in our amended and restated articles of incorporation and bylaws may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our shareholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
        There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Anti-takeover Effects of Certain Provisions of our Amended and Restated Articles of Incorporation and Bylaws
        Several provisions of our amended and restated articles of incorporation and bylaws, which are summarized below, may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize shareholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of our company by means of a tender offer, a proxy contest or otherwise that a shareholder may consider in its best interest and (2) the removal of incumbent officers and directors.
Blank Check Preferred Stock
        Under the terms of our amended and restated articles of incorporation, our board of directors has the authority, without any further vote or action by our shareholders, to authorize our issuance of up to 25,000,000 shares of blank check preferred stock. Our board of directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management. See "—Authorized Capitalization—Preferred Stock."
Classified Board of Directors
        Our amended and restated articles of incorporation provide for the division of our board of directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered, three-year terms. Approximately one-third of our board of directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of us. It could also delay shareholders who do not agree with the policies of our board of directors from removing a majority of our board of directors for up to two years.
Election and Removal of Directors
        Our amended and restated articles of incorporation prohibit cumulative voting in the election of directors. Our bylaws require parties other than the board of directors to give advance written notice of nominations for the election of directors. Our articles of incorporation also provide that our directors may be removed only for cause and only upon the affirmative vote of 66 2 / 3 % of the outstanding shares of our capital stock entitled to vote for those directors. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.
Limited Actions by Shareholders
        Our amended and restated articles of incorporation and our bylaws provide that any action required or permitted to be taken by our shareholders must be effected at an annual or special meeting
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of shareholders or by the unanimous written consent of our shareholders. Our amended and restated articles of incorporation and our bylaws provide that, subject to certain exceptions, our Chairman, President, or Secretary at the direction of the board of directors may call special meetings of our shareholders and the business transacted at the special meeting is limited to the purposes stated in the notice. Accordingly, a shareholder may be prevented from calling a special meeting for shareholder consideration of a proposal over the opposition of our board of directors and shareholder consideration of a proposal may be delayed until the next annual meeting.
Advance Notice Requirements for Shareholder Proposals and Director Nominations
        Our bylaws provide that shareholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of shareholders must provide timely notice of their proposal in writing to the corporate secretary. Generally, to be timely, a shareholder's notice must be received at our principal executive offices not less than 90 days nor more than 120 days before the date on which we first mailed our proxy materials for the preceding year's annual meeting. Our bylaws also specify requirements as to the form and content of a shareholder's notice. These provisions may impede shareholder's ability to bring matters before an annual meeting of shareholders or make nominations for directors at an annual meeting of shareholders.
Shareholder Rights Plan
General
        Each share of our common stock includes one right, or a right, that entitles the holder to purchase from us a unit consisting of one-thousandth of a share of our preferred stock at a purchase price of $25 per unit, subject to specified adjustments. The rights are issued pursuant to a rights agreement between us and            , as rights agent. Until a right is exercised, the holder of a right will have no rights to vote or receive dividends or any other shareholder rights.
        The rights may have anti-takeover effects. The rights may cause substantial dilution to any person or group that attempts to acquire us without the approval of our board of directors. As a result, the overall effect of the rights may be to render more difficult or discourage any attempt to acquire us. Because our board of directors can approve a redemption of the rights or a permitted offer, the rights should not interfere with a merger or other business combination approved by our board of directors. The adoption of the rights agreement was approved by our sole shareholder before the offering.
        We have summarized the material terms and conditions of the rights agreement and the rights below. For a complete description of the rights, we encourage you to read the rights agreement, which we have filed as an exhibit to the registration statement of which this prospectus is a part.
Detachment of the Rights
        The rights are attached to all certificates representing our currently outstanding common stock and will attach to all common stock certificates we issue before the rights distribution date that we describe below. The rights are not exercisable until after the rights distribution date and will expire at the close of business on the tenth anniversary date of the adoption of the rights plan, unless we redeem or exchange them earlier as we describe below. The rights will separate from the common stock and a rights distribution date would occur, subject to specified exceptions, on the earlier of the following two dates:
•
ten days following a public announcement that a person or group of affiliated or associated persons, or an "acquiring person," has acquired or obtained the right to acquire beneficial ownership of 20% or more of our outstanding common stock; or
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•
ten business days following the start of a tender or exchange offer that would result, if closed, in a person's becoming an acquiring person.
        Fleet Acquisition is excluded from the definition of "acquiring person" for purposes of the rights, and therefore its ownership cannot trigger the rights. In addition, any person that acquires from Fleet Acquisition common stock that would otherwise result in that person becoming an "acquiring person" will not become an acquiring person solely as a result of that acquisition. Specified "inadvertent" owners that would otherwise become an acquiring person, including those who would have this designation as a result of repurchases of common stock by us, will not become acquiring persons as a result of those transactions.
        Our board of directors may defer the rights distribution date in some circumstances, and some inadvertent acquisitions will not result in a person becoming an acquiring person if the person promptly divests itself of a sufficient number of shares of common stock.
        Until the rights distribution date:
•
our common stock certificates will evidence the rights, and the rights will be transferable only with those certificates; and

•
any new common stock will be issued with rights and new certificates will contain a notation incorporating the rights agreement by reference.
        As soon as practicable after the rights distribution date, the rights agent will mail certificates representing the rights to holders of record of our common stock at the close of business on that date. After the rights distribution date, only separate rights certificates will represent the rights.
        We will not issue rights with any shares of common stock we issue after the rights distribution date, except as our board of directors may otherwise determine.
Flip-In Event
        A "flip-in event" will occur under the rights agreement when a person becomes an acquiring person except in the case of a permitted offer. The rights agreement generally defines "permitted offer" to mean a tender or exchange offer for all outstanding shares of common stock at a price and on terms that a majority of the members of our board of directors who are independent from the acquiring person or the person making the offer determines to be fair to and otherwise in the best interests of our company and our shareholders.
        If a flip-in event occurs and we do not redeem the rights as described under the heading "Redemption of Rights" below, each right, other than any right that has become void, as we describe below, will become exercisable at the time it is no longer redeemable for the number of shares of common stock, or, in some cases, cash, property or other of our securities, having a current market price equal to two times the exercise price of such right.
        When a flip-in event occurs, all rights that then are, or in some circumstances that were, beneficially owned by or transferred to an acquiring person or specified related parties will become void in the circumstances the rights agreement specifies.
Flip-Over Event
        A "flip-over event" will occur under the rights agreement when, at any time after a person has become an acquiring person:
•
we are acquired in a merger or other business combination transaction, other than specified mergers that follow a permitted offer of the type we describe above; or

•
50% or more of our assets, cash flow or earning power is sold or transferred.
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        If a flip-over event occurs, each holder of a right, other than any right that has become void as we describe under the heading "Flip-In Event" above, will have the right to receive the number of shares of common stock of the acquiring company which has a current market price equal to two times the exercise price of such right.
Anti-Dilution
        The number of outstanding rights associated with our common stock is subject to adjustment for any stock split, stock dividend or subdivision, combination or reclassification of our common stock occurring before the rights distribution date. With some exceptions, the rights agreement will not require us to adjust the exercise price of the rights until cumulative adjustments amount to at least 1% of the exercise price. It also will not require us to issue fractional shares of our preferred stock that are not integral multiples of one one-hundredth of a share and, instead, we may make a cash adjustment based on the market price of the common stock on the last trading date before the date of exercise. The rights agreement reserves to us the right to require before the occurrence of any flip-in event or flip-over event that, on any exercise of rights, a number of rights must be exercised so that we will issue only whole shares of stock.
Redemption of Rights
        At any time until ten days after the date on which the occurrence of a flip-in event is first publicly announced, we may redeem the rights in whole, but not in part, at a redemption price of $0.01 per right. The redemption price is subject to adjustment for any stock split, stock dividend or similar transaction occurring before the date of redemption. At our option, we may pay that redemption price in cash, shares of common stock or any other consideration our board of directors may select. The rights are not exercisable after a flip-in event until they are no longer redeemable. If our board of directors timely orders the redemption of the rights, the rights will terminate on the effectiveness of that action.
Exchange of Rights
        We may, at our option, exchange the rights (other than rights owned by an acquiring person or an affiliate or an associate of an acquiring person, which have become void), in whole or in part. The exchange will be at an exchange ratio of one share of common stock per right, subject to specified adjustments at any time after the occurrence of a flip-in event and before:
•
any person other than our existing shareholders becoming the beneficial owner of common stock with voting power equal to 50% or more of the total voting power of all shares of common stock entitled to vote in the election of directors; or

•
the occurrence of a flip-over event.
Amendment of Terms of Rights
        During the time the rights are redeemable, we may amend any of the provisions of the rights agreement, other than by decreasing the redemption price. Once the rights cease to be redeemable, we generally may amend the provisions of the rights agreement, other than to decrease the redemption price, only as follows:
•
to cure any ambiguity, defect or inconsistency;

•
to make changes that do not materially adversely affect the interests of holders of rights, excluding the interests of any acquiring person; or
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•
to shorten or lengthen any time period under the rights agreement, except that we cannot lengthen the time period governing redemption or lengthen any time period that protects, enhances or clarifies the benefits of holders of rights other than an acquiring person.
Transfer Agent
        The registrar and transfer agent for our common stock is            .
Listing
        We have applied for approval for the quotation of our common stock on the Nasdaq National Market under the symbol "GSTL."
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 CERTAIN MARSHALL ISLANDS COMPANY CONSIDERATIONS
        Our corporate affairs will be governed by our amended and restated articles of incorporation and bylaws and will continue to be governed by the Business Corporation Act of the Marshall Islands, or BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. For example, the BCA allows the adoption of various anti-takeover measures such as shareholder "rights" plans. While the BCA also provides that it is to be in interpreted according to the laws of the state of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether Marshall Islands courts would reach the same conclusions as U.S. courts. Thus, you may have more difficulty in protecting your interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction which has developed a substantial body of case law. The following table provides a comparison between the statutory provisions of the BCA and the Delaware General Corporation Law relating to shareholder's rights.

Marshall Islands
	 	Delaware
	
Shareholder Meetings	

•	
 	
Held at a time and place as designated in the bylaws	
 	
•	
 	
May be held at such time or place as designated in the certificate of incorporation or the bylaws, or if not so designated, as determined by the board of directors	

•	
 	
May be held in or outside of the Marshall Islands	
 	
•	
 	
May be held in or outside of Delaware	

•	
 	
Notice:	
 	
•	
 	
Notice:	

 	
•	
 	
Whenever shareholders are required to take action at a meeting, written notice shall state the place, date and hour of the meeting and indicate that it is being issued by or at the direction of the person calling the meeting	

 	
•	
 	
Whenever shareholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote communication, if any	

 	
•	
 	
A copy of the notice of any meeting shall be given personally or sent by mail not less than 15 nor more than than 60 days before the meeting	

 	
•	
 	
Written notice shall be given not less than ten nor more 60 days before the meeting	
 	 	 	 	 	 	 	 	 	 	 	
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Shareholder's Voting Rights	

•	
 	
Any action required to be taken by a meeting of shareholders may be taken without a meeting if the consent is in writing and is signed by all the shareholders entitled to vote	
 	
•	
 	
Shareholders may act by written consent to elect directors	

•	
 	
Any person authorized to vote may authorize another person to act for him by proxy	
 	
•	
 	
Any person authorized to vote may authorize another person or persons to act for him by proxy	

•	
 	
Unless otherwise provided in the articles of incorporation, a majority of shares entitled to vote constitutes a quorum. In no event shall a quorum consist of fewer than one-third of the shares entitled to vote at a meeting	
 	
•	
 	
For stock corporations, a certificate of incorporation or bylaws may specify the number to constitute a quorum but in no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting. In the absence of such specifications, a majority of shares entitled to vote shall constitute a quorum	

•	
 	
No provision for cumulative voting	
 	
•	
 	
The certificate of incorporation may provide for cumulative voting	

Directors	

•	
 	
The board of directors must consist of at least one member	
 	
•	
 	
The board of directors must consist of at least one member	

•	
 	
Number of members can be changed by an amendment of the bylaws, by the shareholders, or by action of the board of directors	
 	
•	
 	
The number of board members shall be fixed by, or in the manner provided by, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number shall be made only by an amendment of the certificate.	

•	
 	
If the board of directors is authorized to change the number of directors, it can only do so by an absolute majority (majority of the entire board)	

 	

 	

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Dissenter's Rights of Appraisal	

•	
 	
Shareholders have a right to dissent from a merger or sale of all or substantially all assets not made in the usual course of business, and receive payment of the fair value of their shares	
 	
•	
 	
Appraisal rights shall be available for the shares of any class or series of stock of a corporation in a merger or consolidation, however, no appraisal rights are available if, among other things and subject to certain exceptions, such shares were listed on a national securities exchange or designated national market system or such shares were held of record by more than 2,000 holders.	

•	
 	
A holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation has the right to dissent and to receive payment for such shares if the amendment:	

 	

 	

 	
•	
 	
alters or abolishes any preferential right of any outstanding shares having preferences; or	

 	

 	

 	
•	
 	
creates, alters or abolishes any provision or right in respect to the redemption of any outstanding shares; or	

 	

 	

 	
•	
 	
alters or abolishes any preemptive right of such holder to acquire shares or other securities; or	

 	

 	

 	
•	
 	
excludes or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to new shares then being authorized of any existing or new class	

 	

 	
 	 	 	 	 	 	 	 	 	 	 	
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Shareholder's Derivative Actions	

•	
 	
An action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates or of a beneficial interest in such shares or certificates. It shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by operation of law	
 	
•	
 	
In any derivative suit instituted by a shareholder or a corporation, it shall be averred in the complaint that the plaintiff was a shareholder of the corporation at the time of the transaction of which he complains or that such shareholder's stock thereafter devolved upon such shareholder by operation of law	

•	
 	
Complaints shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort	
 	
•	
 	
Other requirements regarding derivative suits have been created by judicial decision, including that a shareholder may not bring a derivative suit unless he or she first demands that the corporation sue on its own behalf and that demand is refused (unless it is shown that such demand would have been futile)	

•	
 	
Such action shall not be discontinued, compromised or settled, without the approval of the High Court of the Republic	

 	

 	

•	
 	
Attorney's fees may be awarded if the action is successful	

 	

 	

•	
 	
Corporations may require a plaintiff bringing a derivative suit to give security for reasonable expenses, in such amount as the court determines, if the plaintiff owns less than 5% of any class of stock and the shares have a value of less than $50,000	

 	

 	
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 TAX CONSIDERATIONS
        The following is a discussion of the material Marshall Islands and U.S. federal income tax considerations relevant to an investment decision by a U.S. Holder or a Non-U.S. Holder, as defined below, with respect to the common stock. This discussion does not purport to deal with the tax consequences of owning common stock to all categories of investors, some of which (such as financial institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, insurance companies, persons holding our common stock as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, traders in securities that have elected the mark-to-market method of accounting for their securities, persons liable for alternative minimum tax, persons who are investors in pass-through entities, dealers in securities or currencies and investors whose functional currency is not the U.S. dollar) may be subject to special rules. This discussion deals only with holders who purchase common stock in connection with this offering and hold the common stock as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local or foreign law of the ownership of common stock.
Marshall Islands Tax Considerations
        In the opinion of Seward & Kissel LLP, the following are the material Marshall Islands tax consequences of our activities to us and shareholders of our common stock. We are incorporated in the Marshall Islands. Under current Marshall Islands law, we are not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon payments of dividends by us to our shareholders.
United States Federal Income Tax Considerations
        In the opinion of Seward & Kissel LLP, our U.S. counsel, the following are the material U.S. federal income tax consequences to us of our activities and to U.S. Holders and Non-U.S. Holders, as defined below, of our common stock. The following discussion of U.S. federal income tax matters is based on the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the U.S. Department of the Treasury, all of which are subject to change, possibly with retroactive effect. In addition, the discussion below is based, in part, on the description of our business as described in "Business" above and assumes that we conduct our business as described in that section.
        The Company has made, or will make, special U.S. tax elections in respect of each of the shipowning or operating subsidiaries that are potentially subject to tax as a result of deriving income attributable to the transportation of cargoes to or from the United States. The effect of the special U.S. tax elections is to ignore or disregard the subsidiaries for which elections have been made as separate taxable entities from that of their parent, the "Company". Therefore, for purposes of the following discussion, the Company, and not the subsidiaries subject to this special election, will be treated as the owner and operator of the subsidiary vessels and as receiving the income therefrom.
United States Federal Income Taxation of Our Company
Taxation of Operating Income: In General
        Unless exempt from U.S. federal income taxation, a foreign corporation is subject to U.S. federal income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, voyage or bareboat charter basis or from the performance of services directly related to those uses, which we refer to as "shipping income," to the extent that the shipping income is derived from sources within the United States. For these purposes, 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end,
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in the United States constitutes income from sources within the United States, which we refer to as "U.S. source shipping income."
        Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the United States will not be subject to any U.S. federal income tax.
        Shipping income attributable to transportation exclusively between U.S. ports will be considered to be 100% derived from U.S. sources. However, the Company is prohibited by U.S. law from engaging in the transportation of cargoes that produces 100% U.S. source income.
        Unless exempt from tax under Section 883 of the Code, our gross U.S. source shipping income generally would be subject to a 4% tax imposed without allowance for deductions as described below.
Exemption of Operating Income from United States Federal Income Taxation
        Under Section 883 of the Code and the regulations thereunder, a foreign corporation will be exempt from U.S. federal income taxation on its U.S. source shipping income if:
(1)
it is organized in a qualified foreign country, which is one that grants an "equivalent exemption" from tax to corporations organized in the United States in respect of each category of shipping income for which exemption is being claimed under Section 883, and to which we refer as the "Country of Organization Test"; and

(2)
either

(a)
more than 50% of the value of its stock is beneficially owned, directly or indirectly, by qualified shareholders, which includes individuals who are "residents" of a qualified foreign country, to which we refer as the "50% Ownership Test"; or

(b)
its stock is "primarily and regularly traded on an established securities market" in a qualified foreign country or in the United States, to which we refer as the "Publicly-Traded Test"; or

(c)
it is a "controlled foreign corporation", or CFC, as described below and it satisfies the "50% Inclusion Test", as described below, to which, collectively, we refer as the "CFC Test".

        The Marshall Islands, the jurisdiction where the Company is incorporated, has been officially recognized by the U.S. Internal Revenue Service, or IRS, as a qualified foreign country that currently grants the requisite "equivalent exemption" from tax in respect of each category of shipping income the Company earns and expects to earn in the future. Therefore, the Company satisfies the Country of Organization Test and will be exempt from U.S. federal income taxation with respect to its U.S. source shipping income if it satisfies any one of the 50% Ownership Test, the Publicly-Traded Test or the CFC Test.
        The Company currently anticipates that after the offering, the Company will be a CFC and therefore, its principal basis for qualifying for exemption rests upon satisfying the CFC Test. For so long as the Company remains a CFC after the offering, the Company will not be able to satisfy the Publicly-Traded Test. The Company does not currently anticipate a circumstance under which it would be able to satisfy the 50% Ownership Test after the offering.
CFC Test
        The Company will be a CFC, for U.S. federal income tax purposes if more than 50 percent of the Company's common stock, its sole class of stock, is owned by U.S. Holders each of whom owns
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10 percent or more of such common stock. We refer to such 10 percent U.S. Holders as "U.S. Shareholders".
        The regulations interpreting Section 883, which were promulgated in August 2003, provide that a foreign corporation that is a CFC will only be treated as satisfying the CFC Test if, for the relevant year in question, more than 50 percent of the foreign corporation's adjusted net income derived from the international operation of ships is includible in the gross income of one or more U.S. Shareholders for such taxable year, which we refer to as the "50% Inclusion Test." At the time the regulations were promulgated in 2003, income derived from the international operation of ships was a category of "Subpart F income." Subpart F income is required to be included in income of U.S. Shareholders under the CFC tax regime rules described below.
        Subsequently, in October of 2004, the American Jobs Creation Act of 2004, or the Jobs Act, was enacted. Under the Jobs Act, income derived by a foreign corporation from the international operation of ships was eliminated as a category of includible "Subpart F" income. As a result of such change, the Company and every other CFC is effectively precluded from ever being able to satisfy the 50% Inclusion Test if literally applied.
        In the absence of further regulatory guidance to the contrary, we do not believe that the 50% Inclusion Test should be interpreted in a manner that would essentially vitiate, in its entirety, the statutory provisions of Section 883 which, on their face, merely require that a foreign corporation be a CFC to qualify for the CFC Test. Instead, we believe that the 50% Inclusion Test should be interpreted to require an inclusion of income by U.S. Shareholders only to the extent such inclusion is mandated by the law. Under the current law, as amended by the Jobs Act, no inclusion is mandated. However, in the absence of any specific legal authority relating to the interaction of the "Subpart F" changes made by Jobs Act and the 50% Inclusion Test of the Section 883 regulations, the IRS or a court could disagree with our position.
Publicly-Traded Test
        The regulations under Section 883 provide, in pertinent part, that stock of a foreign corporation will be considered to be "primarily traded" on an established securities market in a country if the number of shares of such class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares of such stock that are traded during that year on established securities markets in any other single country. Upon completion of our offering, the Company anticipates that its common stock, which will be its sole class of issued and outstanding stock, will be "primarily traded" on the Nasdaq National Market.
        Under the regulations, the Company's common stock will be considered to be "regularly traded" on an established securities market if more than 50% of our outstanding shares of common stock are listed on the market, to which we refer as the "listing threshold."
        It is further required that in addition to the listing threshold, (i) our common stock must be traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or one sixth of the days in a short taxable year; and (ii) the aggregate number of shares of our common stock traded on such market during the taxable year is at least 10% of the average number of shares of our common stock outstanding during such year or as appropriately adjusted in the case of a short taxable year. The regulations provide that the trading frequency and trading volume tests will be deemed satisfied if our common stock is regularly quoted by dealers making a market in our stock.
        We anticipate that we will be able to satisfy the listing threshold and the trading frequency and trading volume tests and therefore, subject to the Five Percent Override Rule described below, will be considered to be "regularly traded" on the Nasdaq National Market.
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        Notwithstanding the foregoing, the regulations provide, in pertinent part, that common stock will not be considered to be "regularly traded" on an established securities market for any taxable year in which 50% or more of the outstanding shares of our stock are owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of our outstanding common stock, to which we refer as the "5 Percent Override Rule."
        For purposes of being able to determine the persons who actually or constructively own 5% or more of our stock, or "5% Shareholders," the regulations permit us to rely on those persons that are identified on Schedule 13G and Schedule 13D filings with the United States Securities and Exchange Commission, or the "SEC", as having a 5% or more beneficial interest in our common stock. The regulations further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Shareholder for such purposes.
        In the event the 5 Percent Override Rule is triggered, the regulations provide that the 5 Percent Override Rule will nevertheless not apply if we can establish that there are sufficient 5% Shareholders that are considered to be "qualified shareholders" for purposes of Section 883 to preclude non-qualified 5% Shareholders from owning 50% or more of our stock for more than half the number of days during the taxable year.
        We believe that, immediately after the offering, the Company will be a CFC and therefore will be subject to the 5 Percent Override Rule. Since U.S. shareholders are not "qualified shareholders" under the regulations, we do not expect to be able to establish that among the group of 5% Shareholders, there are sufficient 5% Shareholders that are considered to be "qualified shareholders" for purposes of Section 883 to preclude the non-qualified 5% Shareholders group from owning 50% or more of each class of our stock for more than half the number of days during the taxable year. If the identity or ownership of the Company's 5% Shareholders changes in the future, the Company may be able to satisfy the Publicly-Traded Test. We can give no assurance, however, that this will be the case.
Taxation in Absence of Section 883 Exemption
        If the benefits of Code Section 883 are unavailable, the Company's U.S. source shipping income, would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions to the extent that such income is not considered to be "effectively connected" with the conduct of a United States trade or business, as described below. Since under the sourcing rules described above, no more than 50% of the Company's shipping income would be treated as being U.S. source shipping income, the maximum effective rate of U.S. federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime.
        To the extent the Company's U.S. source shipping income is considered to be "effectively connected" with the conduct of a U.S. trade or business, as described below, any such "effectively connected" U.S. source shipping income, net of applicable deductions, would be subject to the U.S. federal corporate income tax, currently imposed at rates of up to 35%. In addition, the Company may be subject to the 30% "branch profits" tax on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of the Company's U.S. trade or business.
        The Company's U.S. source shipping income would be considered "effectively connected" with the conduct of a U.S. trade or business only if:
•
the Company has, or is considered to have, a fixed place of business in the United States involved in the earning of U.S. source shipping income; and

•
substantially all of the Company's U.S. source shipping income is attributable to regularly scheduled transportation such as the operation of a vessel that follows a published schedule with
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repeated sailings at regular intervals between the same points for voyages that begin or end in the United States.
        The Company does not intend to have, or permit circumstances that would result in having, any vessel sailing to or from the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of the Company's shipping operations and other activities, we believe that none of the Company's U.S. source shipping income will be "effectively connected" with the conduct of a U.S. trade or business.
United States Taxation of Gain on Sale of Vessels
        If, as the Company believes, it qualifies for exemption from tax under Section 883 in respect of the shipping income derived from the international operation of its vessels, then gain from the sale of any such vessel will likewise be exempt from tax under Section 883. If, however, the Company's shipping income from such vessels does not for whatever reason qualify for exemption under Section 883 and assuming that any decision on a vessel sale is made from and attributable to the U.S. office of the Company, as we believe likely to be the case as the Company is currently structured, then any gain derived from the sale of any such vessel will be treated as derived from U.S. sources and subject to U.S. federal income tax as "effectively connected" income (determined under rules different from those discussed above) under the above described net income and branch tax regime.
U.S. Federal Income Taxation of U.S. Holders
        As used herein, the term "U.S. Holder" means a beneficial owner of common stock that is an individual U.S. citizen or resident, a U.S. corporation or other U.S. entity taxable as a corporation, an estate the income of which is subject to U.S. federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust.
        If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common stock, you are encouraged to consult your tax advisor.
Distributions
        Subject to the discussion of passive foreign investment companies and CFCs below, any distributions made by us with respect to our common stock to a U.S. Holder will generally constitute dividends to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of such earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder's tax basis in his common stock on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a U.S. corporation, U.S. Holders that are corporations will not be entitled to claim a dividends-received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common stock will generally be treated as "passive income" for purposes of computing allowable foreign tax credits for U.S. foreign tax credit purposes.
        Dividends paid on our common stock to a U.S. Holder who is an individual, trust or estate (a "United States Non-Corporate Holder") will generally be treated as "qualified dividend income" that is taxable to such United States Non-Corporate Holder at preferential tax rates (through 2008) provided that (1) the common stock is readily tradable on an established securities market in the United States (such as the Nasdaq National Market on which our common stock will be traded); (2) we are not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we are or will be); (3) the United States Non-Corporate Holder has owned the common stock for more than 60 days in the 121-day period
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beginning 60 days before the date on which the common stock becomes ex-dividend; and (4) the United States Non-Corporate Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a U.S. Non-Corporate Holder, although we believe that they will be so eligible. Any dividends out of earnings and profits we pay which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Non-Corporate Holder.
        Special rules may apply to any "extraordinary dividend"—generally, a dividend in an amount which is equal to or in excess of 10% of a shareholder's adjusted basis (or fair market value in certain circumstances) in a share of common stock—paid by us. If we pay an "extraordinary dividend" on our common stock that is treated as "qualified dividend income," then any loss derived by a United States Non-Corporate Holder from the sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend.
Sale, Exchange or Other Disposition of Common Stock
        Assuming we do not constitute a passive foreign investment company for any taxable year, a U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common stock in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder's tax basis in such stock. Subject to the discussion below regarding U.S. Shareholders of CFCs, such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder's holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as United States source income or loss, as applicable, for U.S. foreign tax credit purposes. Long-term capital gains of U.S. Non-Corporate Holders are eligible for reduced rates of taxation. A U.S. Holder's ability to deduct capital losses is subject to certain limitations.
Controlled Foreign Corporation Status and Significant Tax Consequences
        Special U.S. federal income tax rules apply to a U.S. Shareholder of a CFC. As discussed above, we anticipate that, after this offering, we will be a CFC. A U.S. Holder will be a U.S. Shareholder of us if such holder owns 10 percent or more of the total combined voting power of all classes of our stock entitled to vote, after application of specified attribution rules.
        Assuming that we are a CFC, then each U.S. Holder who is a U.S. Shareholder on the last day of our taxable year on which we are a CFC will be required to include his pro rata share of our "Subpart F income" in his income currently as ordinary income, whether or not we make any distributions of such income. For taxable years beginning on or after January 1, 2005, Subpart F income does not include income derived from the international operation of ships. However, Subpart F income does include, among other things, passive investment income, income from the sale or purchase of certain goods to or from a related party, certain income from the provision of services to a related party and any increase in our investments in certain property located in the United States.
        Inclusions of Subpart F income will increase a U.S. Shareholder's adjusted basis in his common stock. Any subsequent distributions of earnings and profits attributable to previously included Subpart F income will be non-taxable to a U.S. Shareholder and will reduce a U.S. Shareholder's adjusted basis in his common stock.
        A U.S. Shareholder's gain on the disposition of our stock would be treated as a dividend (which may be eligible for the preferential rates applicable to "qualified dividend income" discussed above) to the extent of the U.S. Shareholder's pro rata share of our untaxed earnings and profits. This recharacterization rule would continue to apply for a period of five years after we cease to be a CFC.
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Any gain in excess of untaxed earnings and profits would be treated as capital gain, which may be treated as long-term capital gain as discussed above.
        A U.S. Shareholder will also be required to annually file an information return on IRS Form 5471 reporting his ownership of our common stock and providing certain information regarding us. We will provide our U.S. Shareholders with the information necessary to complete Form 5471.
Passive Foreign Investment Company Status and Significant Tax Consequences
        Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a "passive foreign investment company" for U.S. federal income tax purposes. In general, we will be treated as a passive foreign investment company with respect to a U.S. Holder if, for any taxable year in which such holder held our common stock, either
•
at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business); or

•
at least 50% of the average value of our assets during such taxable year produce, or are held for the production of, passive income.
        The passive foreign investment company rules will not apply to any U.S. Holder for any period during which we are a CFC and such holder is a U.S. Shareholder with respect to us.
        Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute "passive income" unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business.
        Based on our current operations and future projections, we do not believe that we are, nor do we expect to become, a passive foreign investment company with respect to any taxable year. Although there is no legal authority directly on point and we are not relying on an opinion of counsel, our belief is based principally on the position that, for purposes of determining whether we are a passive foreign investment company, the gross income we derive or are deemed to derive from the time chartering and voyage chartering activities of our wholly owned subsidiaries should constitute services income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that we or our wholly owned subsidiaries own and operate in connection with the production of such income, in particular, the vessels, should not constitute passive assets for purposes of determining whether we are a passive foreign investment company. We believe there is substantial legal authority supporting our position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, in the absence of any legal authority specifically relating to the statutory provisions governing passive foreign investment companies, the IRS or a court could disagree with our position. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a passive foreign investment company with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future.
        As discussed more fully below, if we were to be treated as a passive foreign investment company for any taxable year, a U.S. Holder would be subject to different taxation rules depending on whether the U.S. Holder makes an election to treat us as a "Qualified Electing Fund," which election we refer to as a "QEF election." As an alternative to making a QEF election, a U.S. Holder should be able to make a "mark-to-market" election with respect to our common stock, as discussed below.
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Taxation of U.S. Holders Making a Timely QEF Election
        If a U.S. Holder makes a timely QEF election, which U.S. Holder we refer to as an "Electing Holder," the Electing Holder must report each year for U.S. federal income tax purposes its pro rata share of our ordinary earnings and our net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received from us by the Electing Holder. The Electing Holder's adjusted tax basis in the common stock will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common stock and will not be taxed again once distributed. An Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that we incur with respect to any year. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common stock. A U.S. Holder would make a QEF election with respect to any year that our company is a passive foreign investment company by filing one copy of IRS Form 8621 with his U.S. federal income tax return. If we were to be treated as a passive foreign investment company for any taxable year, we would provide each U.S. Holder with all necessary information in order to make the QEF election described above.
Taxation of U.S. Holders Making a "Mark-to-Market" Election
        Alternatively, if we were to be treated as a passive foreign investment company for any taxable year and, as we anticipate, our stock is treated as "marketable stock," a U.S. Holder would be allowed to make a "mark-to-market" election with respect to our common stock, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common stock at the end of the taxable year over such holder's adjusted tax basis in the common stock. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder's adjusted tax basis in the common stock over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder's tax basis in his common stock would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common stock would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common stock would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the U.S. Holder.
Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election
        Finally, if we were to be treated as a passive foreign investment company for any taxable year, a U.S. Holder who does not make either a QEF election or a "mark-to-market" election for that year, whom we refer to as a "Non-Electing Holder," would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on our common stock in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the common stock), and (2) any gain realized on the sale, exchange or other disposition of our common stock. Under these special rules:
•
the excess distribution or gain would be allocated ratably over the Non-Electing Holder's aggregate holding period for the common stock;

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

•
the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met.
        If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, the income from the common stock, including dividends and the gain from the sale, exchange or other disposition of the stock, that is effectively connected with the conduct of that trade or business will generally be subject to regular U.S. federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, if you are a corporate Non-U.S. Holder, your earnings and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty.
Backup Withholding and Information Reporting
        In general, dividend payments, or other taxable distributions, made within the United States to you will be subject to information reporting requirements if you are a non-corporate U.S. Holder. Such payments or distributions may also be subject to backup withholding tax if you are a non-corporate U.S. Holder and you:
•
fail to provide an accurate taxpayer identification number;
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•
are notified by the IRS that you have failed to report all interest or dividends required to be shown on your federal income tax returns; or

•
in certain circumstances, fail to comply with applicable certification requirements.
        Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS Form W-8BEN, W-8ECI or W-8IMY, as applicable.
        If you are a Non-U.S. Holder and you sell your common stock to or through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and information reporting unless you certify that you are a non-U.S. person, under penalties of perjury, or you otherwise establish an exemption. If you sell your common stock through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to you outside the United States, if you sell your common stock through a non-U.S. office of a broker that is a U.S. person or has some other contacts with the United States. Such information reporting requirements will not apply, however, if the broker has documentary evidence in its records that you are a non-U.S. person and certain other conditions are met, or you otherwise establish an exemption.
        Backup withholding tax is not an additional tax. Rather, you generally may obtain a refund of any amounts withheld under backup withholding rules that exceed your income tax liability by filing a refund claim with the IRS.
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 UNDERWRITING
        We intend to offer our shares of common stock through the underwriters listed in the table below. Subject to the terms and conditions described in the Underwriting Agreement, dated            , 2005 among us, the selling shareholder and the underwriters named below, we and the selling shareholder have agreed to sell to the underwriters, and the underwriters have severally agreed to purchase from us and the selling shareholder the number of shares of our common stock listed opposite their respective names below.

Underwriters
	 	Number of Shares
	
Jefferies & Company, Inc.	 	 	
Morgan Stanley & Co. Incorporated	 	 	
Dahlman Rose & Company, LLC	 	 	

Total	

        The underwriters have agreed to purchase all of the shares of our common stock sold under the underwriting agreement if any of these shares are purchased, other than those shares covered by the over-allotment option described below. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.
        The underwriters are offering the shares of our common stock, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares of our common stock, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers' certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
        The selling shareholder may be deemed to be an underwriter under the Securities Act.
        Before this offering, there has been no public trading market for shares of our common stock. Consequently, the initial public offering price of the shares will be determined through negotiations between the underwriters, the selling shareholder and us. In addition to prevailing market conditions, some of the factors to be considered in determining the initial public offering price are:
•
our financial information;

•
the operating histories of the vessels in our fleet;

•
the future prospects for our company and the shipping industry;

•
the present state of our company's development;

•
an assessment of our management;

•
the general condition of the economy and the securities markets at the time of this offering; and

•
the market prices of and demand for publicly traded common shares of comparable companies in recent periods.

        An active trading market for shares of our common stock may not develop. It is also possible that, after the offering, the shares will not trade in the public market at or above the initial public offering price.
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Commission and Expenses
        The underwriters have advised us and the selling shareholder that they propose initially to offer shares of our common stock directly to the public at the public offering price set forth on the front cover page of this prospectus and to selected dealers (who may include the underwriters) at that price less a selling concession not in excess of $                       per share. The underwriters may allow, and the selected dealers may reallow, a discount from the concession not in excess of $                  per share to other dealers. After the initial public offering, the public offering price, concession and discount may change.
        The following table shows the public offering price, underwriting discounts and commissions and proceeds before expenses to us. This information assumes either no exercise or full exercise by the underwriters of their over-allotment option to purchase additional shares of our common stock from us.

 	 	Per Share
	 	Without Option
	 	With Option
	
Public Offering Price	 	 	 	 	 	 	
Underwriting Discounts and Commissions	 	 	 	 	 	 	
Proceeds, before expenses, to us	 	 	 	 	 	 	
Proceeds, before expenses, to the selling shareholder	 	 	 	 	 	 	
        We estimate the expenses of the offering, not including the underwriting discounts and commissions, will be approximately $                  . We will pay all those expenses.
Directed Share Program
        At our request, the underwriters have reserved for sale at the initial public offering price up to            shares of common stock for employees, directors, officers and other persons associated with us who have expressed an interest in purchasing shares of common stock in this offering. The number of shares of common stock available for sale to the general public in this offering will be reduced to the extent those persons purchase the reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares of common stock being offered.
Over-Allotment Option
        We and the selling shareholder have granted the underwriters the option to purchase up to additional shares of our common stock at the public offering price less the underwriting discount. The underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any over-allotments made in connection with this offering. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional shares of our common stock proportionate to that underwriter's initial amount reflected in the table above.
Lock-up Agreements
        Our directors and executive officers and our sole shareholder, Fleet Acquisition, have agreed, with limited exceptions, for a period of 180 days from the date of this prospectus not to, directly or indirectly, offer, sell or otherwise dispose of any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock or enter into any derivative transaction with similar effect as a sale of shares of our common stock.
        We have also agreed, with limited exceptions, for a period of 180 days from the date of this prospectus; not to, directly or indirectly, offer, sell or otherwise dispose of any shares of our common
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stock or securities convertible into or exchangeable or exercisable for any shares of our common stock or enter into any derivative transaction with similar effect as a sale of shares of our common stock.
        The 180-day restricted period described above will be extended if:
•
during the last 17 days of the 180-day restricted period, we issue an earnings release or announce material news or a material event; or

•
before the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period.
In any such case, the restrictions described in the preceding paragraph will continue to apply until the expiration of the 180-day period beginning on the issuance of the earnings release or the announcement of the material news or event.
Nasdaq Listing
        We have applied for approval for the quotation of our common stock on the Nasdaq National Market under the symbol "GSTL."
Price Stabilization, Short Positions and Penalty Bids
        Until the distribution of the shares of our common stock is complete, SEC rules may limit underwriters from bidding for and purchasing shares of our common stock. However, the underwriters may engage in transactions that stabilize the price of the shares of our common stock, such as bids or purchases to peg, fix or maintain that price in accordance with Regulation M under the Exchange Act. These transactions may include the following:
•
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•
Over-allotment transactions involve sales by the underwriters of a number of shares of our common stock in excess of the number of shares the underwriters are obligated to purchase, which create a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of our common stock over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares of our common stock involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option and/or purchasing shares of our common stock in the open market.

•
Syndicate covering transactions involve purchases of shares of our common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of the shares of our common stock to close out the short position, the underwriters will consider, among other things, the price of shares of our common stock available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares of our common stock than could be covered by the over-allotment option, a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering.

•
Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the shares of our common stock originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover a syndicate short position.
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        These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of shares of our common stock or preventing or retarding a decline in the market price of the shares. The imposition of a penalty bid may also affect the price of the shares of our common stock in that it discourages resales of those shares. As a result, the price of the shares of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.
        Neither we, the selling shareholder nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of shares of our common stock. In addition, neither we nor any of the underwriters makes any representation that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Discretionary Sales
        No sales to accounts over which the underwriters have discretionary authority may be made without the prior written approval of the customer.
Indemnification
        We and the selling shareholder have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute payments that may be required to be made in respect thereof.
109

 
 
 LEGAL MATTERS
        The validity of the common stock and certain other matters relating to United States and Marshall Islands law, including certain tax matters, will be passed upon for us by Seward & Kissel LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters by Baker Botts L.L.P., Houston, Texas.
 
 DRYBULK SHIPPING INDUSTRY DATA
        The statistical and graphical information we use in this prospectus has been compiled by Drewry from its database. Drewry compiles and publishes data for the benefit of its clients. Its methodologies for collecting data, and therefore the data collected, may differ from those of other sources, and its data does not reflect all or even necessarily a comprehensive set of the actual transactions occurring in the market.
 
 EXPERTS
        The consolidated financial statements of Genco Shipping & Trading Limited as of December 31, 2004 for the period from September 27, 2004 (date of inception) through December 31, 2004, included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein and elsewhere in the registration statement, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
        The sections in this prospectus entitled "Risk Factors—The international drybulk shipping industry is cyclical and highly volatile, which may lead to reductions and volatility in our charter rates, vessel values and results of operations," "Risk Factors—Charter rates for drybulk carriers are at historically high levels and future growth will depend on continued growth in the world economy," "Risk Factors—A decline in the market value of our vessels could lead to a default under our proposed new credit facility and the loss of our vessels," and "The International Dyrbulk Shipping Industry," and the statistical and graphical information contained therein, and in any other instance where Drewry has been identified as the source of information included in this prospectus, have been reviewed by Drewry, which has confirmed to us that they accurately describe the international drybulk shipping market, subject to the availability and reliability of the data supporting the statistical information presented in this prospectus, as indicated in the consent of Drewry filed as an exhibit to the registration statement on Form S-1 under the Securities Act of which this prospectus is a part.
110

 
 
 WHERE YOU CAN FIND ADDITIONAL INFORMATION
        We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the common stock offered by this prospectus. For the purposes of this section, the term "registration statement" means the original registration statement and any and all amendments, including the schedules and exhibits to the original registration statement or any amendment. This prospectus does not contain all of the information set forth in the registration statement we filed. Although we believe that we have accurately summarized the material terms of documents filed as exhibits to the registration statement, you should read those exhibits for a complete statement of their provisions. The registration statement, including its exhibits and schedules, may be inspected and copied at the public reference facilities maintained by the SEC at 100 Fifth Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-0330, and you may obtain copies at prescribed rates from the Public Reference Section of the SEC at its principal office in Washington, D.C. 20549. The SEC maintains a website ( http://www.sec.gov ) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.
        We will be subject to the full informational requirements of the Securities Exchange Act of 1934. To comply with these requirements, we will file periodic reports, proxy statements and other information with the SEC.
111

 
 GLOSSARY OF SHIPPING TERMS
        The following are definitions of certain terms that are commonly used in the shipping industry and in this prospectus.
        Annual survey.     The inspection of a vessel pursuant to international conventions, by a classification society surveyor, on behalf of the flag state, that takes place every year.
        Ballast.     A voyage during which the vessel is not laden with cargo.
        Bareboat charter.     A charter of a vessel under which the ship owner is usually paid a fixed amount of charterhire for a certain period of time during which the charterer is responsible for the vessel operating expenses and voyage expenses of the vessel and for the management of the vessel, including crewing. A bareboat charter is also known as a "demise charter" or a "time charter by demise."
        Bunkers.     Heavy fuel and diesel oil used to power a vessel's engines.
        Capesize.     A drybulk carrier with capacity greater than 80,000 dwt.
        Charter.     The hire of a vessel for a specified period of time or to carry a cargo from a loading port to a discharging port. The contract for a charter is commonly called a "charterparty".
        Charterer.     The party that hires a vessel for a period of time or for a voyage.
        Charterhire.     A sum of money paid to the ship owner by a charterer for the use of a vessel. Charterhire paid under a voyage charter is also known as "freight."
        Classification society.     An independent society that certifies that a vessel has been built and maintained according to the society's rules for that type of vessel and complies with the applicable rules and regulations of the country of the vessel's registry and the international conventions of which that country is a member. A vessel that receives its certification is referred to as being "in-class."
        Contract of affreightment.     A contract of affreightment, or COA, relates to the carriage of multiple cargoes over the same route and enables the COA holder to nominate different vessels to perform the individual sailings. Essentially, it constitutes a number of voyage charters to carry a specified amount of cargo during the term of the COA, which usually spans a number of years. All of the vessel's operating and voyage expenses are typically borne by the ship owner.
        Drybulk carrier.     A vessel designed to carry bulk cargo, such as coal, iron ore and grain, that is loaded in bulk and not in bags, packages or containers.
        Drydocking.     The removal of a vessel from the water for inspection and repair of those parts of a vessel which are below the water line. During drydockings, which are required to be performed periodically, certain mandatory classification society inspections are carried out and relevant certifications are issued. Drydockings are generally required once every 30 months or twice every five years, one of which must be a special survey.
        Dwt.     Deadweight ton, which is a unit of a vessel's capacity for cargo, fuel, oil, stores and crew measured in metric tons of 1,000 kilograms.
        Fix.     A shipping industry term for arranging the charter of a vessel.
        Freight.     A sum of money paid to the ship owner by the charterer under a voyage charter, usually calculated either per ton loaded or as a lump-sum amount.
        Gross ton.     A unit of measurement for the total enclosed space within a vessel equal to 100 cubic feet or 2.831 cubic meters.
112

        Handymax.     A drybulk carrier with capacity ranging from 30,000 dwt to 60,000 dwt.
        Handysize.     A drybulk carrier with capacity ranging from 10,000 dwt to 30,000 dwt.
        Hull.     Shell or body of a ship.
        IMO.     International Maritime Organization, a U.N. agency that issues international standards for shipping.
        Intermediate survey.     The inspection of a vessel by a classification society surveyor that takes place 24 to 36 months after each special survey.
        Modern.     Consistent with standard industry practice, we consider vessels that are less than 15 years of age to be modern.
        Newbuilding.     A new vessel under construction or just completed.
        Off-hire.     The period in which a vessel is unable to perform the services for which it is immediately required under a time charter. Off-hire periods can include days spent on repairs, drydocking and surveys, whether or not scheduled.
        OPA.     The U.S. Oil Pollution Act of 1990.
        Panamax.     A drybulk carrier with capacity ranging from 60,000 dwt to 80,000 dwt. The term is derived from the maximum length, breadth and draft of a vessel capable of passing fully loaded through the Panama Canal.
        Period charter.     A time charter or a contract of affreightment.
        Protection and indemnity insurance.     Insurance obtained through a mutual association formed by ship owners to provide liability indemnification protection from various liabilities to which they are exposed in the course of their business, and which spreads the liability costs of each member by requiring contribution by all members in the event of a loss.
        Scrapping.     The sale of a vessel as scrap metal.
        Sister ships.     Vessels of the same class and specifications typically built at the same shipyard.
        Special survey.     The inspection of a vessel by a classification society surveyor that takes place every five years, as part of the recertification of the vessel by the classification society.
        Spot market.     The market for immediate chartering of a vessel, usually for single voyages.
        TCE.     Time charter equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per-voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing revenues (net of voyage expenses) by available days for the relevant time period. TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed during specific periods.
        Time charter.     A charter under which the ship owner is paid charterhire on a per-day basis for a specified period of time. Typically, the ship owner is responsible for providing the crew and paying vessel operating expenses while the charterer is responsible for paying the voyage expenses and additional voyage insurance.
113

        Vessel operating expenses.     The costs of operating a vessel, primarily consisting of crew wages and associated costs, insurance premiums, management fees, lubricant and spare part costs, and repair and maintenance costs. Vessel operating expenses exclude fuel costs, port expenses, agents' fees, canal dues and extra war risk insurance premiums, as well as commissions, which are included in "voyage expenses."
        Voyage charter.     A charter under which a ship owner is paid freight on the basis of moving cargo from a loading port to a discharging port. The ship owner is responsible for paying both vessel operating expenses and voyage expenses. Typically, the charterer is responsible for any delay at the loading or discharging ports.
        Voyage expenses.     Expenses incurred due to a vessel's traveling from a loading port to a discharging port, such as fuel (bunkers) costs, port expenses, agents' fees, canal dues and extra war risk insurance, as well as commissions.
114

 
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
        Consolidated Financial Statements as of and for the three months ended March 31, 2005, and as of December 31, 2004 and for the period September 27, 2004 (date of inception) through December 31, 2004:

 	 	PAGE

Report of Independent Registered Public Accounting Firm	
 	
F-2	

Consolidated Balance Sheets as of March 31, 2005 (unaudited) and December 31, 2004	
 	
F-3	

Consolidated Statements of Operations for the three months ended March 31, 2005 (unaudited) and the period September 27, 2004 (date of inception) through December 31, 2004	
 	
F-4	

Consolidated Statements of Shareholder's Equity for the three months ended March 31, 2005 (unaudited) and the period September 27, 2004 (date of inception) through December 31, 2004	
 	
F-5	

Consolidated Statements of Cash Flows for the three months ended March 31, 2005 (unaudited) and the period September 27, 2004 (date of inception) through December 31, 2004	
 	
F-6	

Notes to Consolidated Financial Statements	
 	
F-7	
F-1

 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder
of Genco Shipping & Trading Limited
        We have audited the accompanying consolidated balance sheet of Genco Shipping & Trading Limited (a wholly owned subsidiary of Fleet Acquisition LLC) and its subsidiaries (the "Company") as of December 31, 2004 and the related consolidated statements of operations, shareholder's equity, and cash flows for the period from September 27, 2004 (date of inception) through December 31, 2004. 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 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. The Company is not required to have, nor were we engaged to perform, an audit of its 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 audit provides a reasonable basis for our opinion.
        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2004 and the results of its operations and its cash flows for the period from September 27, 2004 (date of inception) to December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
May 6, 2005
/s/ Deloitte & Touche LLP
New York, New York
F-2

 
 GENCO SHIPPING & TRADING LIMITED
(A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC)

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2005 (UNAUDITED)
AND DECEMBER 31, 2004
(U.S. Dollars in thousands)

 	 	March 31, 2005
	 	December 31, 2004
	
 	 	(unaudited)
	 	 	
ASSETS	 	 	 	 	 	 	
CURRENT ASSETS:	 	 	 	 	 	 	
 	Cash	 	$	17,330	 	$	7,431	
 	Restricted cash	 	 	7,108	 	 	—	
 	Due from charterers	 	 	29	 	 	664	
 	Prepaid expenses and other current assets	 	 	1,163	 	 	434	
 	 		 		
 	 	Total current assets	 	 	25,630	 	 	8,529	
 	 		 		
NONCURRENT ASSETS:	 	 	 	 	 	 	
 	Vessels, net of accumulated depreciation of $4,402 and $421, respectively	 	 	371,402	 	 	148,070	
 	Deferred financing costs, net	 	 	4,209	 	 	4,106	
 	Deposits on vessels	 	 	6,880	 	 	40,923	
 	 		 		
 	 	Total noncurrent assets	 	 	382,491	 	 	193,099	
 	 		 		
TOTAL ASSETS	 	$	408,121	 	$	201,628	
 	 		 		
LIABILITIES AND SHAREHOLDER'S EQUITY	 	 	 	 	 	 	
CURRENT LIABILITIES:	 	 	 	 	 	 	
 	Accounts payable and accrued expenses	 	$	1,919	 	$	845	
 	Current portion of long-term debt	 	 	75,857	 	 	23,203	
 	 		 		
 	 	Total current liabilities	 	 	77,776	 	 	24,048	
 	 		 		
NONCURRENT LIABILITIES:	 	 	 	 	 	 	
 	Deferred revenue	 	 	2,771	 	 	1,643	
 	Long-term debt	 	 	242,816	 	 	102,563	
 	 		 		
 	 	Total noncurrent liabilities	 	 	245,587	 	 	104,206	
 	 		 		
TOTAL LIABILITIES	 	 	323,363	 	 	128,254	
 	 		 		
 COMMITMENTS AND CONTINGENCIES	 	 	 	 	 	 	

SHAREHOLDER'S EQUITY:	

 	

 	
 	Common stock, par value $0.01; 500 shares authorized; 500 issued and outstanding	 	$	—	 	 	—	
 	Paid-in capital	 	 	72,467	 	 	72,467	
 	Retained earnings	 	 	12,291	 	 	907	
 	 		 		
 	 	Total shareholder's equity	 	 	84,758	 	 	73,374	
 	 		 		
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY	 	$	408,121	 	$	201,628	
 	 		 		
See notes to consolidated financial statements.
F-3

 
 
 GENCO SHIPPING & TRADING LIMITED
(A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2005 (UNAUDITED)
AND THE PERIOD SEPTEMBER 27, 2004 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 2004
(U.S. Dollars in thousands, except earnings per share)

 	 	Three Months
ended
March 31, 2005
	 	September 27, 2004
through
December 31, 2004
	 	
 	 	(unaudited)
	 	 	 	
REVENUES	 	$	21,399	 	$	1,887	 	
OPERATING EXPENSES:	 	 	 	 	 	 	 	
 	Voyage expenses	 	 	890	 	 	44	 	
 	Vessel operating expenses	 	 	2,016	 	 	141	 	
 	General and administative expenses	 	 	591	 	 	140	 	
 	Depreciation	 	 	3,981	 	 	421	 	
 	 		 		 	
 	 	Total operating expenses	 	 	7,478	 	 	746	 	

OPERATING INCOME	

13,921	

1,141	

INTEREST INCOME (EXPENSE):	

 	

 	
 	
 	Interest income	 	 	83	 	 	8	 	
 	Interest expense	 	 	(2,620	)	 	(242	)	

NET INTEREST EXPENSE	

(2,537	
)	
 	
(234	
)	
 	 		 		 	
NET INCOME	 	$	11,384	 	$	907	 	
 	 		 		 	
EARNINGS PER SHARE—BASIC	 	$	22,768	 	$	1,814	 	
 	 		 		 	
Weighted average common shares outstanding	 	 	500	 	 	500	 	
 	 		 		 	
See notes to consolidated financial statements.
F-4

 
 
 GENCO SHIPPING & TRADING LIMITED

(A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC)

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2005 (UNAUDITED)
AND THE PERIOD SEPTEMBER 27, 2004 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 2004
(U.S. Dollars in thousands)

 	 	Common
Stock
	 	Paid-in
Capital
	 	Retained
Earnings
	 	Total
	
Balance—September 27, 2004 (date of inception)	 	$	—	 	$	—	 	$	—	 	$	—	
 	Capital contributions	 	 	 	 	 	72,467	 	 	 	 	 	72,467	
 	Net income	 	 	 	 	 	 	 	 	907	 	 	907	
 	 	 	 	 		 		 		
Balance—December 31, 2004	 	 	 	 	 	72,467	 	 	907	 	 	73,374	
 	 	 	 	 		 		 		
 	Net income	 	 	 	 	 	 	 	 	11,384	 	 	11,384	
 	 		 		 		 		
Balance—March 31, 2005 (unaudited)	 	$	—	 	$	72,467	 	$	12,291	 	$	84,758	
 	 		 		 		 		
See notes to consolidated financial statements.
F-5

 
 
 GENCO SHIPPING & TRADING LIMITED
(A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2005 (UNAUDITED) AND
THE PERIOD SEPTEMBER 27, 2004 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 2004
(U.S. Dollars in thousands)

 	 	Three
Months
ended
March 31, 2005
	 	September 27,
2004
Through
December 31, 2004
	 	
 	 	(Unaudited)
	 	 	 	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	
 	Net income	 	$	11,384	 	$	907	 	
 	
Adjustments to reconcile net income to net cash provided by operating activities:	

 	

 	
 	
 	 	Depreciation	 	 	3,981	 	 	421	 	
 	 	Amortization of deferred financing costs	 	 	202	 	 	—	 	
 	 	Change in assets and liabilities:	 	 	 	 	 	 	 	
 	 	 	Decrease (increase) in due from charterers	 	 	635	 	 	(664	)	
 	 	 	Increase in prepaid expenses and other current assets	 	 	(729	)	 	(434	)	
 	 	 	Increase in accounts payable and accrued expenses	 	 	1,074	 	 	845	 	
 	 	 	Increase in deferred revenue	 	 	1,128	 	 	1,643	 	
 	 		 		 	
 	 	 	 	Net cash provided by operating activities	 	 	17,675	 	 	2,718	 	

CASH FLOWS FROM INVESTING ACTIVITIES:	

 	

 	
 	
 	Purchase of vessels and equipment	 	 	(193,270	)	 	(148,491	)	
 	Deposits on vessels	 	 	—	 	 	(40,923	)	
 	 		 		 	
 	 	 	 	Net cash used in investing activities	 	 	(193,270	)	 	(189,414	)	

CASH FLOWS FROM FINANCING ACTIVITIES:	

 	

 	
 	
 	Proceeds from bank loan	 	 	192,907	 	 	125,766	 	
 	Deferred financing costs	 	 	(305	)	 	(4,106	)	
 	Capital contributions from shareholder	 	 	—	 	 	72,467	 	
 	Increase in restricted cash	 	 	(7,108	)	 	—	 	
 	 		 		 	
 	 	 	 	Net cash provided by financing activities	 	 	185,494	 	 	194,127	 	

NET INCREASE IN CASH	

9,899	

7,431	

CASH AT BEGINNING OF PERIOD	

7,431	

—	

 	CASH AT END OF PERIOD	 	$	17,330	 	$	7,431	 	

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION—	

 	

 	
 	
 	Cash paid during the period for interest	 	$	1,418	 	$	155	 	
 	 		 		 	
See notes to consolidated financial statements.
F-6

 
 GENCO SHIPPING & TRADING LIMITED
(A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2005 (UNAUDITED) AND THE PERIOD
SEPTEMBER 27, 2004 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 2004
(U.S. Dollars in thousands, except per share amounts)
1.    GENERAL INFORMATION
        The accompanying consolidated financial statements include the accounts of Genco Shipping & Trading Limited ("GS&T") and its wholly owned subsidiaries (collectively, the "Company"). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. GS&T was formed September 27, 2004 under the laws of the Marshall Islands and is the sole owner of all of the outstanding shares of the following subsidiaries: Genco Ship Management LLC, and the 16 shipowning subsidiaries as set forth below. The Company was incorporated on September 27, 2004 and began operations on December 6, 2004 with the delivery of its first vessel.
        The Company agreed to acquire a fleet of 16 drybulk carriers from an unaffiliated third party. As of March 31, 2005, the Company had taken delivery of the following 14 drybulk carriers and took delivery of the Genco Prosperity in April 2005 and the Genco Trader in June 2005 as shown below:

Wholly Owned
Subsidiaries
	 	Vessels
Acquired
	 	dwt
	 	Date
Delivered
	 	Year
Built
	
Genco Reliance Limited	 	Genco Reliance	 	29,952	 	12/6/04	 	1999	
Genco Glory Limited	 	Genco Glory	 	41,062	 	12/8/04	 	1984	
Genco Vigour Limited	 	Genco Vigour	 	73,941	 	12/15/04	 	1999	
Genco Explorer Limited	 	Genco Explorer	 	29,952	 	12/17/04	 	1999	
Genco Carrier Limited	 	Genco Carrier	 	47,180	 	12/28/04	 	1998	
Genco Sugar Limited	 	Genco Sugar	 	29,952	 	12/30/04	 	1998	
Genco Pioneer Limited	 	Genco Pioneer	 	29,952	 	1/4/05	 	1999	
Genco Progress Limited	 	Genco Progress	 	29,952	 	1/12/05	 	1999	
Genco Wisdom Limited	 	Genco Wisdom	 	47,180	 	1/13/05	 	1997	
Genco Success Limited	 	Genco Success	 	47,186	 	1/31/05	 	1997	
Genco Beauty Limited	 	Genco Beauty	 	73,941	 	2/7/05	 	1999	
Genco Knight Limited	 	Genco Knight	 	73,941	 	2/16/05	 	1999	
Genco Leader Limited	 	Genco Leader	 	73,941	 	2/16/05	 	1999	
Genco Marine Limited	 	Genco Marine	 	45,222	 	3/29/05	 	1996	
Genco Prosperity Limited	 	Genco Prosperity	 	47,180	 	4/4/05	 	1997	
Genco Trader Limited	 	Genco Trader	 	69,388	 	6/7/05	 	1990	
        The purchase price of the 16 vessels aggregated to approximately $421,000, which was funded from a portion of the $72,467 generated from GS&T's initial issuance of common stock to Fleet Acquisition LLC (the "Parent Company" or "Parent") from the borrowings under the Company's credit facility and from the Company's cash flows from operations.
        The Company is 100% owned by the Parent. Fleet Acquisition LLC is a limited liability company organized on September 27, 2004 under the laws of the Marshall Islands. Fleet Acquisition LLC is owned 66.53% by OCM Opportunity (Oaktree Capital Management), 26.63% by Peter Georgiopoulos, and 6.84% by others.
F-7

        The information set forth in these consolidated financial statements for the three months ended March 31, 2005 is unaudited and reflects all adjustments, consisting only of normal recurring adjustments, that, in the opinion of management, are necessary to present fairly the financial position and results of operations of the Company for the period. Results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year.
2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         Principles of Consolidation — The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which include the accounts of Genco Shipping & Trading Limited and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
         Business Geographics —Non-U.S. operations accounted for 100% of revenues and net income. The Company's vessels regularly move between countries in international waters, over hundreds of trade routes.
         Segment Reporting —The Company reports financial information and evaluates its operations by charter revenues and not by the length of ship employment for its customers, i.e. spot or time charters. The Company does not use discrete financial information to evaluate the operating results for different types of charters. Although revenue can be identified for these types of charters, management cannot and does not separately identify expenses, profitability or other financial information for these charters. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet and thus, the Company has determined that it operates under one reportable segment. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable.
         Revenue and Voyage Expense Recognition —Since the Company's inception, revenues have been generated from time charter agreements. A time charter involves placing a vessel at the charterer's disposal for a set period of time during which the charterer may use the vessel in return for the payment by the charterer of a specified daily hire rate. In time charters, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. Time charter revenues are recorded over the term of the charter as service is provided. Revenues are recognized on a straight line basis as the average revenue over the term of the respective time charter agreement. The Company has no significant performance claims in its time charter agreements.
         Vessel Operating Expenses —Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, and other miscellaneous expenses. Vessel operating expenses are recognized when incurred.
F-8

         Vessels, Net —Vessels, net are stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date of initial delivery from the shipyard.
        Depreciation expense is calculated based on cost less the estimated residual scrap value. The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessel's remaining estimated useful life or the estimated life of the renewal or betterment. Undepreciated cost of any asset component being replaced that was acquired after the initial vessel purchase is written off as a component of vessel operating expense. Expenditures for routine maintenance and repairs are expensed as incurred. Scrap value is estimated by the Company by taking the cost of steel times the weight of the ship noted in lightweight ton (lwt). At March 31, 2005 and December 31, 2004, the Company estimated the cost of steel to be approximately $175/lwt.
        Deferred Drydocking Costs —Our vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. We capitalize the costs associated with the drydockings as they occur and amortize these costs on a straight-line basis over the period between drydockings. Costs capitalized as part of a vessel's drydocking include actual costs incurred at the drydocking yard; cost of fuel consumed between the vessel's last discharge port prior to the drydocking and the time the vessel leaves the drydocking yard; cost of hiring riding crews to perform drydocking-related activities and cost of parts that are reasonably made in anticipation of reducing the duration or cost of the drydocking; cost of travel, lodging and subsistence of personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee the drydocking. During the period September 27, 2004 (date of inception) through December 31, 2004 and for the three months ended March 31, 2005, the Company did not incur any drydocking costs.
         Inventory —Inventory consist of lubricants, which are stated at the lower of cost or market. Cost is determined by the first-in, first-out method.
         Impairment of Long-Lived Assets — The Company follows Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets , which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. In the evaluation of the fair value and future benefits of long-lived assets, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value. Various factors including anticipated future charter rates, estimated scrap values, future drydocking costs and estimated vessel operating costs, are included in this analysis.
F-9

        For the three months ended March 31, 2005 and the period September 27, 2004 (date of inception) through December 31, 2004, no impairment charges were recorded, based on the analysis described above.
         Deferred Financing Costs, Net —Deferred financing costs include fees, commissions and legal expenses associated with securing loan facilities. These costs are amortized over the life of the related debt, which is included in interest expense. Accumulated amortization of deferred financing costs as of March 31, 2005 and December 31, 2004 were $262 and $60, respectively.
         Deposits on Vessels —Deposits on vessels consist of payments made to the seller of vessels in advance of the Company taking possession of the vessel.
         Cash and Cash Equivalents —The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.
        Restricted Cash —Restricted cash represents cash that must be used to pay future principal and interest for the subsequent quarter pursuant to the Company's existing credit facility.
         Income Taxes —Pursuant to the U.S. Internal Revenue Code of 1986 as amended (the "Code"), Section 883, effective for the Company's fiscal years beginning on or after December 1, 1987, qualified income derived from the international operations of ships is excluded from gross income and exempt from U.S. federal income tax if the company, engaged in the international operation of ships, meets certain requirements. Among other things, in order to qualify, the company must be incorporated in a country which grants an equivalent exemption to U.S. citizens and corporations and must satisfy certain qualified ownership requirements.
        The Company is incorporated in the Marshall Islands. Pursuant to the income tax laws of the Marshall Islands, the Company is not subject to Marshall Islands income tax.
        The Marshall Islands has been officially recognized by the Internal Revenue Service as a qualified foreign country that currently grants the requisite equivalent exemption from tax.
        Unless exempt from United States federal income taxation under the rules discussed above, a foreign corporation is subject to United States federal income taxation on its "shipping income" that is treated as derived from sources within the United States, to which we refer as "United States source shipping income." For these purposes "shipping income" means any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time voyage, from the participation in a pool, partnership, strategic alliance, joint operating agreement, code sharing arrangement or other joint venture it directly or indirectly owns or participates in that generates such income, or from the performance of services directly related to those uses. For tax purposes, "United States source shipping income" includes (i) 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States and (ii) 100% of shipping income that is attributable to transportation that both begins and ends in the United States.
F-10

        In October 2004, the U.S. Congress enacted the American Jobs Creation Act of 2004. The Act provided for certain changes in the taxation of U.S.-owned shipping companies. The Company does not believe that such changes will impact its exemption from taxation of its U.S. operations.
         Deferred Revenue —Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as income in the appropriate future periods.
         Accounting 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include vessel and drydock valuations and the valuation of due from charterers. Actual results could differ from those estimates.
         Concentration of Credit Risk —Financial instruments that potentially subject the Company to concentrations of credit risk are trade receivables. With respect to accounts receivable, the Company attempts to limit its credit risk by performing ongoing credit evaluations and, when deemed necessary, requiring letters of credit, guarantees or collateral. Although the Company earned 100% of revenues from ten customers, management does not believe significant risk exists in connection with the Company's concentrations of credit at March 31, 2005.
         Fair Value of Financial Instruments —The estimated fair values of the Company's financial instruments approximate their individual carrying amounts as of March 31, 2005 and December 31, 2004 due to their short-term maturity or the variable-rate nature of the respective borrowings.
         Earnings Per Share —Earnings per share has been calculated by dividing the net income by weighted average number of common shares outstanding during the period. There is no dilution for the three months ended March 31, 2005 or for the period ended December 31, 2004.
         New Accounting Pronouncements —In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R that will require compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS 123R replaces SFAS No. 123, "Accounting for Stock-Based Compensation", and supersedes APB 25. This Statement will be effective as of the beginning of the first fiscal year that begins after June 15, 2005.
        Entities that used the fair-value-based method for either recognition or disclosure under SFAS No. 123 will apply this revised Statement using a modified version of prospective application. Under this transition method, for the portion of outstanding awards for which the requisite service has not yet been rendered, compensation cost is recognized on or after the required effective date based on the grant-date fair value of those awards calculated under SFAS No. 123 for either recognition or pro
F-11

forma disclosures. For periods before the required effective date, those entities may elect to apply a modified version of the retrospective application under which financial statements for periods are adjusted on a basis consistent with the pro forma disclosures required for those periods by SFAS No. 123. The adoption of SFAS No. 123R will not have a material impact on the Company's financial statements.
3.    DEPOSITS ON VESSELS
        Under the terms of the purchase agreement between the company and an unaffiliated seller, the Company was required to make a deposit of 15% of the purchase price for each vessel to be acquired for its initial fleet. The deposit for each vessel is applied towards the purchase price of that vessel on the acquisition date. As of March 31, 2005 and December 31, 2004 deposits held for the subsequent purchase of the remaining two and ten vessels were $6,880 and $40,923, respectively.
4.    RELATED PARTY TRANSACTIONS
        The following are related party transactions not disclosed elsewhere in these financial statements:
        As of April 2005, the Company rents office space as its principal executive offices in a building currently leased by GenMar Realty LLC, a company wholly owned by Peter C. Georgiopoulos, the Chairman of the Board. There is no lease agreement between the Company and GenMar Realty LLC. The Company currently pays an occupancy fee on a month to month basis in the amount of $55. For the three months ended March 31, 2005 and the period from September 27, 2004 (date of inception) through December 31, 2004, the Company did not incur any of these occupancy fees.
        During the three months ended March 31, 2005 and the period from September 27, 2004 (date of inception) through December 31, 2004, the Company incurred legal services (primarily in connection with vessel acquisitions in 2004) aggregating $107 and $83 from Constantine Georgiopoulos, father of Peter C. Georgiopoulos, Chairman of the Board. At March 31, 2005 and December 31, 2004, $190 and $83, respectively, were outstanding to Constantine Georgiopoulous.
        The Company has obtained an insurance policy through Leeds & Leeds Company Inc., a broker. Leeds & Leeds Company Inc. currently holds less than 0.1% ownership in the Parent. The Company incurred $361 and $24 of insurance expense to them for the three months ended March 31, 2005 and the period from September 27, 2004 (date of inception) through December 31, 2004, respectively.
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5.    PREPAID EXPENSES AND OTHER CURRENT ASSETS
        Prepaid expenses and other current assets consist of the following:

 	 	March 31,
2005
	 	December 31,
2004
	
 	 	(unaudited)
	 	 	
Lubricants inventory	 	$	629	 	$	291	
Prepaid Insurance	 	 	240	 	 	—	
Other	 	 	294	 	 	143	
 	 		 		
Total	 	$	1,163	 	$	434	
 	 		 		
6.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES
        Accounts payable and accrued expenses consist of the following:

 	 	March 31,
2005
	 	December 31,
2004
	
 	 	(unaudited)
	 	 	
Accounts payable	 	$	276	 	$	332	
Accrued expenses	 	 	314	 	 	363	
Accrued interest	 	 	1,027	 	 	27	
Commitment fee payable	 	 	302	 	 	123	
 	 		 		
Total	 	$	1,919	 	$	845	
 	 		 		
7.    LONG-TERM DEBT
        Long-term debt consists of the following:

 	 	March 31,
2005
	 	December 31,
2004
	
 	 	(unaudited)
	 	 	
Term Loan	 	$	318,673	 	$	125,766	
Less: Current portion of long-term debt	 	 	75,857	 	 	23,203	
 	 		 		
Long-term debt	 	$	242,816	 	$	102,563	
 	 		 		
        On December 3, 2004 the Company entered into a credit facility ("2004 Credit Facility") with a limit of $357,000 with a group of lender banks. The loan has a five year maturity at a rate of LIBOR plus 1.375% per year until $100,000 has been repaid and thereafter at LIBOR plus 1.250%. In the
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event of late principal payments additional interest charges will be incurred. The following table sets forth our contractual obligations and the maturity dates as of March 31, 2005:

Period Ending December 31,
	 	Total
	
2005 (June 1, 2005 to December 31, 2005)	 	$	57,448	
2006	 	 	73,643	
2007	 	 	38,495	
2008	 	 	26,779	
2009	 	 	26,779	
Thereafter	 	 	95,529	
 	 		
 	 	$	318,673	
 	 		
        The 2004 Credit Facility is secured by a first priority mortgage on each of the vessels in the Company's fleet and a first assignment of all freights, earnings and insurances. As at March 31, 2005, the 14 vessels acquired in 2004 and 2005 as described in Note 1 had a carrying value of $371,402. As of March 31, 2005, all the principal of the loan for the 14 vessels acquired in 2004 was outstanding.
        The terms and conditions of the 2004 Credit Facility require compliance with certain restrictive covenants. Under the credit facility, the Company is required to maintain certain financial covenants requiring among other things to ensure that, the aggregate market value of the vessels in the fleet that secure the obligation under the 2004 Credit Facility exceed the aggregate principal amount of debt outstanding under the 2004 Credit Facility and maintain certain ratios such as: interest coverage ratios and maximum leverage ratios. In addition, the Company must employ all vessels under a fixed rate charter for a term ending no sooner than 24 months immediately following the vessel's purchase and maintain certain minimum funding requirements from the Parent. Vessel charterers must be approved by the lenders under the current credit facility.
        The Company failed to comply with such covenants by employing certain vessels under fixed-rate charters for terms ending sooner than 24 months immediately following the vessel's purchase. The Company received a waiver in May 2005 that deemed all charters entered into to be in compliance with the covenant for chartering except for the Genco Leader. In March and April 2005, the Company received waivers extending the required compliance date of the Genco Leader through June 30, 2005.
        The Company was obligated to receive a minimum amount of funding from the Parent on the earlier of December 15, 2004 or the delivery of the fourth vessel. On December 15, 2004, the Company was underfunded from its parent by $2.69 million. In May 2005, the Company received a waiver for the underfunding through May 31, 2005. The Parent made the required capital contribution in May 2005.
        Interest rates during the three months ended March 31, 2005 averaged 3.912% and ranged from 3.687% to 4.250% during that period. Interest rates during the period from inception to December 31, 2004 ranged from 3.625% to 3.875% on the Credit Facility.
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8.    REVENUE FROM TIME CHARTERS
        Total revenue earned on time charters for the three months ended March 31, 2005 and the period from September 27, 2004 (date of inception) through December 31, 2004 was $21,399 and $1,887 respectively. Future minimum time charter revenue, based on vessels committed to noncancelable time charter contracts as of March 31, 2005 will be $92,636 during the remaining nine months of 2005, $120,553 during 2006 and $22,519 during 2007.
9.    SIGNIFICANT CUSTOMERS
        For the three months ended March 31, 2005, the Company's total revenue was earned from ten customers and two customers accounted for more than 30% of revenues individually. For the period ended December 31, 2004, all of the Company's revenues were earned from four customers. For the period ended December 31, 2004, three of the Company's customers accounted for more than 10% of its revenue.
10.    LEGAL PROCEEDINGS
        From time to time the Company will be subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the Company, its financial condition, results of operations or cash flows.
11.    SUBSEQUENT EVENTS (UNAUDITED)
        In May 2005 the Company received an additional capital contribution from the fleet acquisition of $2.7 milllion.
        In June 2005 the Company has received a waiver for the Genco Trader through July 31, 2005 extending the compliance date for the covenant to employ vessels under fixed-rate charters for terms ending no sooner than 24 months immediately following the vessel's purchase.
        The following two vessels have been delivered subsequent to March 31, 2005.

Vessel
	 	dwt
	 	Year
Built
	 	Delivery Date
	
Genco Prosperity	 	47,180	 	1997	 	4/4/2005	
Genco Trader	 	69,388	 	1990	 	6/7/2005	
        Subsequent to March 31, 2005, the Company paid $38,989 to purchase the vessels. The purchase price paid for the vessels upon delivery was funded with $38,327 of additional debt under the Credit Facility and $662 from working capital.
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 [ARTWORK]

         Through and including            , 2005, which is the 25 th day after the date of this prospectus, all dealers effecting transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 
 PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13.    Other Expenses of Issuance and Distribution
 
 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
        We estimate the expenses in connection with the issuance and distribution of our common stock in this offering, other than underwriting discounts and commissions, as follows:

SEC Registration Fee	 	$	41,195	
Printing Expenses	 	 	 	
Legal Fees and Expenses	 	 	 	
Accountants' Fees and Expenses	 	 	 	
Nasdaq Entry Fee	 	 	 	
National Association of Securities Dealers, Inc. Filing Fee	 	$	35,500	
Blue Sky Fees and Expenses	 	 	 	
Transfer Agent's Fees and Expenses	 	 	 	
 	 		
Other Fees and Expenses	 	 	 	
 	 		
Total	 	$	 	
 	 		
Item 14.    Indemnification of Directors and Officers.
        The amended and restated bylaws of the Registrant will provide that every director and officer of the Registrant shall be indemnified out of the funds of the Registrant against:
        (1) all civil liabilities, loss, damage or expense (including but not limited to liabilities under contract, tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable) incurred or suffered by him as such director or officer acting in the reasonable belief that he has been so appointed or elected notwithstanding any defect in such appointment or election, provided always that such indemnity shall not extend to any matter which would render it void pursuant to any Marshall Islands statute from time to time in force concerning companies insofar as the same applies to the Registrant (the "Companies Acts"); and
        (2) all liabilities incurred by him as such director or officer in defending any proceedings, whether civil or criminal, in which judgment is given in his favor, or in which he is acquitted, or in connection with any application under the Companies Acts in which relief from liability is granted to him by the court.
        Section 60 of the Associations Law of the Marshall Islands provides as follows:
        Indemnification of directors and officers.
        (1) Actions not by or in right of the corporation .    A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The
II-1

termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of no contest, or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the bests interests of the corporation, and, with respect to any criminal action or proceedings, had reasonable cause to believe that his conduct was unlawful.
        (2)     Actions by or in right of the corporation ,    A corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him or in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claims, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
        (3)     When director or officer successful ,    To the extent that a director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (1) or (2) of this section, or in the defense of a claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
        (4)     Payment of expenses in advance ,    Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section.
        (5)     Continuation of indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
        (6)     Insurance ,    A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer against any liability asserted against him and incurred by him in such capacity. whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section.
Item 15.    Recent Sales of Unregistered Securities.
        On November 15, 2004, we issued 500 shares of our common stock to our sole shareholder, Fleet Acquisition LLC, for aggregate consideration consisting of $5,000, in connection with our initial capitalization. This issuance was exempt from registration pursuant to Section 4(2) of the Securities Act.
II-2

Item 16.    Exhibits and Financial Statement Schedules.
(a)
Exhibits

Exhibit
Number
	 	Description
	
1	 	Form of Underwriting Agreement*	

3.1	
 	
Amended and Restated Articles of Incorporation of the Company*	

3.2	
 	
Amended and Restated Bylaws of the Company*	

4.1	
 	
Form of Share Certificate of the Company*	

4.2	
 	
Form of Shareholders' Rights Agreement*	

5	
 	
Form of Opinion of Seward & Kissel LLP, United States and Marshall Islands Counsel to the Company, as to the validity of the common stock**	

8	
 	
Form of Opinion of Seward & Kissel LLP, United States Counsel to the Company, with respect to certain tax matters**	

10.1	
 	
Form of Registration Rights Agreement*	

10.2	
 	
Form of 2005 Equity Incentive Plan*	

10.3	
 	
Credit Agreement among Fleet Acquisition LLC, Genco Shipping & Trading Limited, Various Lenders, Nordea Bank Finland plc, New York Branch and Citigroup Global Markets Limited dated December 3, 2004	

10.4	
 	
Credit Agreement dated            , 2005, between the Company and        *	

10.5	
 	
Employment Agreement between the Company and Robert Gerald Buchanan*	

10.6	
 	
Employment Agreement between the Company and John C. Wobensmith*	

21	
 	
Subsidiaries of the Company**	

23.1	
 	
Consents of Seward & Kissel LLP (included in Exhibits 5 and 8)**	

23.2	
 	
Consent of Deloitte & Touche LLP	

23.3	
 	
Consent of Drewry Shipping Consultants Limited	

23.4	
 	
Consent of Nathaniel A. Kramer*	

23.5	
 	
Consent of Stephen A. Kaplan*	

23.6	
 	
Consent of Mark F. Polzin*	

23.7	
 	
Consent of Rear Admiral Robert C. North, USCG (ret.)*	

*
To be filed by amendment.

**
Previously filed.
Item 17. Undertakings.
         Reg. S-K, Item 512(f) Undertaking:     The undersigned Registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
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         Reg. S-K, Item 512(h) Undertaking: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the provisions described above in Item 14, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
         Reg. S-K, Item 512(I) Undertaking: The undersigned Registrant hereby undertakes that:
1.
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

2.
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4

 
 SIGNATURES
        Pursuant to the requirements of the Securities Act of 1933, the registrant to has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York on June 16, 2005.

 	 	GENCO SHIPPING & TRADING LIMITED	

 	
By:	
/s/   ROBERT GERALD BUCHANAN       

Name: Robert Gerald Buchanan
Title: President	
        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Robert Gerald Buchanan, John C. Wobensmith, Gary J. Wolfe, and Robert E. Lustrin his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement and any related registration statement filed pursuant to Rule 462(b), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
        Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons on June 16, 2005 in the capacities indicated.

Signature
	 	Title

 	

/s/   PETER C. GEORGIOPOULOS       

Peter C. Georgiopoulos	 	Chairman of the Board	

/s/   ROBERT GERALD BUCHANAN       

Robert Gerald Buchanan	
 	
President
(Principal Executive Officer)	

/s/   JOHN C. WOBENSMITH       

John C. Wobensmith	
 	
Chief Financial Officer, Secretary and Treasurer
(Principal Financial and Accounting Officer)	
II-5

 
 
 INDEX TO EXHIBITS

Exhibit
Number
	 	Description
	
1	 	Form of Underwriting Agreement*	

3.1	
 	
Amended and Restated Articles of Incorporation of the Company*	

3.2	
 	
Amended and Restated Bylaws of the Company*	

4.1	
 	
Form of Share Certificate of the Company*	

4.2	
 	
Form of Shareholders' Rights Agreement*	

5	
 	
Form of Opinion of Seward & Kissel LLP, United States and Marshall Islands Counsel to the Company, as to the validity of the common stock**	

8	
 	
Form of Opinion of Seward & Kissel LLP, United States Counsel to the Company, with respect to certain tax matters**	

10.1	
 	
Form of Registration Rights Agreement*	

10.2	
 	
Form of 2005 Equity Incentive Plan*	

10.3	
 	
Credit Agreement among Fleet Acquisition LLC, Genco Shipping & Trading Limited, Various Lenders, Nordea Bank Finland plc, New York Branch and Citigroup Global Markets Limited dated December 3, 2004	

10.4	
 	
Credit Agreement dated            , 2005, between the Company and        *	

10.5	
 	
Employment Agreement between the Company and Robert Gerald Buchanan*	

10.6	
 	
Employment Agreement between the Company and John C. Wobensmith*	

21	
 	
Subsidiaries of the Company**	

23.1	
 	
Consents of Seward & Kissel LLP (included in Exhibits 5 and 8)**	

23.2	
 	
Consent of Deloitte & Touche LLP	

23.3	
 	
Consent of Drewry Shipping Consultants Limited	

23.4	
 	
Consent of Nathaniel A. Kramer*	

23.5	
 	
Consent of Stephen A. Kaplan*	

23.6	
 	
Consent of Mark F. Polzin*	

23.7	
 	
Consent of Rear Admiral Robert C. North, USCG (ret.)*	

*
To be filed by amendment.

**
Previously filed.
II-6

QuickLinks
 [ARTWORK]
 PROSPECTUS SUMMARY
Our Company
Our Fleet
Fleet Management
Industry Trends
Our Competitive Strengths
Our Business Strategy
Dividend Policy
Principal Executive Offices
 The Offering
Risk Factors
Summary Consolidated Financial and Other Data
 RISK FACTORS
 FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
 DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 THE INTERNATIONAL DRYBULK SHIPPING INDUSTRY
World Seaborne Trade in 2004
Drybulk Seaborne Trade—2004
Chinese Iron Ore Imports
Crude Steel Production
Ton-Mile Demand by Commodity
Major Drybulk Seaborne Trade Routes (2004 approximate values)
 Drybulk Carrier Fleet Development—Deliveries vs. Scrappings
Drybulk Carrier Fleet and Orderbook Development
Drybulk Carrier Fleet—May 2005
Historical Drybulk Carrier Fleet and Orderbook 2001 to 2004
Drybulk Carrier Orderbook—May 2005
Drybulk Carrier Age Profile—May 2005
Drybulk Carrier Scrapping
Drybulk Fleet Ownership Summary (As of May 2005)
Time Charter Rates—12 month period, prompt delivery
Baltic Panamax Index
Drybulk Carrier Newbuilding Prices
Drybulk Carrier Secondhand Prices
 BUSINESS
 NEW CREDIT FACILITY
MANAGEMENT
PRINCIPAL AND SELLING SHAREHOLDER
RELATED-PARTY TRANSACTIONS
SHARES ELIGIBLE FOR FUTURE SALE
 DESCRIPTION OF CAPITAL STOCK
 CERTAIN MARSHALL ISLANDS COMPANY CONSIDERATIONS
 TAX CONSIDERATIONS
 UNDERWRITING
LEGAL MATTERS
DRYBULK SHIPPING INDUSTRY DATA
EXPERTS
WHERE YOU CAN FIND ADDITIONAL INFORMATION
 GLOSSARY OF SHIPPING TERMS
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 GENCO SHIPPING & TRADING LIMITED (A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC) CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004 (U.S. Dollars in thousands)
GENCO SHIPPING & TRADING LIMITED (A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 (UNAUDITED) AND THE PERIOD SEPTEMBER 27, 2004 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004 (U.S. Dollars in thousands, except earnings per share)
GENCO SHIPPING & TRADING LIMITED (A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC) CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2005 (UNAUDITED) AND THE PERIOD SEPTEMBER 27, 2004 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004 (U.S. Dollars in thousands)
GENCO SHIPPING & TRADING LIMITED (A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2005 (UNAUDITED) AND THE PERIOD SEPTEMBER 27, 2004 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004 (U.S. Dollars in thousands)
 GENCO SHIPPING & TRADING LIMITED (A WHOLLY OWNED SUBSIDIARY OF FLEET ACQUISITION LLC) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2005 (UNAUDITED) AND THE PERIOD SEPTEMBER 27, 2004 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2004 (U.S. Dollars in thousands, except per share amounts)
 [ARTWORK]
 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 SIGNATURES
INDEX TO EXHIBITS
 
Exhibit 10.3
 
[CONFORMED COPY
with Exhibits E, F-1, F-2, G & H
Conformed as Executed]
 
CREDIT AGREEMENT
 
among
 
FLEET ACQUISITION LLC,

GENCO SHIPPING & TRADING LIMITED,

VARIOUS LENDERS

and

NORDEA BANK FINLAND PLC, NEW YORK BRANCH,
 
as Administrative Agent
 
Dated as of December 3, 2004
 
and

CITIGROUP GLOBAL MARKETS LIMITED

and
 
NORDEA BANK FINLAND PLC, NEW YORK BRANCH
as Joint Lead Arrangers and Joint Book Runners

 
TABLE OF CONTENTS

SECTION 1. Amount and Terms of Credit Facilities	
 	1.01 The Commitments	 	
 	1.02 Minimum Amount of Each Borrowing; Limitation on Number of Borrowings	 	
 	1.03 Notice of Borrowing	 	
 	1.04 Disbursement of Funds	 	
 	1.05 Notes	 	
 	1.06 Pro Rata Borrowings	 	
 	1.07 Interest	 	
 	1.08 Interest Periods	 	
 	1.09 Increased Costs, Illegality, etc	 	
 	1.10 Compensation	 	
 	1.11 Change of Lending Office	 	
 	1.12 Replacement of Lenders	 	
 	 	 	
SECTION 2. Reserve Account	 	
 	 	
SECTION 3. Commitment Commission; Reductions of Commitment	 	
 	 	
 	3.01 Commitment Commission	 	
 	3.02 Voluntary Termination of Unutilized Commitments	 	
 	3.03 Mandatory Reduction of Commitments	 	
 	 	 	
SECTION 4. Prepayments; Payments; Taxes	 	
 	 	
 	4.01 Voluntary Prepayments	 	
 	4.02 Mandatory Repayments	 	
 	4.03 Method and Place of Payment	 	
 	4.04 Net Payments; Taxes	 	
 	 	 	
SECTION 5. Conditions Precedent to the Initial Borrowing Date	 	
 	 	
 	5.01 Initial Borrowing Date; Notes	 	
 	5.02 Pro forma Balance Sheets; Projections	 	
 	5.03 Opinions of Counsel	 	
 	5.04 Corporate Documents; Proceedings; etc	 	
 	5.05 Common Equity Financing	 	
 	5.06 Appraisals	 	
 	5.07 Subsidiaries Guaranty	 	
 	5.08 Borrower/Subsidiary Pledge and Security Agreement	 	
 	5.09 Holdings Pledge and Security Agreement; Control Agreement	 	
 	5.10 Vessel Acquisition Document Assignment	 	
 	5.11 Solvency Certificate	 	
 	5.12 Vessel Acquisition Documents	 	
 	5.13 Approvals	 	
 
(i)

 

SECTION 6. Conditions Precedent to each Borrowing Date	 	
 	 	 	
 	6.01 No Default; Representations and Warranties	 	
 	6.02 Notice of Borrowing	 	
 	6.03 Consummation of the Vessel Acquisitions; etc	 	
 	6.04 Common Equity Financing	 	
 	 6.05 Indebtedness	 	
 	6.06 Opinions of Counsel	 	
 	6.07 Assignments of Earnings, Insurances and Charter	 	
 	6.08 Mortgages	 	
 	6.09 Certificates of Ownership; Searches; Class Certificates; Appraisal Reports; Mortgages	 	
 	6.10 Employment of Vessel; Consent to Assignment of Charters	 	
 	6.11 Approvals	 	
 	6.12 Litigation	 	
 	6.13 Environmental Laws	 	
 	6.14 Material Adverse Effect	 	
 	6.15 Officer’s Certificate	 	
 	6.16 Fees, etc	 	
 	6.17 No Conflicts	 	
 	6.18 Management and Service Agreements	 	
 	 	 	
SECTION 7. Representations, Warranties and Agreements	 	
 	 	
 	7.01 Corporate/Limited Liability Company/Limited Partnership Status	 	
 	7.02 Corporate Power and Authority	 	
 	7.03 No Violation	 	
 	7.04 Governmental Approvals	 	
 	7.05 Balance Sheets; Financial Condition; Undisclosed Liabilities	 	
 	7.06 Litigation	 	
 	7.07 True and Complete Disclosure	 	
 	7.08 Use of Proceeds; Margin Regulations	 	
 	7.09 Tax Returns and Payments	 	
 	7.10 Compliance with ERISA	 	
 	7.11 The Security Documents	 	
 	7.12 Representations and Warranties in Documents	 	
 	7.13 Capitalization	 	
 	7.14 Subsidiaries	 	
 	7.15 Compliance with Statutes, etc	 	
 	7.16 Investment Company Act	 	
 	7.17 Public Utility Holding Company Act	 	
 	7.19 Labor Relations	 	
 	7.20 Patents, Licenses, Franchises and Formulas	 	
 	7.21 Indebtedness	 	
 	7.22 Insurance	 	
 	7.23 Concerning the Top Glory Vessels	 	
 	7.24 Citizenship	 	
 	7.25 Vessel Classification	 	
 
(ii)

 

 	7.26 No Immumty	 	
 	7.27 Fees and Enforcement	 	
 	7.28 Form of Documentation	 	
 	7.29 Vessel Acquisitions	 	
 	 	 	
SECTION 8. Affirmative Covenants	 	
 	 	
 	8.01 Information Covenants	 	
 	8.02 Books, Records and Inspections	 	
 	8.03 Maintenance of Property; Insurance	 	
 	8.04 Corporate Franchises	 	
 	8.05 Compliance with Statutes, etc	 	
 	8.06 Compliance with Environmental Laws	 	
 	8.07 ERISA	 	
 	8.08 End of Fiscal Years; Fiscal Quarters	 	
 	8.09 Performance of Obligations	 	
 	8.10 Payment of Taxes	 	
 	8.11 Further Assurances	 	
 	8.12 Deposit of Earnings	 	
 	8.13 Ownership of Subsidiaries	 	
 	8.14 Flag of Mortgaged Vessels; Vessel Classifications	 	
 	 	 	
SECTION 9. Negative Covenants	 	
 	 	
 	9.01 Liens 40	 	
 	9.02 Consolidation, Merger, Sale of Assets, etc	 	
 	9.03 Dividends	 	
 	9.04 hndebtedness	 	
 	9.05 Advances, Investments and Loans	 	
 	9.06 Transactions with Affiliates	 	
 	9.07 Capital Expenditures	 	
 	9.08 Consolidated Interest Coverage Ratio	 	
 	9.09 Maximum Leverage Ratio	 	
 	9.10 Collateral Maintenance	 	
 	9.11 Minimum Cash Balance	 	
 	9.12 Limitation on Modifications of Certificate of Incorporation and By-Laws; etc	 	
 	9.13 Limitation on Certain Restrictions on Subsidiaries	 	
 	9.14 Limitation on Issuance of Capital Stock	 	
 	9.15 Business	 	
 	9.16 Vessel Acquisitions	 	
 	9.17 Bank Accounts	 	
 	 	 	
SECTION 10. Events of Default	 	
 	 	
 	10.01 Payments	 	
 	10.02 Representations, etc	 	
 	10.03 Covenants	 	
 	10.04 Default Under Other Agreements	 	
 	10.05 Bankruptcy, etc	 	
 
(iii)

 

 	10.06 ERISA	 	
 	10.07 Security Documents	 	
 	10.08 Guaranty	 	
 	10.09 Judgments	 	
 	10.10 Change of Control	 	
 	10.11 Vessel Acquisition Documents	 	
 	 	 	
SECTION 11. Definitions and Accounting Terms	 	
 	 	
 	11.01 Defined Terms	 	
 	 	 	
SECTION 12. Agency and Security Trustee Provisions	 	
 	 	
 	12.01 Appointment	 	
 	12.02 Nature of Duties	 	
 	12.03 Lack of Reliance on the Agents	 	
 	12.04 Certain Rights of the Agents	 	
 	12.05 Reliance	 	
 	12.06 Indemnification	 	
 	12.07 The Administrative Agent in its Individual Capacity	 	
 	12.08 Holders	 	
 	12.09 Resignation by the Administrative Agent	 	
 	 	 	
SECTION 13. Miscellaneous	 	
 	 	
 	13.01 Payment of Expenses, etc	 	
 	13.02 Right of Setoff	 	
 	13.03 Notices	 	
 	13.04 Benefit of Agreement	 	
 	13.05 No Waiver; Remedies Cumulative	 	
 	13.06 Payments Pro Rata	 	
 	13.07 Calculations; Computations	 	
 	13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL	 	
 	13.09 Counterparts	 	
 	13.10 Effectiveness	 	
 	13.11 Headings Descriptive	 	
 	13.12 Amendment or Waiver; etc	 	
 	13.13 Survival	 	
 	13.14 Domicile of Loans	 	
 	13.15 Limitation on Additional Amounts, etc	 	
 	13.16 Confidentiality	 	
 	13.17 Register	 	
 	13.18 Judgment Currency	 	
 	13.19 Language	 	
 	13.20 Waiver of Immunity	 	
 	13.21 USA PATRIOT Act Notice	 	
 
(iv)

 
CREDIT AGREEMENT, dated as of December 3, 2004, among FLEET ACQUISITION LLC, a limited liability company organized under the laws of the Republic of the Marshall Islands (“Holdings”), GENCO SHIPPING & TRADING LIMITED, a corporation organized under the laws of the Republic of Marshall Islands (the “Borrower”), the Lenders party hereto from time to time, CITIBANK GLOBAL MARKETS LIMITED (“CGML”) and NORDEA BANK FINLAND PLC, NEW YORK BRANCH, as Joint Lead Arrangers and Joint Book Runners (“NBF” and together with CGML, the “Lead Arrangers”), and NORDEA BANK FINLAND PLC, NEW YORK BRANCH, as Administrative Agent (in such capacity, the “Administrative Agent”) and as Collateral Agent under the Security Documents (in such capacity, the “Collateral Agent”). All capitalized terms used herein and defined in Section 11 are used herein as therein defined.
 
W I T N E S S E T H:
 
WHEREAS, subject to and upon the terms and conditions herein set forth, the Lenders are willing to make available to the Borrower the credit facilities provided for herein;
 
NOW, THEREFORE, IT IS AGREED:
 
SECTION 1. Amount and Terms of Credit Facilities.
 
1.01 The Commitments . Subject to and upon the terms and conditions set forth herein, each Lender severally agrees to make a term loan or term loans (each a “Loan” and, collectively, the “Loans”) to the Borrower, which Loans (i) shall bear interest in accordance with Section 1.07, (ii) may only be incurred on a date occurring on or after the Initial Borrowing Date and prior to the Commitment Termination Date on which a Top Glory Vessel is acquired by a Subsidiary of the Borrower pursuant to the Vessel Acquisition Documents (each a “Vessel Acquisition” and collectively, the “Vessel Acquisitions”); provided that no more than two Vessel Acquisitions may be made after April 1, 2005, (iii) shall be denominated in Dollars, (iv) shall not exceed in aggregate principal amount on any Borrowing Date (x) when added to the aggregate principal amount of all Loans then outstanding, an amount equal to 85% of the sum of the Appraised Value of all Top Glory Vessels acquired by the Borrower and its Subsidiaries on or prior to such Borrowing Date (including the Top Glory Vessels then being acquired) and (y) for any Top Glory Vessel, an amount equal to the lesser of (x) 85% of the Appraised Value of such Top Glory Vessel and (y) the Maximum Loan Amount for such Top Glory Vessel, and (v) shall not exceed for any Lender, that amount which equals the Commitment of such Lender as in effect on such Borrowing Date (determined before giving effect on such Borrowing Date to the reduction thereto required by Section 3.03). Once repaid, Loans incurred hereunder may not be reborrowed.
 
1.02 Minimum Amount of Each Borrowing; Limitation on Number of Borrowings. (a) The aggregate principal amount of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount.
 
(b) More than one Borrowing may occur on the same date, but at no time shall there be outstanding more than (x) 16 Borrowings of Loans subject to different Interest Periods in the aggregate at any time prior to the Commitment Termination Date or (y) six Borrowings of

 
Loans subject to different Interest Periods in the aggregate at any time after the Commitment Termination Date.
 
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make a Borrowing hereunder, it shall give the Administrative Agent at its Notice Office at least two Business Days’ prior written notice of each Loan to be made hereunder, provided that any such notice shall be deemed to have been given on a certain day only if given before 4:00 P.M. (New York time). Each such written notice (each a “Notice of Borrowing”), except as otherwise expressly provided in Section 1.09, shall be irrevocable and shall be given by the Borrower in the form of Exhibit A, appropriately completed to specify (i) the aggregate principal amount of the Loans to be made pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the initial Interest Period to be applicable thereto, (iv) the Top Glory Vessels to be acquired with the proceeds of the Loans to be made pursuant to such Borrowing, and (v) to which account the proceeds of such Loans are to be deposited. The Administrative Agent shall promptly give each Lender which is required to make Loans, notice of such proposed Borrowing, of such Lender’s proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing.
 
(b) Without in any way limiting the obligation of the Borrower to deliver a written Notice of Borrowing in accordance with Section 1.03(a), the Administrative Agent may act without liability upon the basis of telephonic notice of such Borrowing, believed by the Administrative Agent in good faith to be from an Authorized Officer of the Borrower prior to receipt of Notice of Borrowing. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent’s record of the terms of such telephonic notice of such Borrowing of Loans, absent manifest error.
 
1.04 Disbursement of Funds. Except as otherwise specifically provided in the immediately succeeding sentence, no later than 12:00 Noon (New York time) on the date specified in each Notice of Borrowing, each Lender will make available its pro rata portion of each such Borrowing requested to be made on such date. All such amounts shall be made available in Dollars and in immediately available funds at the Payment Office of the Administrative Agent and the Administrative Agent will make available to the Borrower (prior to 1:00 P.M. (New York Time) on such day to the extent of funds actually received by the Administrative Agent prior to 12:00 Noon (New York Time) on such day) at the Payment Office, in the account specified in the applicable Notice of Borrowing, the aggregate of the amounts so made available by the Lenders. Unless the Administrative Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender’s portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover on demand
 
2

 
from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Lender, at the overnight Federal Funds Rate and (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.07. In this connection, in order to facilitate a Vessel Acquisition on a Borrowing Date, the Administrative Agent may (but shall not be obligated to) on the Business Day immediately preceding such Borrowing Date issue a Swift MT 199 or other similar communication to Societe Generale, Hong Kong Branch (which is the agent for the Seller’s lenders) (“Societe Generale”) confirming the Administrative Agent’s irrevocable and unconditional commitment to make available to Societe Generale on such Borrowing Date an amount equal to the aggregate principal amount of the Loans required to fund the Vessel Acquisition(s) on such Borrowing Date if a duly executed Protocol of Delivery and Acceptance in respect of such Vessel Acquisition is delivered to the Administrative Agent c/o Johnson Stokes & Master, the Administrative Agent’s special Hong Kong counsel (each such communication, a “Funding Commitment”). Unless a Lender shall have given the Administrative Agent notice by no later than 11:00 A.M. (New York time) on such immediately preceding Business Day that it does not intend to fund its pro rata portion of the Loans on such Business Date because a condition to lending is not satisfied, in the event that the Administrative Agent issues such Funding Commitment and funds the Loans pursuant thereto, such Lender shall be irrevocably obligated to fund its portion of the Loan on such Borrowing Date whether or not the applicable conditions precedent set forth in Sections 5 and 6 are satisfied on such Borrowing Date or a Default or Event of Default then exists. For the avoidance of doubt, the parties hereto acknowledge and agree that the issuance of a Funding Commitment shall not be deemed to be a waiver of any condition precedent to the Loans on such Borrowing Date and the Borrower agrees that it shall not deliver a Protocol of Delivery and Acceptance on a Borrowing Date (i) if the Administrative Agent shall have given the Borrower notice that the applicable conditions precedent set forth in Sections 5 and 6 are not satisfied on such Borrowing Date or (ii) if the applicable conditions set forth in Sections 5 and 6 are not satisfied on such Borrowing Date.
 
1.05 Notes. (a) The Borrower’s obligation to pay the principal of, and interest on, the Loans made by each Lender shall, if requested by such Lender, be evidenced by a promissory note duly executed and delivered by the Borrower substantially in the form. of Exhibit B with blanks appropriately completed in conformity herewith (each a “Note” and, collectively, the “Notes”).
 
(b)           Each Note shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date (or, in the case of Notes issued after the Initial Borrowing Date, be dated the date of issuance thereof), (iii) be in a stated principal amount equal to the Commitment of such Lender on the Initial Borrowing Date before giving effect to any reductions thereto on such date (or, in the case of Notes issued after the Initial Borrowing Date, be in a stated principal amount equal to the outstanding principal amount of Loans of such Lender on the date of the issuance thereof) and be payable in the principal amount of the Loans evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as provided in
 
3

 
Section 1.07, (vi) be subject to voluntary prepayment and mandatory repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents.
 
(c)          Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will, prior to any transfer of any of its Notes, endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation or any error in any such notation or endorsement shall not affect the Borrower’s obligations in respect of such Loans.
 
(d)         Notwithstanding anything to the contrary contained above in this Section 1.05 or elsewhere in this Agreement, Notes shall be delivered only to Lenders that at any time specifically request the delivery of such Notes. No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) incurred by the Borrower that would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the security or guaranties therefor provided pursuant to the Credit Documents. Any Lender that does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (c). At any time (including, without limitation, to replace any Note that has been destroyed or lost) when any Lender requests the delivery of a Note to evidence any of its Loans, the Borrower shall promptly execute and deliver to such Lender the requested Note in the appropriate amount or amounts to evidence such Loans provided that, in the case of a substitute or replacement Note, the Borrower shall have received from such requesting Lender (i) an affidavit of loss or destruction and (ii) a customary lost/destroyed Note indemnity, in each case in form and substance reasonably acceptable to the Borrower and such requesting Lender, and duly executed by such requesting Lender.
 
1.06 Pro Rata Borrowings . All Borrowings of Loans under this Agreement shall be incurred from the Lenders pro rata on the basis of their Commitments. It is understood that no Lender shall be responsible for any default by any other Lender of its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder.
 
1.07 Interest. (a) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Loan from the date the proceeds thereof are made available to the Borrower until the maturity (whether by acceleration or otherwise) of such Loan at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the sum of the Applicable Margin plus the Eurodollar Rate for such Interest Period.
 
(b)           Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder shall, in each case, bear interest at a rate per annum equal to 2% per annum in excess of the rate then borne by such Loans (or, if such overdue amount is not interest or principal in respect of a Loan, 2.50% per annum in excess of the Base Rate as in effect from time to time), in each case with such interest to be payable on demand.
 
4

 
(c)           Accrued and unpaid interest shall be payable in respect of each Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period, on any repayment or prepayment (on the amount repaid or prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand.
 
(d)           Upon each Interest Deteuuination Date, the Administrative Agent shall determine the Eurodollar Rate for each Interest Period applicable to the Loans to be made pursuant to the applicable Borrowing and shall promptly notify the Borrower and the respective Lenders thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto.
 
1.08 Interest Periods. At the time the Borrower gives any Notice of Borrowing in respect of the making of any Loan (in the case of the initial Interest Period applicable thereto) or on the third Business Day prior to the expiration of an Interest Period applicable to such Loan (in the case of any subsequent Interest Period) (provided that any such notice shall be deemed to be given on a certain day only if given before 11:00 A.M. (New York time)), it shall have the right to elect, by giving the Administrative Agent notice thereof, the interest period (each an “Interest Period”) applicable to such Loan, which Interest Period shall, at the option of the Borrower, be a one, three, six or, to the extent available and agreed by all Lenders, nine or twelve month period; provided that:
 
(i)            all Loans comprising a Borrowing shall at all times have the same Interest Period;
 
(ii)           the initial Interest Period for any Loan shall commence on the Borrowing Date of such Loan and teuLiinate on (x) in the case of any Interest Period which commences prior to December 29, 2004, December 29, 2004 and (y) in the case of any Interest Period which commences on and after December 29, 2004, the first Business Day of the immediately succeeding calendar month (provided that any such Interest Period which commences prior to January 1, 2005, shall terminate on the first Business Day in February 2005), provided that the initial Interest Period for any Loan made after the Amortization Commencement Date shall commence on the date of such Loan and end on the first Payment Date to occur thereafter;
 
(iii)          subject to clause (vi) below, each Interest Period for any Loan for each Interest Period after the initial Interest Period with respect thereto shall commence on the day on which the immediately preceding Interest Period applicable thereto expires and end on the first Business Day of a calendar month (or in the case of the Interest Period commencing on December 29, 2005, the first Business Day of February 2005);
 
(iv)          if any Interest Period relating to a Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month;
 
(v)           if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the first succeeding Business Day;
 
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provided, however, that if any Interest Period for a Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;
 
(vi)          no Interest Period longer than one month may be selected at any time when an Event of Default (or, if the Administrative Agent or the Required Lenders have determined that such an election at such time would be disadvantageous to the Lenders, a Default) has occurred and is continuing;
 
(vii)         no Interest Period in respect of any Borrowing of any Loans shall be selected which extends beyond the Maturity Date;
 
(viii)        no Interest Period in respect of any Borrowing of Loans shall be selected which extends beyond any date upon which a mandatory repayment of Loans will be required to be made under Section 4.02(a) if the aggregate principal amount of Loans which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of Loans then outstanding less the aggregate amount of such required repayment on such date; and
 
(ix)           the selection of Interest Periods shall be subject to the provisions of Section 1.02(b).
 
If upon the expiration of any Interest Period applicable to a Borrowing, the Borrower has failed to elect a new Interest Period to be applicable to such Loans as provided above, the Borrower shall be deemed to have elected a one month Interest Period to be applicable to such Loans effective as of the expiration date of such current Interest Period.
 
1.09 Increased Costs, Illegality, etc. (a) In the event that any Lender shall have determined in good faith (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the Administrative Agent):
 
(i)            on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or
 
(ii)           at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Loan because of (x) any change since the Effective Date in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or govern-mental rule, regulation, order, guideline or request, such as, for example, but not limited to: (A) a change in the basis of taxation of payment to any Lender of the principal of or interest on such Loan or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income, gross receipts or net profits of such Lender, or any franchise tax based on net income, net profits or net worth, of such
 
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Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which such Lender’s principal office or applicable lending office is located or any subdivision thereof or therein), but without duplication of any amounts payable in respect of Taxes pursuant to Section 4.04, or (B) a change in official reserve requirements but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances arising since the Effective Date affecting such Lender or the interbank Eurodollar market or the position of such Lender in such market; or
 
(iii)          at any time, that the making or continuance of any Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by any Lender in good faith with any governmental request (whether or not having force of law) and/or (z) impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the interbank Eurodollar market;
 
then, and in any such event, such Lender (or the Administrative Agent, in the case of clause (i) above) shall promptly give notice (by telephone confirmed in writing) to the Borrower and, except in the case of clause (i) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the Lenders). Thereafter (x) in the case of clause (i) above, any Notice of Borrowing given by the Borrower with respect to any affected Loans which have not yet been incurred shall be deemed rescinded by the Borrower and the Total Commitment shall thereafter not be available to be borrowed hereunder, and the rate of interest applicable to any affected Loans then outstanding shall be the Base Rate, as in effect from time to time, plus the Applicable Margin as in effect from time to time minus 1.00%, from the date such notice is delivered to the Borrower and thereafter until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, (y) in the case of clause (ii) above, the Borrower agrees, subject to the provisions of Section 1.11 and Section 13.15 (to the extent applicable), to pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its reasonable good faith discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing in reasonable detail the basis for and the calculation thereof, submitted to the Borrower by such Lender in good faith shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, and subject to Section 1.11, such Lender shall so notify the Administrative Agent and the Borrower (and the Administrative Agent shall promptly give notice thereof to the other Lenders) and thereafter (A) except in the case of an event of the type described in clause (iii)(z) above, the Commitment of such Lender shall be permanently reduced by an amount sufficient to alleviate such circumstance arising pursuant to clause (iii)(x) or (y) above, or shall be terminated in its entirety if all of such Lender’s Loans are so affected, and the Borrower shall prepay in full the affected Loans of such Lender, together with accrued interest thereon and, in the event of a termination of such Lender’s Commitment, any Commitment Commission which may be due to such Lender under this Agreement (and, in the event all of such Lender’s Loans are being repaid, any other amounts which may be owing to such Lender hereunder (including, without limitation, any accrued and unpaid interest)), on either the last day of the then current Interest Period applicable to each such affected Loan (if
 
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such Lender may lawfully continue to maintain and fund such Loans) or immediately (if such Lender may not lawfully continue to maintain and fund such Loans to such day) and (B) in the case of an event of the type described in clause (iii)(z) above, the Commitment of such Lender shall be terminated in its entirety and the Borrower shall pay to such Lender any accrued and unpaid Commitment Commission which may be due to such Lender under this Agreement, and all outstanding Loans of such Lender shall, from the date such notice is delivered to the Borrower and thereafter until such time as the Administrative Agent or such Lender shall notify the Borrower that the circumstances giving rise to the operation of clause (iii)(z) above with respect to such Lender no longer exist, bear interest at a rate equal to the Base Rate, as in effect from time to time, plus the Applicable Margin as in effect from time to time minus 1.00%. The Administrative Agent and each Lender (to the extent it continues to be a Lender hereunder) agree that if any of them gives notice to the Borrower of any of the events described in clause (i) or (iii) above, it shall promptly notify the Borrower and, in the case of any such Lender, the Administrative Agent, if such event ceases to exist. If any such event described in clause (iii) above ceases to exist as to a Lender (to the extent it continues at such time to be a Lender hereunder), the obligations of such Lender to make Loans on the terms and conditions contained herein shall to the extent of such Lender’s outstanding Loans and Commitments as in effect at such time, be immediately reinstated.
 
(b)           If any Lender in good faith determines that after the Effective Date the introduction of or effectiveness of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by the NAIC or any governmental authority, central bank or comparable agency will have the effect of increasing the amount of capital required or requested to be maintained by such Lender, or any corporation controlling such Lender, based on the existence of such Lender’s Commitments hereunder or its obligations hereunder, then the Borrower agrees, subject to the provisions of Section 13.15 (to the extent applicable), to pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that such Lender’s determination of compensation owing under this Section 1.09(b) shall, absent manifest error, but subject to the provisions of Section 13.15 (to the extent applicable), be final and conclusive and binding on all the parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 1.09(b), will give prompt written notice thereof to the Borrower, which notice shall show in reasonable detail the basis for and calculation of such additional amounts.
 
1.10 Compensation. The Borrower agrees, subject to the provisions of Section 13.15 (to the extent applicable), to compensate each Lender, upon its written request (which request shall set forth in reasonable detail the basis for requesting and the calculation of such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any such loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Loans but excluding any loss of anticipated profits) which such Lender may sustain in respect of Loans made to the Borrower:
 
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(i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of Loans does not occur on a date specified therefor in a Notice of Borrowing (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.09(a));  (ii) if any prepayment or repayment (including any prepayment or repayment made pursuant to Section 1.09(a), Section 4.01 or Section 4.02 or as a result of an acceleration of the Loans pursuant to Section 10) of any of its Loans, or assignment of its Loans pursuant to Section 1.12, occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of any other Default or Event of Default arising as a result of the Borrower’s failure to repay Loans or make payment on any Note held by such Lender when required by the terms of this Agreement.
 
1.11 Change of Lending Office. Each Lender agrees that on the occurrence of any event giving rise to the operation of Section 1.09(a)(ii) or (iii), Section 1.09(b) or Section 4.04 with respect to such Lender, it will, if requested by the Borrower, use reasonable good faith efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event, provided that such designation is made on such teems that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 1.11 shall affect or postpone any of the obligations of the Borrower or the rights of any Lender provided in Section 1.09 and Section 4.04.
 
1.12 Replacement of Lenders. (x) If any Lender defaults in its obligations to make Loans, (y) upon the occurrence of any event giving rise to the operation of Section 1.09(a)(ii) or (iii), Section 1.09(b) or Section 4.04 with respect to any Lender which results in such Lender charging to the Borrower increased costs in excess of those being generally charged by the other Lenders, or (z) as provided in Section 13.12(b) in the case of certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrower shall have the right, if no Default or Event of Default will exist immediately after giving effect to the respective replacement, to either replace such Lender (the “Replaced Lender”) with one or more other Eligible Transferee or Eligible Transferees (collectively, the “Replacement Lender”) reasonably acceptable to the Administrative Agent, provided that:
 
(i) at the time of any replacement pursuant to this Section 1.12, the Replacement Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans, the outstanding Loans and Commitment (if any)) of the Replaced Lender and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum (without duplication) of (x) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, and (y) an amount equal to all accrued, but unpaid, Commitment Commission owing to the Replaced Lender pursuant to Section 3.01; and
 
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(ii) all obligations of the Borrower due and owing to the Replaced Lender at such time (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Lender concurrently with such replacement.
 
Upon the execution of the respective Assignment and Assumption Agreement, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to (i) the Replacement Lender of the appropriate Note or Notes executed by the Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall . cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 4.04, 13.01 and 13.06), which shall survive as to such Replaced Lender.
 
SECTION 2. Reserve Account . As provided in Section 8.12, all earnings derived from each of the Mortgaged Vessels (including, without limitation, charter revenues and proceeds) shall be deposited in the Concentration Accounts maintained by the Subsidiary Guarantors owning such Mortgaged Vessel. On the last Business Day of each month during the period commencing March 2005 through the Maturity Date, the Borrower shall transfer (each, a “Reserve Transfer”) from the Concentration Accounts to an additional account of the Borrower maintained with the Administrative Agent (the “Reserve Account”) an amount equal to 33 1/3% of the Required Debt Service Amount for the immediately succeeding Payment Date. During any monthly period, the Borrower and the Subsidiary Guarantors shall be permitted to apply amounts in the Concentration Accounts to the payment of the operating expenses and other expenditures permitted under this Agreement of the Borrower and the Subsidiary Guarantors, to the extent that the amounts to be applied are not otherwise required to fund a Reserve Transfer. On each Payment Date and on each date on which interest is payable under Section 1.07(c), amounts on deposit in the Reserve Account shall be applied to the payment of principal and interest of the Loans then due and payable.
 
SECTION 3 . Commitment Commission; Reductions of Commitment.
 
3.01 Commitment Commission . (a) The Borrower agrees to pay the Administrative Agent for distribution to each Lender a commitment commission (the “Commitment Commission”) for the period from the Effective Date to and including the Commitment Termination Date (or such earlier date as the Total Commitment shall have been terminated) computed at a rate for each day equal to a per annum rate of 0.61875% on the daily average Commitment of such Lender. Accrued Commitment Commission shall be due and payable on the Payment Dates occurring in April 2005 and July 2005.
 
(b)           The Borrower shall pay to the Administrative Agent, for the Administrative Agent’s own account, such other fees as have been agreed to in writing by the Borrower and the Administrative Agent.
 
3.02 Voluntary Termination of Unutilized Commitments. (a) Upon at least three Business Days ’ prior notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate or reduce
 
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the Total Commitment, in whole or in part, in integral multiples of $5,000,000 in the case of partial reductions thereto, provided that each such reduction shall apply proportionately to permanently reduce the Commitment of each Lender.
 
(b)           In the event of certain refusals by a Lender as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrower may, subject to the requirements of said Section 13.12(b) and upon five Business Days’ written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), terminate all of the Commitment (if any) of such Lender so long as all Loans, together with accrued and unpaid interest, Commitment Commission and all other amounts, owing to such Lender are repaid concurrently with the effectiveness of such termination (at which time Schedule I shall be deemed modified to reflect such changed amounts), and at such time such Lender shall no longer constitute a “Lender” for purposes of this Agreement, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 4.04, 13.01 and 13.06), which shall survive as to such repaid Lender.
 
3.03 Mandatory Reduction of Commitments. The Total Commitment (i) shall be reduced on each Borrowing Date (after giving effect to the incurrence of Loans on each such date) in an amount equal to the aggregate principal amount of Loans incurred on such date and (ii) (and the Commitment of each Lender) shall terminate in its entirety on the Commitment Termination Date, after giving effect to all Borrowings of Loans on such date. Each reduction to the Total Commitment pursuant to this Section 3.03 shall be applied proportionately to reduce the Commitment of each Lender with such a Commitment.
 
SECTION 4. Prepayments; Payments; Taxes.
 
4.01 Voluntary Prepayments. The Borrower shall have the right to prepay the Loans, without premium or penalty except as provided by law, in whole or in part at any time and from time to time on the following terms and conditions:
 
(i)            the Borrower shall give the Administrative Agent prior to 12:00 Noon (New York time) at its Notice Office at least three Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay such Loans, the amount of such prepayment and the specific Borrowing or Borrowings pursuant to which made, which notice the Administrative Agent shall promptly transmit to each of the Lenders;
 
(ii)           each prepayment shall be in an aggregate principal amount of at least $5,000,000 or such lesser amount of a Borrowing which is outstanding, provided that no partial prepayment of Loans made pursuant to any Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than $5,000,000;
 
(iii)          at the time of any prepayment of Loans pursuant to this Section 4.01 on any date other than the last day of the Interest Period applicable thereto, the Borrower shall pay the amounts required pursuant to Section 1.10;
 
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(iv)          in the event of certain refusals by a Lender as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrower may, upon five Business Days’ written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), prepay all Loans, together with accrued and unpaid interest, Commitment Commission, and other amounts owing to such Lender in accordance with said Section 13.12(b) so long as prior to the Commitment Termination Date (A) the Commitment of such Lender (if any) is terminated concurrently with such prepayment (at which time Schedule I shall be deemed modified to reflect the changed Commitments) and (B) the consents required by Section 13.12(b) in connection with the prepayment pursuant to this clause (iv) have been obtained;
 
(v)           except as expressly provided in the preceding clause (iv), each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among the Loans comprising such Borrowing; and
 
(vi)          each prepayment of principal of Loans pursuant to this Section 4.01 shall be applied to reduce the then remaining Scheduled Repayments of Loans pro rata based upon the then remaining principal amounts of the Scheduled Repayments of Loans after giving effect to all prior reductions thereto.
 
4.02 Mandatory Repayments . (a) In addition to any other mandatory repayments pursuant to this Section 4.02, on each Payment Date set forth below, the Borrower shall be required to repay that aggregate principal amount of Loans set forth opposite such Payment Date below (provided that, in any event, all then outstanding Loans shall be due in full on the Maturity Date)(each such repayment, as the same may be reduced as provided in Sections 4.01, 4.02(b) and 4.02(c), a “Scheduled Repayment”):

Payment Date	 	Amount	 	
 	 	 	 	
June 1, 2005	 	$	20,625,000	 	
September 1, 2005	 	$	20,625,000	 	
December 1, 2005	 	$	20,625,000	 	
March 1, 2006	 	$	20,625,000	 	
June 1, 2006	 	$	20,625,000	 	
September 1, 2006	 	$	20,625,000	 	
December 1, 2006	 	$	20,625,000	 	
March 1, 2007	 	$	20,625,000	 	
June 1, 2007	 	$	7,500,000	 	
September 1, 2007	 	$	7,500,000	 	
December 1, 2007	 	$	7,500,000	 	
March 1, 2008	 	$	7,500,000	 	
June 1, 2008	 	$	7,500,000	 	
September 1, 2008	 	$	7,500,000	 	
December 1, 2008	 	$	7,500,000	 	
March 1, 2009	 	$	7,500,000	 	
 
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June 1, 2009	 	 	$	7,500,000	 	
September 1, 2009	 	 	$	7,500,000	 	
December 1, 2009	 	 	$	7,500,000	 	
Maturity Date	 	 	$	109,500,000	 	
 
; provided that in the event that the Total Commitment on the Initial Borrowing Date (and before giving effect to the Loans being made on such date) exceeds the aggregate principal amount of the Loans made on or prior to the Commitment Termination Date, the amount of such excess shall reduce each Scheduled Repayment to occur after the Commitment Termination Date pro rata based upon the then remaining principal amounts of the Scheduled Repayments of Loans after giving effect to all prior reduction thereto.
 
(b)         In addition to any other mandatory repayments required pursuant to this Section 4.02, but without duplication, on (i) the Business Day following the date of any Collateral Disposition involving a Mortgaged Vessel (other than a Collateral Disposition constituting an Event of Loss or a Collateral Disposition in connection with a Vessel Exchange) and (ii) the earlier of (A) the date which is 180 days following any Collateral Disposition constituting an Event of Loss involving a Mortgaged Vessel and (B) the date of receipt by the Borrower, any of its Subsidiaries or the Administrative Agent of the insurance proceeds relating to such Event of Loss, the Borrower shall be required to repay an aggregate principal amount of outstanding Loans in an amount equal to (x) the sum of the then outstanding aggregate principal amount of Loans multiplied by a fraction (A) the numerator of which is equal to the Appraised Value of the Mortgaged Vessel or Mortgaged Vessels which is/are the subject of such Collateral Disposition and (B) the denominator of which is equal to the Aggregate Appraised Value or (y) if such Collateral Disposition occurs prior to the Trigger Date and if such amount is greater than the amount determined pursuant to clause (x), 100% of the net sale or insurance proceeds, as the case may be, received from such Collateral Disposition; provided that without limiting anything otherwise provided for in this Agreement, the Borrower hereby acknowledges that it is obliged to comply with Section 9.10 at all times (including, without limitation, after giving effect to any payment contemplated by this Section 4.02(b)). The amount of each principal repayment of Loans required by this Section 4.02(b) shall be applied to reduce the then remaining Scheduled Repayments pro rata based upon the then remaining principal amounts of such Scheduled Repayments after giving effect to all prior reductions thereto.
 
(c)          In addition to any other mandatory repayments required pursuant to this Section 4.02, on each Payment Date occurring prior to the Trigger Date, the Borrower shall be required to repay an aggregate principal amount of outstanding Loans in an amount equal to the excess of (x) Available Cash on such Payment Date less (y) the Required Debt Service Amount for such Payment Date. The amount of each principal repayment of Loans required by this Section 4.02(c) shall be applied to reduce the then remaining Scheduled Repayments pro rata based upon the then remaining principal amounts of such Scheduled Repayments after giving effect to all prior reductions thereto.
 
(d)         With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the specific Borrowing or Borrowings pursuant to which such Loans were made, provided that (i) repayments of Loans pursuant to this Section 4.02 may only be made on the last day of an Interest Period applicable thereto unless all Loans with Interest
 
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Periods ending on such date of required repayment have been paid in full and (ii) each repayment of any Loans comprising a Borrowing shall be applied pro rata among such Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the preceding provisions of this clause (d), make such designation in its sole reasonable discretion with a view, but no obligation, to minimize breakage costs owing pursuant to Section 1.10.
 
(e)           The Loans repaid pursuant to Section 4.01 and this Section 4.02 may not be reborrowed.
 
(t)            Notwithstanding anything to the contrary contained elsewhere in this Agreement, all then outstanding Loans shall be repaid in full on the Maturity Date.
 
4.03 Method and Place of Payment . Except as otherwise specifically provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Lender or Lenders entitled thereto not later than 12:00 Noon (New York time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office of the Administrative Agent. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension.
 
4.04 Net Payments; Taxes . (a) All payments made by any Credit Party hereunder or under any Note will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income, net profits or any franchise tax based on net income, net profits or net worth, of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “Taxes”). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Lender, upon the written request of such Lender, for taxes imposed on or measured by the net income, net profits or any franchise tax based on net income, net profits or net worth, of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located and for any withholding of taxes as such Lender shall determine are payable by, or withheld
 
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from, such Lender, in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence. The Borrower will furnish to the Administrative Agent within 45 days after the date of payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender.
 
(b)         Each Lender agrees to use reasonable efforts (consistent with legal and regulatory restrictions and subject to overall policy considerations of such Lender) to file any certificate or document or to furnish to the Borrower any information as reasonably requested by the Borrower that may be necessary to establish any available exemption from, or reduction in the amount of, any Taxes; provided, however, that nothing in this Section 4.04(b) shall require a Lender to disclose any confidential information (including, without limitation, its tax returns or its calculations).
 
(c)          If the Borrower pays any additional amount under this Section 4.04 to a Lender and such Lender determines in its sole discretion exercised in good faith that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or with respect to the taxable year in which the additional amount is paid (a “Tax Benefit”), such Lender shall pay to the Borrower an amount that such Lender shall, in its sole discretion exercised in good faith, determine is equal to the net benefit, after tax, which was obtained by such Lender in such year as a consequence of such Tax Benefit; provided, however, that (i) any Lender may determine, in its sole discretion exercised in good faith consistent with the policies of such Lender, whether to seek a Tax Benefit, (ii) any Taxes that are imposed on a Lender as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Lender that otherwise would not have expired) of any Tax Benefit with respect to which such Lender has made a payment to the Borrower pursuant to this Section 4.04(c) shall be treated as a Tax for which the Borrower is obligated to indemnify such Lender pursuant to this Section 4.04 without any exclusions or defenses, (iii) nothing in this Section 4.04(c) shall require any Lender to disclose any confidential information to the Borrower (including, without limitation, its tax returns), and (iv) no Lender shall be required to pay any amounts pursuant to this Section 4.04(c) at any time during which a Default or Event of Default exists.
 
SECTION 5 . Conditions Precedent to the Initial Borrowing Date. The obligation of each Lender to make Loans on the Initial Borrowing Date is subject at the time of the making of such Loans to the satisfaction or waiver of the following conditions:
 
5.01 Initial Borrowing Date; Notes. On or prior to the Initial Borrowing Date (i) the Effective Date shall have occurred and (ii) if requested by a Lender, there shall have been delivered to the Administrative Agent, for the account of such Lender, the appropriate Note for such Lender executed by the Borrower, in each case in the amount, maturity and as otherwise provided herein.
 
5.02 Pro forma Balance Sheets; Projections. On or prior to the Initial Borrowing Date, the Administrative Agent shall have received and the Administrative Agent shall be
 
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reasonably satisfied with (i)  pro forma balance sheet of Holdings and its Subsidiaries prepared assuming that the Transaction has been consummated and (ii) detailed projected consolidated financial statements of the Borrower and its Subsidiaries for the five fiscal years ended after the Initial Borrowing Date (the “Projections”).
 
5.03 Opinions of Counse l. (a) On the Initial Borrowing Date, the Administrative Agent shall have received from Kramer Levin Naftalis & Frankel LLP, special New York counsel to Holdings and its Subsidiaries, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit C-1 which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests (other than those to be covered by opinions delivered pursuant to clauses (b) through (c) below) granted pursuant to the Security Documents and such other matters incidental to the transactions contemplated herein as the Administrative Agent may reasonably request.
 
(b)           On the Initial Borrowing Date, the Administrative Agent shall have received from Constantine P. Georgiopoulos, special New York maritime counsel to Holdings and its Subsidiaries, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit C-2 which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests granted pursuant to the Vessel Mortgages and such other matters incidental thereto as the Administrative Agent may reasonably request.
 
(c)           On the Initial Borrowing Date, the Administrative Agent shall have received from Johnson Stokes & Master, special Hong Kong and Marshall Islands counsel to the Administrative Agent, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit C-3, which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests granted pursuant to the relevant Vessel Mortgage(s) and such other matters incidental thereto as the Administrative Agent may reasonably request.
 
5.04 Corporate Documents; Proceedings ; etc. (a) On the Initial Borrowing Date, the Administrative Agent shall have received a certificate, dated the Initial Borrowing Date, signed by an Authorized Officer, member or general partner of each Credit Party, and attested to by the secretary or any assistant secretary (or, to the extent such Credit Party does not have a secretary or assistant secretary, the analogous Person within such Credit Party) of such Credit Party, as the case may be, in the form of Exhibit D, with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws (or equivalent organizational documents) of such Credit Party and the resolutions of such Credit Party referred to in such certificate, and the foregoing shall be reasonably acceptable to the Administrative Agent.
 
(b)           All corporate, limited liability company, partnership and legal proceedings, and all material instruments and agreements in connection with the transactions contemplated by this Agreement and the other Documents, shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate, limited liability company and partnership proceedings, governmental approvals, good standing
 
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certificates and bring-down telegrams or facsimiles, if any, which the Administrative Agent may have reasonably requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities.
 
5.05 Common Equity Financing . On or prior to the Initial Borrowing Date, Holdings shall have received net cash proceeds from the Common Equity Financing of at least $63,474,990 and of $2,500,00 from the Holdings Loan and shall have used the proceeds thereof to (x) make deposits with the Seller pursuant to the Vessel Acquisition Documents an aggregate amount of $63,116,883 and (y) used the remainder thereof to make a cash capital contribution to the Borrower. All terms and conditions (and the documentation) in connection with the Common Equity Financing (including the identity of any equity investors (including management) other than the Investors in Holdings and the relative amounts of their equity investments in Holdings) shall be reasonably satisfactory to the Lead Arrangers (it being understood that the form of Fleet LLC Agreement delivered to the Lead Arrangers prior to the Effective Date is reasonably satisfactory to the Lead Arrangers).
 
5.06 Appraisals . On or prior to the Initial Borrowing Date, the Administrative Agent shall have received Appraisals from at least two Approved Appraisers of each Top Glory Vessel of a recent date (and in no event dated earlier than 90 days prior to the Initial Borrowing Date) in scope, form and substance, the results of which shall be reasonably satisfactory to the Administrative Agent.
 
5.07 Subsidiaries Guaranty . On the Initial Borrowing Date, each Subsidiary of the Borrower which is to acquire a Top Glory Vessel shall have duly authorized, executed and delivered to the Administrative Agent the Subsidiaries Guaranty in the form of Exhibit E (as modified, supplemented or amended from time to time, the “Subsidiaries Guaranty”), and the Subsidiaries Guaranty shall be in full force and effect.
 
5.08 Borrower/Subsidiary Pledge and Security Agreement. On the Initial Borrowing Date, each of the Borrower and each of the Subsidiary Guarantors shall have (x) duly authorized, executed and delivered the Borrower/Subsidiary Pledge and Security Agreement in the form of Exhibit F-1 (as modified, supplemented or amended from time to time, the “Borrower/Subsidiary Pledge Agreement”) and shall have (A) delivered to the Collateral Agent, as pledgee, all the Pledged Securities referred to therein, together with executed and undated stock powers in the ease of capital stock constituting Pledged Securities, and (B) otherwise complied with all of the requirements set forth in the Borrower/Subsidiary Pledge Agreement and (y) duly authorized, executed and delivered any other related documentation necessary or advisable to perfect the Lien on the Pledge Agreement Collateral referred to therein in the respective jurisdictions of formation of the respective Subsidiary Guarantor or the Borrower, as the case may be.
 
5.09 Holdings Pledge and Security Agreement; Control Agreement. On the Initial Borrowing Date, Holdings shall have (x) duly authorized, executed and delivered the Holdings Pledge and Security Agreement in the form of Exhibit F-2 (as modified, supplemented or amended from time to time, the “Holdings Pledge Agreement”) and shall have (A) delivered to the Collateral Agent, as pledgee, all the Pledged Securities referred to therein, together with executed and undated stock powers in the case of capital stock constituting Pledged Securities,
 
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and (B) otherwise complied with all of the requirements set forth in the Holdings Pledge Agreement and (y) duly authorized, executed and delivered any other related documentation necessary or advisable to perfect the Lien on the Pledge Agreement Collateral referred to therein in the jurisdiction of formation of Holdings.
 
(b)           On the Initial Borrowing Date, the Borrower, each Subsidiary Guarantor, the Collateral Agent and Nordea Bank Finland plc, New York Branch, as deposit bank shall have duly executed and delivered a Control Agreement in the form attached to the Borrower/Subsidiary Pledge Agreement with respect to each Concentration Account and the Reserve Account.
 
5.10 Vessel Acquisition Document Assignment. On the Initial Borrowing Date, Holdings, the Borrower and each of the Subsidiary Guarantors shall have (x) duly authorized, executed and delivered the Vessel Acquisition Document Assignments in the form of Exhibit G hereto (as modified, supplemented or amended from time to time, the “Vessel Acquisition Document Assignment”) and (y) taken all actions necessary or advisable to perfect the Lien on the collateral described therein.
 
5.11 Solvency Certificate. On the Initial Borrowing Date, the Borrower shall cause to be delivered to the Administrative Agent a solvency certificate from the senior financial officer of the Borrower, in the form of Exhibit H, which shall be addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date, setting forth the conclusion that, after giving effect to the incurrence of all the financings contemplated hereby, the Borrower individually, and the Borrower and its Subsidiaries taken as a whole, are not insolvent and will not be rendered insolvent by the incurrence of such indebtedness, and will not be left with unreasonably small capital with which to engage in their respective businesses and will not have incurred debts beyond their ability to pay such debts as they mature.
 
5.12 Vessel Acquisition Documents. On or prior to Initial Borrowing Date, the Lead Arrangers shall have received copies of the Acquisition Agreements and all other documentation for all Vessel Acquisitions (the “Vessel Acquisition Documents”); all Vessel Acquisition Documents shall be in full force and effect and all the terms and the structure of the Vessel Acquisitions and the Vessel Acquisition Documents shall be reasonably satisfactory in form and substance to the Lead Arrangers (it being understood that the Acquisition Agreements furnished to the Lead Arrangers prior to the Effective Date are satisfactory in form and substance to the Lead Arrangers).
 
5.13 Approvals . On or prior to the Initial Borrowing Date, all necessary governmental (domestic and foreign) and third party approvals and/or consents in connection with the Loans, and the granting of Liens under the Credit Documents (other than the registration of the Vessel Mortgages in respect of the Top Glory Vessels not being acquired on such date) shall have been obtained and remain in effect, and all applicable waiting periods with respect thereto shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the making of the Loans and the performance by the Credit Parties of the Credit Documents. On the Initial Borrowing Date, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially
 
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adverse conditions upon the making of the Loans or the performance by the Credit Parties of the Credit Documents.
 
SECTION 6. Conditions Precedent to each Borrowing Date. The obligation of each Lender to make Loans on each Borrowing Date (including the Initial Borrowing Date) is subject at the time of the making of such Loans to the satisfaction or waiver of the following conditions:
 
6.01 No Default; Representations and Warranties. At the time of each such Loan and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in any other Credit Document shall be true and correct in all material respects both before and after giving effect to such Loan with the same effect as though such representations and warranties had been made on the date of such Loan (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date).
 
6.02 Notice of Borrowing . Prior to the making of each Loan, the Administrative Agent shall have received the Notice of Borrowing required by Section 1.03(a).
 
6.03 Consummation of the Vessel Acquisitions; etc. (a) On or prior to each Borrowing Date, there shall have been delivered to the Administrative Agent true and correct copies of the Vessel Acquisition Documents in respect of the Vessel Acquisition(s) being consummated on such date, all of which Vessel Acquisition Documents shall be in full force and effect. Each of such Vessel Acquisition Documents shall not have been amended or modified in violation of Section 9.12(b) since the Initial Borrowing Date unless such amendment is approved by the Administrative Agent and each of the Lead Arrangers.
 
(b)           On or prior to each Borrowing Date (i) the Vessel Acquisition(s) occurring on such Borrowing Date shall have been consummated in all material respects in accordance with the respective Vessel Acquisition Documents and all applicable laws, and (ii) all conditions precedent to the consummation of such Vessel Acquisition, as set forth in the related Vessel Acquisition Documents, shall have been satisfied, and not waived except with the consent of the Lead Arrangers.
 
6.04 Common Equity Financing . (a) On each Borrowing Date, the Borrower shall have received from Holdings through an equity contribution net cash proceeds in an amount equal to the sum of (x) 15% of the aggregate purchase price for the Vessel Acquisition(s) being made on such Borrowing Date (it being understood that the obligation of Holdings to make such contribution shall be satisfied to the extent of the application of the deposits established pursuant to the Vessel Acquisition Documents and the direct payment thereof to the Seller) and (y) in the event that the Maximum Loan Amount of the Top Glory Vessel being acquired on such Borrowing Date exceeds 85% of the Appraised Value of such Top Glory Vessel, an amount equal to the amount by which such Maximum Loan Amount exceeds 85% of such Appraised Value.
 
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(b)            On the earlier of (x) the first Borrowing Date to occur on or after December 15, 2004 and (y) the Borrowing Date on which the fourth Vessel Acquisition is consummated, Holdings shall have received additional net cash proceeds from the Common Equity Financing of at least $11,525,010 plus the accrued and unpaid interest on the Holdings Loan (which amount shall be in addition to the amounts described in Sections 5.05 and 6.04 in respect of previous Borrowing Dates and under Section 6.04(a) on such Borrowing Date) and shall have (x) used the proceeds to repay in full the Holdings Loans and interest thereon and contributed an amount equal to such net cash proceeds remaining after the repayment of Holdings Loan as a cash capital contribution to the Borrower.
 
(c)            On each Borrowing Date, the Lead Arrangers shall have received evidence, in form and substance satisfactory to the Lead Arrangers that the equity contributions required to be made on or before such Borrowing Date pursuant to Section 5.05 and clauses (a) and (b) of this Section 6.04 have been made.
 
6.05 Indebtedness. On each Borrowing Date and after giving effect to the related Vessel Acquisition, the Borrower and its Subsidiaries shall have no outstanding Indebtedness or contingent liabilities, except for Indebtedness incurred pursuant to this Agreement, and all equity interests of the Borrower’s Subsidiaries shall be owned directly by the Borrower, in each case free and clear of Liens (other than under the Credit Documents) and all equity interests of the Borrower shall be owned directly by Holdings free and clear of Liens (other than under the Credit Documents).
 
6.06 Opinions of Counsel. On each Borrowing Date, the Administrative Agent shall have received from Johnson Stokes & Master, special Hong Kong and Marshall Islands counsel to the Administrative Agent, an opinion addressed to the Administrative Agent and each of the Lenders and dated such Borrowing Date, which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests granted pursuant to the Vessel Mortgage(s) and such other matters incident thereto as the Administrative Agent may reasonably request.
 
6.07 Assignments of Earnings, Insurances and Charter. On each Borrowing Date, each Credit Party which is consummating a Vessel Acquisition on such date shall have duly authorized, executed and delivered an Assignment of Earnings in the form of Exhibit I-1 (as modified, supplemented or amended from time to time, the “Assignment of Earnings”), an Assignment of Insurances in the form of Exhibit I-2 (as modified, supplemented or amended from time to time, the “Assignment of Insurances”) and an Assignment of Charters in the form of Exhibit B to the Assignment of Earnings (as modified, supplemented or amended from time to time, the “Assignment of Charters”), together covering all of such Credit Party’s present and future Earnings and Insurance Collateral, in each ease together with:
 
(i)             proper Financing Statements (Form UCC-1) fully executed for filing under the UCC or in other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Assignment of Earnings, Assignment of Charters and the Assignment of Insurances;
 
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(ii)            certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name any Credit Party as debtor and that are filed in the jurisdictions referred to in Section 6.07(i) above, together with copies of such other financing statements (none of which shall cover the Collateral except to the extent evidencing Permitted Liens unless in respect of which the Collateral Agent shall have received Form UCC-3 Termination Statements (or such other termination statements as shall be required by local law) fully executed for filing if required by applicable laws); and
 
(iii)           evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Assignment of Earnings, the Assignment of Insurances and the Assignment of Charters have been taken.
 
6.08 Mortgages. (i) On each Borrowing Date, each Credit Party which is consummating a Vessel Acquisition on such Borrowing Date shall have duly authorized, executed and delivered, and caused to be recorded in the appropriate vessel registry a Vessel Mortgage with respect to each of the Top Glory Vessels being acquired on such Borrowing Date and the Vessel Mortgages shall be effective to create in favor of the Collateral Agent and/or the Lenders a legal, valid and enforceable first priority security interest, in and lien upon such Top Glory Vessels, subject only to Permitted Liens. Except as specifically provided above, all filings, deliveries of instruments and other actions necessary or desirable in the reasonable opinion of the Collateral Agent to perfect and preserve such security interests shall have been duly effected and the Collateral Agent shall have received evidence thereof in form and substance reasonably satisfactory to the Collateral Agent.
 
6.09 Certificates of Ownership; Searches; Class Certificates; Appraisal Reports; Mortgages. On each Borrower Date, the Administrative Agent shall have received each of the following with respect to each Top Glory Vessel being acquired on such Borrowing Date:
 
(i)             certificates of ownership from appropriate authorities showing (or confirmation updating previously reviewed certificates and indicating) the registered ownership of such Top Glory Vessel by the relevant Subsidiary Guarantor;
 
(ii)            the results of maritime registry searches with respect to such Top Glory Vessel, indicating no record liens other than Liens in favor of the Collateral Agent and/or the Lenders and Permitted Liens;
 
(iii)           class certificates from a classification society listed on Schedule VIII hereto or another internationally recognized classification society acceptable to the Collateral Agent, indicating that such Top Glory Vessel meets the criteria specified in Section 7.25;
 
(iv)           if requested by the Administrative Agent prior to such Borrowing Date, Appraisals from at least two Approved Appraisers of such Top Glory Vessel of recent date in scope, form and substance reasonably satisfactory to the Administrative Agent; and
 
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(v)            a report, in form and scope reasonably satisfactory to the Administrative Agent, from a firm of independent marine insurance brokers reasonably acceptable to the Administrative Agent with respect to the insurance maintained by the Credit Parties in respect of such Top Glory Vessel, together with a certificate from such broker certifying that such insurances (i) are placed with such insurance companies and/or underwriters and/or clubs, in such amounts, against such risks, and in such form, as are customarily insured against by similarly situated insureds for the protection of the Administrative Agent and/or the Lenders as mortgagee and (ii) conform with the insurance requirements of the respective Vessel Mortgage.
 
6.10 Employment of Vessel Consent to Assignment of Charters. ‘(a) On each Borrowing Date and after giving effect to the related Vessel Acquisition, each Top Glory Vessel being acquired on such Borrowing Date shall (i) be employed under a fixed rate charter for a term ending no sooner than 24 months immediately following such Borrowing Date or (ii) be employed on a basis equivalent to that set forth in clause (i) above and arranged through the freight derivatives market, in the case of both clauses (i) and (ii), on teens and with counterparties reasonably satisfactory to the Lead Arrangers (the arrangements set forth in clauses (i) and (ii) with respect to a Top Glory Vessel are hereinafter referred to as the “Initial Charter Arrangements” for such Top Glory Vessel) (it being understood that the Lead Arrangers shall receive from the Borrower, upon reasonable request, such information (including, without limitation, financial information) in respect of such charter counterparties as may be reasonably requested).
 
(b) On or before each Borrowing Date, the Borrower shall use its commercially reasonable efforts to cause each charter counterparty which is party to a charter described in clause (i) of Section 6.10(a) with respect to each Top Glory Vessel being acquired on such Borrowing Date to execute and deliver to the Administrative Agent a Charterers’ Consent and Agreement in substantially the form attached as Annex 1 to Exhibit B to the Assignment of Charters with such changes as may be approved by the Administrative Agent.
 
6.11 Approvals. On or prior to each Borrowing Date, all necessary governmental (domestic and foreign) and third party approvals and/or consents (including any necessary anti-trust approvals or consents) in connection with the Vessel Acquisition(s) being consummated on such Borrowing Date, the transactions contemplated by the Documents with respect to such Vessel Acquisition(s) and otherwise referred to herein or therein shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which, in the reasonable judgment of the Administrative Agent, restrains, prevents or imposes materially adverse conditions upon the consummation of such Vessel Acquisition(s) or the transactions contemplated by this Agreement or the other Documents. Additionally, there shall not exist any judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon such Vessel Acquisition(s) or the other transactions contemplated by this Agreement.
 
6.12 Litigation. On each Borrowing Date, no actions, suits, investigations or proceedings of any Credit Party by any entity (private or governmental) shall be pending or, to the knowledge of any Credit Party, threatened with respect to (i) the Vessel Acquisition(s) being
 
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consummated on such date, (ii) any Top Glory Vessels, (iii) any Document, or (iv) which the Administrative Agent shall determine could be reasonably to have a Material Adverse Effect.
 
6.13 Environmental Laws. On each Borrowing Date, there shall not exist any condition or occurrence on or arising from any Top Glory Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries that (a) results in noncompliance by the Borrower or such Subsidiary with any applicable Environmental Law or (b) could reasonably be expected to form the basis of a Environmental Claim against the Borrower or any of its Subsidiaries or any such Top Glory Vessel or property, which in any such case individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.
 
6.14 Material Adverse Effect. On each Borrowing Date and after giving effect to the related Vessel Acquisition, nothing shall have occurred (and neither the Lead Arrangers nor any of the Lenders shall have become aware of facts or conditions not previously known to them) which any Agent or the Required Lenders shall determine has had, or could reasonably be expected to have, a Material Adverse Effect.
 
6.15 Officer’s Certificate. On each Borrowing Date, the Administrative Agent shall have received a certificate in the form of Exhibit J from an Authorized Officer of the Borrower certifying that (x) the conditions set forth in Sections 5.05, 5.13, 6.01, 6.03, 6.04(a) and (b), 6.05, 6.11 through 6.14, and 6.17 are satisfied on such Borrowing Date (to the extent that, in each case, such conditions are not required to be acceptable (reasonably or otherwise) to the Lead Arrangers or the Required Lenders) and (y) in the event a charter counterparty consent is not delivered in respect of the Vessel Acquisition being consummated on such Borrowing Date, it has used its commercially reasonably efforts to get such consent.
 
6.16 Fees, etc. On each Borrowing Date, the Borrower shall have paid to the Administrative Agent, the Lead Arrangers and the Lenders all costs, fees and expenses (including, without limitation, reasonable legal fees and expenses) payable to the Administrative Agent, the Lead Arrangers and the Lenders in respect of the transactions contemplated by this Agreement to the extent then due.
 
6.17 No Conflicts. (a) On each Borrowing Date and after giving effect to the related Vessel Acquisitions, there shall be no material conflict with, or material default under, any material agreement of Holdings or any of its Subsidiaries (including, without limitation, any Vessel Acquisition Document).
 
(b)            On each Borrowing Date, all Loans shall be in full compliance with all applicable requirements of law, including, without limitation, Regulations T, U and X.
 
6.18 Management and Service Agreements. On or prior to the each Borrowing Date, there shall have been delivered to the Administrative Agent or its counsel true and correct copies of the following documents:
 
(a) all agreements with respect to the management of the Borrower or any of its Subsidiaries or any of the Mortgaged Vessels not delivered pursuant to this Section 6.18 on a prior Borrowing Date (collectively, the “Management Agreements”); and
 
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(b) all service agreements entered into between the Borrower and its Subsidiaries not delivered pursuant to this Section 6.18 on a prior Borrowing Date (“Service Agreement”);
 
all of which Management Agreements and Service Agreements shall be in form and substance reasonably satisfactory to the Administrative Agent and shall be in full force and effect on such Borrowing Date.
 
The acceptance of the proceeds of each Loan shall constitute a representation and warranty by the Borrower to the Administrative Agent and each of the Lenders that all of the applicable conditions specified in Section 5 and in this Section 6 and applicable to such Borrowing have been satisfied as of that time. All of the applicable Notes, certificates, legal opinions and other documents and papers referred to in Section 5 and in this Section 6, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office for the account of each of the Lenders and, except for the Notes, in sufficient counterparts for each of the Lenders and shall be in form and substance reasonably satisfactory to the Administrative Agent.
 
 SECTION 7. Representations, Warranties and Agreements. In order to induce the Lenders to enter into this Agreement and to make the Loans, each of Holdings and the Borrower, jointly and severally, makes the following representations, warranties and agreements, in each case on the Effective Date and after giving effect to each Vessel Acquisition consummated on each Borrowing Date, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans, with the incurrence of each Loan on or after the Effective Date being deemed to constitute a representation and warranty that the matters specified in this Section 7 are true and correct in all material respects on and as of the Effective Date and on each Borrowing Date (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date):
 
7.01 Corporate/Limited Liability Company/Limited Partnership Status. Holdings and each of its Subsidiaries (i) is a duly organized and validly existing corporation, limited liability company or limited partnership, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) has the corporate or other applicable power and authority to own its property and assets and to transact the business in which it is currently engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the conduct of its business as currently conducted requires such qualifications, except for failures to be so qualified which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
 
7.02 Corporate Power and Authority. Each Credit Party has the corporate or other applicable power and authority to execute, deliver and perfoim the terms and provisions of each of the Documents to which it is party and has taken all necessary corporate or other applicable action to authorize the execution, delivery and performance by it of each of such Documents. Each Credit Party has duly executed and delivered each of the Documents to which it is party, and each of such Documents constitutes the legal, valid and binding obligation of such
 
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Credit Party enforceable against such Credit Party in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).
 
7.03 No Violation. Neither the execution, delivery or performance by any Credit Party of the Documents to which it is a party, nor compliance by it with the terms and provisions thereof, will (i) contravene any material provision of any applicable law, statute, rule or regulation or any applicable order, writ, injunction or decree of any court or governmental instrumentality, (ii) conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the material properties or assets of Holdings or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, to which Holdings or any of its Subsidiaries is a party or by which it or any of its material property or assets is bound or to which it may be subject or (iii) violate any provision of the Certificate of Incorporation or By-Laws (or equivalent organizational documents) of Holdings or any of its Subsidiaries.
 
7.04 Governmental Approvals. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except as have been obtained or made or in the case of any filings or recordings in respect of the Security Documents (other than the Vessel Mortgages), will be made within 10 days of the date such Security Document is required to be executed pursuant hereto), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance by any Credit Party of any Document to which it is a party or (ii) the legality, validity, binding effect or enforceability of any Document to which it is a party.
 
7.05 Balance Sheets; Financial Condition; Undisclosed Liabilities. (a) The pro forma consolidated balance sheet of the Borrower has been prepared as of December 3, 2004, as if the Transaction and the financing therefor had been consummated on such date. Such pro forma consolidated balance sheet presents fairly in all material respects the pro forma consolidated financial position of the Borrower as of the date first referenced in the preceding sentence.
 
(b) On and as of each Borrowing Date and after giving effect to the Transaction and to all Indebtedness (including the Loans) being incurred or assumed and Liens created by the Credit Parties in connection therewith (i) the sum of the assets, at a fair valuation, of the Borrower and on a stand-alone basis and of the Borrower and its Subsidiaries taken as a whole will exceed their respective debts, (ii) each of the Borrower on a stand-alone basis and the Borrower and its Subsidiaries taken as a whole have not incurred and do not intend to incur, and do not believe that they will incur, debts beyond their respective ability to pay such debts as such debts mature, and (iii) the Borrower on a stand-alone basis and the Borrower and its Subsidiaries taken as a whole will have sufficient capital with which to conduct their respective businesses. For purposes of this Section 7.05(b), “debt” means any liability on a claim, and “claim” means
 
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(a) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (b) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
 
(c)            Except as fully disclosed in the balance sheets delivered pursuant to Section 7.05(a), there were as of the Initial Borrowing Date no liabilities or obligations with respect to Holdings or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in the aggregate, would be materially adverse to Holdings and its Subsidiaries taken as a whole. None of the Credit Parties knows of any basis for the assertion against it of any liability or obligation of any nature that is not fairly disclosed (including, without limitation, as to the amount thereof) in the balance sheets delivered pursuant to Section 7.05(a) which, either individually or in the aggregate, could be materially adverse to Holdings and its Subsidiaries taken as a whole.
 
(d)            The Projections delivered to the Administrative Agent and the Lenders prior to the Initial Borrowing Date have been prepared in good faith and are based on reasonable assumptions (it being understood that such financial projections are subject to uncertainties and contingencies, which may be beyond the control of the Borrower and its Subsidiaries and that no assurances is given by the Borrower that the Projections will be realized).
 
(e)            Since November 19, 2004, nothing has occurred that has had or could reasonably be expected to have a Material Adverse Effect.
 
(I)             Neither Holdings nor the Borrower has paid any Dividends.
 
7.06 Litigation. There are no actions, suits, investigations or proceedings by any entity (private or governmental) pending or, to the knowledge of any Credit Party, threatened with respect to (i) any Vessel Acquisition, (ii) any Top Glory Vessel, (iii) any Document or (iv) which could reasonably be expected to have a Material Adverse Effect.
 
7.07 True and Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of Holdings or any of its Subsidiaries to the Administrative Agent or any Lender (including, without limitation, all information contained in the Documents) for purposes of or in connection with this Agreement, the other Credit Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Holdings or any of its Subsidiaries in writing to the Administrative Agent or any Lender will be, true and accurate in all material respects and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time as such information was provided.
 
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7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the Loans shall be used (i) to finance the Vessel Acquisitions and (ii) to pay fees and expenses relating to the Transaction.
 
(b) No part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulations T, U or X of the Board of Governors of the Federal Reserve System.
 
7.09 Tax Returns and Payments. Holdings and each of its Subsidiaries has timely filed all U.S. federal income tax returns, statements, forms and reports for taxes and all other material U.S. and non-U.S. tax returns, statements, forms and reports for taxes required to be filed by or with respect to the income, properties or operations of Holdings and/or any of its Subsidiaries (the “Returns”). The Returns accurately reflect in all material respects all liability for taxes of Holdings and its Subsidiaries as a whole for the periods covered thereby. Holdings and each of its Subsidiaries have at all times paid, or have provided adequate reserves (in accordance with GAAP) for the payment of, all material U.S. federal, state and non-U.S. income taxes applicable for all taxes payable by them. There is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the knowledge of Holdings or any of its Subsidiaries, threatened by any authority regarding any taxes relating to Holdings or any of its Subsidiaries. As of the Effective Date, neither Holdings nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of Holdings or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of Holdings or any of its Subsidiaries not to be subject to the normally applicable statute of limitations.
 
7.10 Compliance with ERISA. (i) Schedule VI sets forth, as of the Effective Date, each Plan; each Plan, other than any Multiemployer Plan (and each related trust, insurance contract or fund), is in substantial compliance with its terms and with all applicable laws, including without limitation ERISA and the Code; each Plan, other than any Multiemployer Plan (and each related trust, if any), which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; to the best knowledge of Holdings or any of its Subsidiaries or ERISA Affiliates no Plan which is a Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability in an amount material to Holding’s operation; no Plan (other than a Multiemployer Plan) which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been or will be timely made (except as disclosed on Schedule VI); neither Holdings nor any of its Subsidiaries nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the
 
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Code or expects to incur any such liability under any of the foregoing sections with respect to any Plan; no condition exists which presents a material risk to Holdings or any of its Subsidiaries or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted by the PBGC to terminate or appoint a trustee to administer any Plan (in the case of a Multiemployer Plan, to the best knowledge of Holdings or any of its Subsidiaries or ERISA Affiliates) which is subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, or, to the best knowledge of Holdings or any of its Subsidiaries, expected or threatened which could reasonably be expected to have a Material Adverse Effect; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, Holdings and its Subsidiaries and ERISA Affiliates would have no liabilities to any Plans which are Multiemployer Plans in the event of a complete withdrawal therefrom in an amount which could reasonably be expected to have a Material Adverse Effect; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of Holdings, any of its Subsidiaries, or any ERISA Affiliate has at all times been operated in material compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of Holdings or any of its Subsidiaries or any ERISA Affiliate exists nor has any event occurred which could reasonably be expected to give rise to any such lien on account of any Plan; and Holdings and its Subsidiaries do not maintain or contribute to any employee welfare plan (as defined in Section 3(1) of ERISA) which provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan the obligations with respect to which could reasonably be expected to have a Material Adverse Effect.
 
(ii) Each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Foreign Pension Plan have been or will be timely made. Neither Holdings nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Pension Plan that could reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries maintains or contributes to any Foreign Pension Plan the obligations with respect to which could in the aggregate reasonably be expected to have a Material Adverse Effect.
 
7.11 The Security Documents. After the execution and delivery thereof and upon the taking of the actions mentioned in the immediately succeeding sentence, each of the Security Documents creates in favor of the Collateral Agent for the benefit of the Secured Creditors a legal, valid and enforceable fully perfected first priority security interest in and Lien on all right, title and interest of the Credit Parties party thereto in the Collateral described therein, subject to no other Liens subject only to Permitted Liens. No filings or recordings are required in order to perfect the security interests created under any Security Document except for filings or recordings which shall have been made (y) on or prior to the respective Borrowing Date, in the case of the respective Vessel Mortgages, Assignment of Earnings, Assignment of Insurances and Assignment of Charters in respect of the Vessels acquired on such Borrowing Date or (z) on or
 
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prior to the tenth day after the Initial Borrowing Date or the respective Borrowing Date (as applicable) in the case of all other Collateral.
 
7.12 Representations and Warranties in Documents. On each Borrowing Date, all representations and warranties made by Holdings and its Subsidiaries in the other Documents were true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made).
 
7.13 Capitalization. (a) On the Initial Borrowing Date, the capital contributions of the Members (as defined in the Fleet LLC Company Agreement) of Holdings shall be as follows: Peter C. Georgiopoulos in the amount of $10,675,000, 0CM Fleet Acquisition LLC in the amount of $50,000,000 and the other Investors in the aggregate additional amount of $2,799,999. In addition, 0CM Fleet Acquisition LLC has made a loan to Holdings in the amount of $2,500,000 (the “Holdings Loan”). The following units representing Membership Interests (as defined in the Fleet LLC Company Agreement) of Holdings have been issued to the Members: Peter C. Georgiopoulos in the amount of 10,675, 0CM Fleet Acquisition LLC in the amount of 50,000 and other Investors in the about of 2799.9. All such outstanding Membership Interests have been issued free of preemptive rights, except as set forth in the Limited Liability Company Agreement of Holdings (the “Fleet LLC Company Agreement”). As of the Initial Borrowing Date, Holdings has no outstanding membership interests convertible into or exchangeable for its membership interests or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its membership interests, except as set forth in the Fleet LLC Company Agreement.
 
(b) On the earlier of (x) the first Borrowing Date to occur on or after December 15, 2004 and (y) the Borrowing Date on which the fourth Vessel Acquisition is consummated, (A) the capital contributions of the Members of Holdings shall be as follows: Peter C. Georgiopoulos in the amount of $20,000,000, 0CM Fleet Acquisition LLC in the amount of $50,000,000 and the other Investors in the aggregate additional amount of $5,000,000 and (B) the units representing Membership Interests of Holdings issued to the Members shall be as follows: Peter C. Georgiopoulos in the amount of 20,000, 0CM Fleet Acquisition LLC in the amount of 50,000 and other Investors in the amount of 5,000.
 
7.14 Subsidiaries. On the date hereof, Holdings has no Subsidiaries other than those Subsidiaries listed on Schedule VII (which Schedule identifies the correct legal name, direct owner, percentage ownership and jurisdiction of organization of each such Subsidiary on the date hereof).
 
7.15 Compliance with Statutes, etc. Holdings and each of its Subsidiaries is in compliance in all material respects with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
 
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7.16 Investment Company Act. Neither Holdings nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.
 
7.17 Public Utility Holding Company Act. Neither Holdings nor any of its Subsidiaries is a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended.
 
7.18 Pollution and Other Regulations. Each of Holdings and its Subsidiaries is in compliance with all applicable Environmental Laws governing its business, except for such failures to comply as are not reasonably likely to have a Material Adverse Effect, and neither Holdings nor any of its Subsidiaries is liable for any material penalties, fines or forfeitures for failure to comply with any of the foregoing. All licenses, permits, registrations or approvals required for the business of Holdings and each of its Subsidiaries, as conducted as of the Effective Date, under any Environmental Law have been secured and Holdings and each of its Subsidiaries is in substantial compliance therewith, except for such failures to secure or comply as are not reasonably likely to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries is in any respect in noncompliance with, breach of or default under any applicable writ, order, judgment, injunction, or decree to which Holdings or such Subsidiary is a party or which would affect the ability of Holdings or such Subsidiary to operate any Top Glory Vessel, Real Property or other facility and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute noncompliance, breach of or default thereunder, except in each such case, such noncompliance, breaches or defaults as are not likely to, individually or in the aggregate, have a Material Adverse Effect. There are no Environmental Claims pending or, to the knowledge of Holdings, threatened against Holdings or any of its Subsidiaries which, either individually or in the aggregate, are reasonably likely to have a Material Adverse Effect. There are no facts, circumstances, conditions or occurrences on any Top Glory Vessel, Real Property or other facility owned or operated by Holdings or any of its Subsidiaries that is reasonably likely (i) to form the basis of an Environmental Claim against Holdings, any of its Subsidiaries or any Top Glory Vessel, Real Property or other facility owned by Holdings or any of its Subsidiaries, or (ii) to cause such Top Glory Vessel, Real Property or other facility to be subject to any restrictions on its ownership, occupancy, use or transferability under any Environmental Law, except in each such case, such Environmental Claims or restrictions that individually or in the aggregate are not reasonably likely to have a Material Adverse Effect.
 
7.19 Labor Relations. Neither Holdings nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect and there is (i) no unfair labor practice complaint pending against Holdings or any of its Subsidiaries or, to Holdings’ knowledge, threatened against any of them before the National Labor Relations Board, and no material grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against Holdings or any of its Subsidiaries or, to Holdings’ knowledge, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against Holdings or any of its Subsidiaries or, to Holdings’ knowledge, threatened against Holdings or any of its Subsidiaries and (iii) no union representation proceeding pending with respect to the employees of Holdings or any of its
 
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Subsidiaries, except (with respect to the matters specified in clauses (i), (ii) and (iii) above) as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
 
7.20 Patents, Licenses, Franchises and Formulas. Holdings and each of its Subsidiaries owns, or has the right to use, all material patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and formulas, and has obtained assignments of all leases and other rights of whatever nature, necessary for the present conduct of its business, without any known conflict with the rights of others, except for such failures and conflicts which could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
 
7.21 Indebtedness. Schedule IV sets forth a true and complete list of all Indebtedness of Holdings and its Subsidiaries as of the Initial Borrowing Date and which is to remain outstanding after giving effect to the Initial Borrowing Date (the “Existing Indebtedness”), in each case showing the aggregate principal amount thereof and the name of the borrower and any other entity which directly or indirectly guarantees such debt.
 
7.22 Insurance. Schedule V sets forth a true and complete listing of all insurance maintained by each Credit Party as of the Initial Borrowing Date, with the amounts insured (and any deductibles) set forth therein.
 
7.23 Concerning the Top Glory Vessels. The name (after giving effect to the respective Vessel Acquisition), registered owner (which shall be a Subsidiary Guarantor after giving effect to such Vessel Acquisition), official number, and jurisdiction of registration and flag of each Top Glory Vessel (after giving effect to such Vessel Acquisition) are set forth on Schedule III. At the time of the consummation of the respective Vessel Acquisition, and thereafter, each Top Glory Vessel will be operated in material compliance with all applicable law, rules and regulations.
 
7.24 Citizenship. At the time of the consummation of the respective Vessel Acquisition, and thereafter, the Borrower and each other Credit Party which owns or operates, or will own or operate, one or more Top Glory Vessels is, or will be, qualified to own and operate such Top Glory Vessels under the laws of Hong Kong or the Republic of the Marshall Islands, as may be applicable, or such other jurisdiction in which any such Top Glory Vessels are permitted, or will be permitted, to be flagged in accordance with the terms of the respective Vessel Mortgages.
 
7.25 Vessel Classification. At the time of the consummation of each Vessel Acquisition, and thereafter, each Mortgaged Vessel is or will be, classified in the highest class available for Vessels of its age and type with a classification society listed on Schedule VIII hereto or another internationally recognized classification society acceptable to the Administrative Agent, free of any conditions or recommendations, other than as permitted, or will be permitted, under the Vessel Mortgages.
 
7.26 No Immunity. Holdings does not, nor does any other Credit Party or any of their respective properties, have any right of immunity on the grounds of sovereignty or
 
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otherwise from the jurisdiction of any court or from setoff or any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of any jurisdiction. The execution and delivery of the Credit Documents by the Credit Parties and the performance by them of their respective obligations thereunder constitute commercial transactions.
 
7.27 Fees and Enforcement. No fees or taxes, including, without limitation, stamp, transaction, registration or similar taxes, are required to be paid to ensure the legality, validity, or enforceability of this Agreement or any of the other Credit Documents other than recording taxes which have been, or will be, paid as and to the extent due. Under the laws of Hong Kong or the Republic of the Marshall Islands, as applicable, the choice of the laws of the State of New York as set forth in the Credit Documents which are stated to be governed by the laws of the State of New York is a valid choice of law, and the irrevocable submission by each Credit Party to jurisdiction and consent to service of process and, where necessary, appointment by such Credit Party of an agent for service of process, in each case as set forth in such Credit Documents, is legal, valid, binding and effective.
 
7.28 Form of Documentation. Each of the Credit Documents is in proper legal form under the laws of the applicable Acceptable Flag Jurisdiction for the enforcement thereof under such laws, subject only to such matters which may affect enforceability arising under the law of the State of New York. To ensure the legality, validity, enforceability or admissibility in evidence of each such Credit Document in the applicable Acceptable Flag Jurisdiction, it is not necessary that any Credit Document or any other document be filed or recorded with any court or other authority in the applicable Acceptable Flag Jurisdiction, except as have been made, or will be made, in accordance with Section 6.
 
7.29 Vessel Acquisitions. (a) At the time of the consummation thereof, each Vessel Acquisition will have been consummated in all material respects in accordance with the terms of the respective Vessel Acquisition Documents and all applicable laws. At the time of consummation of each Vessel Acquisition, all necessary material consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required in order to make or consummate such Vessel Acquisition will have been obtained, given, filed or taken and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained). All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon any Vessel Acquisition. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon any Vessel Acquisition, or the incurrence of any Loan or the performance by the Borrower or any other Credit Party of their respective obligations under the respective Credit Documents. At the time of the consummation thereof, all actions taken by the Borrower pursuant to or in furtherance of the Vessel Acquisitions have been taken in all material respects in compliance with the respective Vessel Acquisition Documents and all applicable laws.
 
(b) The purchase price paid for each Top Glory Vessel pursuant to each Vessel Acquisition does not and will not exceed the purchase price set forth for each respective Top Glory Vessel on Schedule IX.
 
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 SECTION 8 . Affirmative Covenants. The Borrower hereby covenants and agrees that on and after the Effective Date and until the Total Commitments have terminated and the Loans and Notes, together with interest, Commitment Commission and all other obligations incurred hereunder and thereunder, are paid in full:
 
8.01 Information Covenants. The Borrower will furnish to the Administrative Agent, with sufficient copies for each of the Lenders:
 
(a)            Quarterly Financial Statements. Within 45 days after the close of the first three quarterly accounting periods in each fiscal year of the Borrower, (i) the consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such quarterly accounting period and the related consolidated statements of income and cash flows, in each case for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, and in each case, setting forth comparative figures for the related periods in the prior fiscal year, all of which shall be certified by the senior financial officer of the Borrower, subject to normal year-end audit adjustments and (ii) management’s discussion and analysis of the important operational and financial developments during the fiscal quarter and year-to-date periods.
 
(b)            Annual Financial Statements. Within 120 days after the close of each fiscal year of the Borrower, (i) the consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for such fiscal year setting forth comparative figures for the preceding fiscal year and certified by an independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent, together with a report of such accounting firm stating that in the course of its regular audit of the financial statements of the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default pursuant to Sections 9.08 through 9.11, inclusive, which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and (ii) management’s discussion and analysis of the important operational and financial developments during such fiscal year.
 
(c)            Appraisal Reports. Within 45 days after the close of the second and the fourth quarterly accounting periods in each fiscal year of the Borrower, and at any other time within 33 days of the written request of the Administrative Agent, Appraisals for each Mortgaged Vessel of recent date in form and substance and from at least two Approved Appraisers. All such Appraisals shall be conducted by, and made at the expense of, the Borrower (it being understood that the Administrative Agent may and, at the request of the Required Lenders, shall, upon notice to the Borrower, obtain such Appraisals and that the cost of all such Appraisals will be for the account of the Borrower); provided that unless a Default or Event of Default has occurred and is continuing, in no event shall the Borrower be required to pay for Appraisals obtained pursuant to this Section 8.01(c) on more than two occasions in any single fiscal year of the Borrower, with the cost of any such reports in excess thereof to be paid by the Lenders on a pro rata basis.
 
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(d)            Projections, etc. As soon as available but not more than 45 days after the commencement of each fiscal year of the Borrower beginning with its fiscal year commencing on January 1, 2005, a budget of the Borrower and its Subsidiaries in reasonable detail for each of the twelve months and four fiscal quarters of such fiscal year.
 
(e)            Officer’s Compliance Certificates. (i) At the time of the delivery of the financial statements provided for in Sections 8.01(a) and (b), a certificate of the senior financial officer of the Borrower in the form of Exhibit K to the effect that, to the best of such officer’s knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof (in reasonable detail), which certificate shall, (x) set forth the calculations required to establish whether the Borrower was in compliance with the provisions of Sections 9.08 through 9.11, inclusive, at the end of such fiscal quarter or year, as the case may be and (y) certify that there have been no changes to any of Schedule VII and Annexes A through F of the Pledge Agreement since the Initial Borrowing Date or, if later, since the date of the most recent certificate delivered pursuant to this Section 8.01(e)(i), or if there have been any such changes, a list in reasonable detail of such changes (but, in each case with respect to this clause (y), only to the extent that such changes are required to be reported to the Collateral Agent pursuant to the terms of such Security Documents) and whether the Borrower and the other Credit Parties have otherwise taken all actions required to be taken by them pursuant to such Security Documents in connection with any such changes.
 
(ii) At the time of a Collateral Disposition or Vessel Exchange in respect of any Mortgaged Vessel, a certificate of a senior financial officer of the Borrower which certificate shall (x) certify on behalf of the Borrower the last Appraisals received pursuant to Section 8.01(c) determining the Aggregate Appraised Value after giving effect to such disposition or exchange, as the case may be, and (y) set forth the calculations required to establish whether the Borrower is in compliance with the provisions of Section 9.10 after giving effect to such disposition or exchange, as the case may be.
 
(f)             Notice of Default, Litigation or Event of Loss. Promptly, and in any event within three Business Days after the Borrower obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or Event of Default which notice shall specify the nature thereof, the period of existence thereof and what action the Borrower proposes to take with respect thereto, (ii) any litigation or governmental investigation or proceeding pending or threatened (x) against the Borrower or any of its Subsidiaries which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or (y) with respect to any Vessel Acquisition or any Document and (iii) any Event of Loss in respect of any Mortgaged Vessel.
 
(g)            Other Reports and Filings. Promptly, copies of all financial information, proxy materials and other information and reports, if any, which the Borrower or any of its Subsidiaries shall file with the Securities and Exchange Commission (or any successor thereto) or deliver to holders of its Indebtedness pursuant to the terms of the documentation governing such Indebtedness (or any trustee, agent or other representative therefor).
 
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(h)            Environmental Matters. Promptly upon, and in any event within five Business Days after, the Borrower obtains knowledge thereof, written notice of any of the following environmental matters occurring after the Effective Date, except to the extent that such environmental matters could not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect:
 
(i)             any Environmental Claim pending or threatened in writing against the Borrower or any of its Subsidiaries or any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries;
 
(ii)            any condition or occurrence on or arising from any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries that (a) results in noncompliance by the Borrower or such Subsidiary with any applicable Environmental Law or (b) could reasonably be expected to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any such Vessel or property;
 
(iii)           any condition or occurrence on any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries that could reasonably be expected to cause such Vessel or property to be subject to any restrictions on the ownership, occupancy, use or transferability by the Borrower or such Subsidiary of such Vessel or property under any Environmental Law; and
 
(iv)           the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Vessel or property owned or operated or occupied by the Borrower or any of its Subsidiaries as required by any Environmental Law or any governmental or other administrative agency; provided that in any event the Borrower shall deliver to the Administrative Agent all material notices received by the Borrower or any of its Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA or OPA.
 
All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the Borrower’s or such Subsidiary’s response thereto. In addition, the Borrower will provide the Administrative Agent with copies of all material communications with any government or governmental agency and all material communications with any Person relating to any Environmental Claim of which notice is required to be given pursuant to this Section 8.01(h), and such detailed reports of any such Environmental Claim as may reasonably be requested by the Administrative Agent or the Required Lenders.
 
(i)  Other Information. From time to time, such other information or documents (financial or otherwise) with respect to the Borrower or its Subsidiaries as the Administrative Agent or the Required Lenders may reasonably request in writing.
 
8.02 Books, Records and Inspections. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries, in conformity in all material respects with generally accepted accounting principles and all requirements of law, shall be made of all dealings and transactions in relation to its business.
 
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The Borrower will, and will cause each of its Subsidiaries to, permit officers and designated representatives of the Administrative Agent and the Lenders as a group to visit and inspect, during regular business hours and under guidance of officers of the Borrower or any of its Subsidiaries, any of the properties of the Borrower or its Subsidiaries, and to examine the books of account of the Borrower or such Subsidiaries and discuss the affairs, finances and accounts of the Borrower or such Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all upon reasonable advance notice and at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or the Required Lenders may request; provided that, unless an Event of Default exists and is continuing at such time, the Administrative Agent and the Lenders shall not be entitled to request more than two such visitations and/or examinations in any fiscal year of the Borrower.
 
8.03 Maintenance of Property; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (i) keep all material property necessary in its business in good working order and condition (ordinary wear and tear and loss or damage by casualty or condemnation excepted), (ii) maintain insurance on the Mortgaged Vessels in at least such amounts and against at least such risks as are in accordance with normal industry practice for similarly situated insureds and (iii) furnish to the Administrative Agent, at the written request of the Administrative Agent or any Lender, a complete description of the material terms of insurance carried. In addition to the requirements of the immediately preceding sentence, the Borrower will at all times cause insurance of the types described in Schedule V to (x) be maintained (with the same scope of coverage as that described in Schedule V) at levels which are at least as great as the respective amount described on Schedule V and (y) comply with the insurance requirements of the Vessel Mortgages.
 
8.04 Corporate Franchises. The Borrower will, and will cause each of its Subsidiaries, to do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents (if any) used in its business; provided, however, that nothing in this Section 8.04 shall prevent (i) sates or other dispositions of assets, consolidations or mergers by or involving the Borrower or any of its Subsidiaries which are permitted in accordance with Section 9.02, (ii) any Subsidiary Guarantor from changing the jurisdiction of its organization to the extent permitted by Section 9.12 or (iii) the abandonment by the Borrower or any of its Subsidiaries of any rights, franchises, licenses and patents that could not be reasonably expected to have a Material Adverse Effect.
 
8.05 Compliance with Statutes, etc. The Borrower will, and will cause each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions (including all laws and regulations relating to money laundering) imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such non-compliances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
 
8.06 Compliance with Environmental Laws. (a) The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all Environmental Laws applicable to the ownership or use of any Vessel or property now or hereafter owned or operated by the Borrower or any of its Subsidiaries, will within a reasonable time period pay or cause to be paid all costs and expenses incurred in connection with such compliance (except to the extent
 
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being contested in good faith), and will keep or cause to be kept all such Vessel or property free and clear of any Liens imposed pursuant to such Environmental Laws. Neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of, Hazardous Materials on any Vessel or property now or hereafter owned or operated or occupied by the Borrower or any of its Subsidiaries, or transport or permit the transportation of Hazardous Materials to or from any ports or property except in material compliance with all applicable Environmental Laws and as reasonably required by the trade in connection with the operation, use and maintenance of any such property or otherwise in connection with their businesses. The Borrower will, and will cause each of its Subsidiaries to, maintain insurance on the Vessels in at least such amounts as are in accordance with normal industry practice for similarly situated insureds, against losses from oil spills and other environmental pollution.
 
(b) At the written request of the Administrative Agent or the Required Lenders, which request shall specify in reasonable detail the basis therefor, at any time and from time to time, the Borrower will provide, at the Borrower’s sole cost and expense, an environmental assessment of any Mortgaged Vessel by such Vessel’s classification society (to the extent such classification society is listed on Schedule VIII hereto) or another internationally recognized classification society acceptable to the Administrative Agent. If said classification society, in its assessment, indicates that such Mortgaged Vessel is not in compliance with the Environmental Laws, said society shall set forth potential costs of the remediation of such non-compliance; provided that such request may be made only if (i) there has occurred and is continuing an Event of Default, (ii) the Administrative Agent or the Required Lenders reasonably and in good faith believe that the Borrower, any of its Subsidiaries or any such Mortgaged Vessel is not in compliance with Environmental Law and such non-compliance could reasonably be expected to have a Material Adverse Effect, or (iii) circumstances exist that reasonably could be expected to form the basis of a material Environmental Claim against the Borrower or any of its Subsidiaries or any such Mortgaged Vessel. If the Borrower fails to provide the same within 90 days after such request was made, the Administrative Agent may order the same and the Borrower shall grant and hereby grants to the Administrative Agent and the Lenders and their agents access to such Mortgaged Vessel and specifically grants the Administrative Agent and the Lenders an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at the Borrower’s expense.
 
8.07 ERISA. As soon as reasonably possible and, in any event, within ten (10) days after the Borrower or any of its Subsidiaries or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, the Borrower will deliver to the Administrative Agent, with sufficient copies for each of the Lenders, a certificate of the senior financial officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred (except to the extent that the Borrower has previously delivered to the Administrative Agent a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an
 
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event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application may be or has been made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made with respect to a Plan or Foreign Pension Plan has not been timely made and such failure could result in a material liability for the Borrower or any of its Subsidiaries; that a Plan has been or may be reasonably expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA with a material amount of unfunded benefit liabilities; that a Plan (in the case of a Multiemployer Plan, to the best knowledge of the Borrower or any of its Subsidiaries or ERISA Affiliates) has a material Unfunded Current Liability; that proceedings may be reasonably expected to be or have been instituted by the PBGC to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a material delinquent contribution to a Plan; that the Borrower, any of its Subsidiaries or any ERISA Affiliate will or may reasonably expect to incur any material liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(1) of ERISA or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that the Borrower, or any of its Subsidiaries may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan. Upon request, the Borrower will deliver to the Administrative Agent with sufficient copies to the Lenders (i) a complete copy of the annual report (on Internal Revenue Service Form 5500 series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the Internal Revenue Service and (ii) copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. In addition to any certificates or notices delivered to the Lenders pursuant to the first sentence hereof, copies of annual reports and any records, documents or other information required to be furnished to the PBGC, and any notices received by the Borrower, any of its Subsidiaries or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan with respect to any circumstances or event that could reasonably be expected to result in a material liability shall be delivered to the Lenders no later than ten (10) days after the date such annual report has been filed with the Internal Revenue Service or such records, documents and/or information has been furnished to the PBGC or such notice has been received by the Borrower, such Subsidiary or such ERISA Affiliate, as applicable.
 
8.08 End of Fiscal Years; Fiscal Quarters. The Borrower will cause (i) each of its, and each of its Subsidiaries’, fiscal years to end on December 31 of each year and (ii) each of its and its Subsidiaries’ fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year.
 
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8.09 Performance of Obligations. The Borrower will, and will cause each of its Subsidiaries to, perform all of its obligations under the teems of each mortgage, indenture, security agreement and other debt instrument (including, without limitation, the Documents) by which it is bound, except such non-performances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
 
8.10 Payment of Taxes. The Borrower will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 9.01(i), provided that neither the Borrower nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with generally accepted accounting principles.
 
8.11 Further Assurances. (a) The Borrower, and each other Credit Party, agrees that at any time and from time to time, at the expense of the Borrower or such other Credit Party, it will promptly execute and deliver all further instruments and documents, and take all further action that may be reasonably necessary, or that the Administrative Agent may reasonably require, to perfect and protect any Lien granted or purported to be granted hereby or by the other Credit Documents, or to enable the Collateral Agent to exercise and enforce its rights and remedies with respect to any Collateral. Without limiting the generality of the foregoing, the Borrower will execute and file, or cause to be filed, such financing or continuation statements under the UCC (or any non-U.S. equivalent thereto), or amendments thereto, such amendments or supplements to the Vessel Mortgages (including any amendments required to maintain Liens granted by such Vessel Mortgages pursuant to the effectiveness of this Agreement), and such other instruments or notices, as may be reasonably necessary, or that the Administrative Agent may reasonably require, to protect and preserve the Liens granted or purported to be granted hereby and by the other Credit Documents.
 
(b)            The Borrower hereby authorizes the Collateral Agent to file one or more financing or continuation statements under the UCC (or any non-U.S. equivalent thereto), and amendments thereto, relative to all or any part of the Collateral without the signature of the Borrower, where permitted by law. The Collateral Agent will promptly send the Borrower a copy of any financing or continuation statements which it may file without the signature of the Borrower and the filing or recordation information with respect thereto.
 
(c)            To the extent that any Vessel Acquisition is made by a Subsidiary of the Borrower which is not a Credit Party at the time of such acquisition (and which has not otherwise executed and delivered the documents described below in this Section 8.11(c)), the Borrower will cause such Subsidiary (and any Subsidiary which directly owns the stock of such Subsidiary to the extent not a Credit Party) to execute and deliver to the Administrative Agent a counterpart of the Borrower/Subsidiary Pledge Agreement (including any supplemental agreement required to give effect to such security interests purported to be created by the Borrower/Subsidiary Pledge Agreement under applicable local law), the Subsidiaries Guaranty, Assignment of Earnings, Assignment of Insurances, Assignment of Charters (if applicable) and
 
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the appropriate Vessel Mortgage(s), together with all related documentation (including, without limitation, opinions of counsel, corporate documents and proceedings and officer’s certificates) as such Subsidiary would have been required to deliver pursuant to Sections 5 and 6 of this Agreement had such Subsidiary been a Credit Party on a Borrowing Date.
 
8.12 Deposit of Earnings. Each Credit Party will cause the earnings derived from each of the respective Mortgaged Vessels, to the extent constituting Earnings and Insurance Collateral, to be deposited by the respective account debtor in respect of such earnings into one or more of the Concentration Accounts maintained for such Credit Party or the Borrower from time to time. Without limiting any Credit Party’s obligations in respect of this Section 8.12, each Credit Party agrees that, in the event it receives any earnings constituting Earnings and Insurance Collateral, or any such earnings are deposited other than in one of the Concentration Accounts, it shall promptly deposit all such proceeds into one of the Concentration Accounts maintained for such Credit Party or the Borrower from time to time.
 
8.13 Ownership of Subsidiaries. (a) Holdings will directly own 100% of the capital stock and other equity interests of the Borrower.
 
(b)            Holdings and the Borrower shall cause each Subsidiary Guarantor, to at all times, be directly wholly-owned by one or more Credit Parties (other than Holdings).
 
8.14 Flag of Mortgaged Vessels; Vessel Classifications. (a) The Borrower will, and will cause each of its Subsidiaries to, cause each Mortgaged Vessel to be registered under the laws and flag of (x) Hong Kong, (y) the Republic of Marshall Islands or (z) any other jurisdiction acceptable to the Required Lenders (each jurisdiction in clauses (x), (y) or (z), an “Acceptable Flag Jurisdiction”). Notwithstanding the foregoing, any Credit Party may transfer a Mortgaged Vessel registered in an Acceptable Flag Jurisdiction to another Acceptable Flag Jurisdiction pursuant to a Flag Jurisdiction Transfer.
 
(b)            The Borrower will, and will cause each of its Subsidiaries to, insure that the representation set forth in Section 7.25 is true and correct in all respects at all times.
 
 SECTION 9 . Negative Covenants. The Borrower hereby covenants and agrees that on and after the Effective Date and until all Commitments have terminated and the Loans and Notes, together with interest, Commitment Commission and all other Obligations incurred hereunder and thereunder, are paid in full:
 
9.01 Liens. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any Collateral, whether now owned or hereafter acquired, or sell any such Collateral subject to an understanding or agreement, contingent or otherwise, to repurchase such Collateral (including sales of accounts receivable with recourse to the Borrower or any of its Subsidiaries), or assign any right to receive income or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute; provided that the provisions of this Section 9.01 shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as “Permitted Liens”):
 
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(i)             inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP;
 
(ii)            Liens imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers’, warehouse-men’s, materialmen’s and mechanics’ liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of the Collateral and do not materially impair the use thereof in the operation of the business of the Borrower or such Subsidiary or (y) which are being contested in good faith by appropriate proceedings, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the Collateral subject to any such Lien;
 
(iii)           Permitted Encumbrances;
 
(iv)           Liens created pursuant to the Security Documents;
 
(v)            Liens arising out of judgments, awards, decrees or attachments with respect to which the Borrower or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review, provided that the aggregate amount of all such judgments, awards, decrees or attachments shall not constitute an Event of Default under Section 10.09;
 
(vi)           Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, Liens to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations in each case incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money) and Liens arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; provided that the aggregate value of all cash and property at any time encumbered pursuant to this clause (vi) shall not exceed $2,500,000; and
 
(vii)          Liens in respect of seamen’s wages which are not past due and other maritime Liens for amounts not past due arising in the ordinary course of business and not yet required to be removed or discharged under the terms of the respective Vessel Mortgages.
 
In connection with the granting of Liens described above in this Section 9.01 by the Borrower or any of its Subsidiaries, the Administrative Agent and the Collateral Agent shall be authorized to take any actions deemed appropriate by it in connection therewith (including, without limitation, by executing appropriate lien subordination agreements in favor of the holder or holders of such Liens, in respect of the item or items of equipment or other assets subject to such Liens).
 
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9.02 Consolidation, Merger, Sale of Assets, etc. The Borrower will not, and will not permit any Subsidiary Guarantor to wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or substantially all of its assets or any of the Collateral, or enter into any sale-leaseback transactions involving any of the Collateral, except that:
 
(i)                 the Borrower and each of its Subsidiaries may sell, lease or otherwise dispose of any Mortgaged Vessel, provided that (x)(A) such sale is made at fair market value (as determined in accordance with the Appraisals most recently delivered to the Administrative Agent (or obtained by the Administrative Agent) pursuant to Sections 5.14, 6.09(iv) or 8.01(c) or delivered at the time of such sale to the Administrative Agent by the Borrower), (B) 100% of the consideration in respect of such sale shall consist of cash or Cash Equivalents received by the Borrower, or the respective Subsidiary Guarantor which owned such Mortgaged Vessel, on the date of consummation of such sale, (C) the Net Cash Proceeds of such sale or other disposition shall be applied as required by Section 4.02(b) to repay outstanding Loans or (y) so long as no Default or Event of Default has occurred and is continuing (or would arise after giving effect thereto) and so long as all representations and warranties made by the Borrower pursuant to Section 7 of this Agreement are true and correct both before and after any such exchange, such Mortgaged Vessel is exchanged for a Acceptable Replacement Vessel pursuant to a Vessel Exchange; provided further that in the case of both clause (x) and (y) above, that the Borrower shall have delivered to the Administrative Agent an officer’s certificate, certified by the senior financial officer of the Borrower, demonstrating pro forma compliance (giving effect to such Collateral Disposition and, in the case of calculations involving the Appraised Value of Mortgaged Vessels, using valuations consistent with the Appraisals most recently delivered to the Administrative Agent (or obtained by the Administrative Agent) pursuant to Sections 5.14, 6.09(iv) or 8.01(c)) with each of the covenants set forth in Sections 9.08 through 9.11, inclusive, for the most recently ended Test Period (or at the time of such sale, as applicable) and projected compliance with such covenants for the one year period following such Collateral Disposition, in each case setting forth the calculations required to make such determination in reasonable detail;
 
(ii)                the Borrower and its Subsidiaries may sell or discount, in each case with-out recourse and in the ordinary course of business, overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof consistent with customary industry practice (and not as part of any bulk sale);
 
(iii)               (A) any Subsidiary Guarantor may transfer assets or lease to or acquire or lease assets from any other Subsidiary Guarantor and (B) any Subsidiary of the Borrower (other than a Subsidiary Guarantor) may transfer assets or lease to or acquire or lease assets from any other Subsidiary of the Borrower (other than a Subsidiary Guarantor) or any Subsidiary of the Borrower (other than a Subsidiary Guarantor) may be merge into any Subsidiary of the Borrower (other than a Subsidiary Guarantor) or any Subsidiary Guarantor may be merged into any other Subsidiary Guarantor, in each case so long as all actions necessary or desirable to preserve, protect and maintain the security interest and
 
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Lien of the Collateral Agent in any Collateral held by any Person involved in any such transaction are taken to the satisfaction of the Administrative Agent; and
 
(iv)             following a Collateral Disposition permitted by this Agreement, the Subsidiary Guarantor which owned the Vessel that is the subject of such Collateral Disposition may dissolve, provided, that (x) all proceeds from such Collateral Disposition shall have been applied to repayment of the Loans to the extent required in Section 4.02 of this Agreement, (y) all of the proceeds of such dissolution shall be paid only to the Borrower and (z) no Event of Default is continuing unremedied at the time of such dissolution.
 
Notwithstanding the foregoing, the Borrower will not, and will not permit ariy Subsidiary Guarantor to, enter into any bareboat charter of any Mortgaged Vessel without the prior written consent of the Required Lenders.
 
To the extent the Required Lenders waive the provisions of this Section 9.02 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 9.02, such Collateral (unless sold to the Borrower or a Subsidiary of the Borrower) shall be sold free and clear of the Liens created by the Security Documents, and the Administrative Agent and Collateral Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing.
 
9.03 Dividends. The Borrower shall not, and shall not permit any of its Subsidiaries to, authorize, declare or pay any Dividends with respect to the Borrower or any of its Subsidiaries, except that:
 
(i)                 (x) any Subsidiary of the Borrower which is not a Subsidiary Guarantor may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower, (y) any Subsidiary Guarantor may pay Dividends to the Borrower or any other Subsidiary Guarantor and (z) if the respective Subsidiary is not a Wholly-Owned Subsidiary of the Borrower, such Subsidiary may pay cash dividends to its shareholders generally so long as the Borrower and/or its respective Subsidiaries which own equity interests in the Subsidiary paying such Dividends receive at least their proportionate share thereof (based upon their relative holdings of the equity interests in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests of such Subsidiary);
 
(ii)                at any time after the earlier of (x) the Modified Trigger Date and (y) the Trigger Date, the Borrower may pay Dividends in an aggregate amount not to exceed 50% of Consolidated Net Income of the Borrower and its Subsidiaries for the period commencing on the first day of the fiscal quarter immediately succeeding the Modified Trigger Date or Trigger Date, as the case may be, and ending on the last day of the fiscal quarter immediately preceding the date such Dividends are paid for which financial statements are available; provided that (x) no Default or Event of Default exists at the time of the payment thereof, (y) immediately after giving effect to the payment of such Dividend the Borrower will be in compliance with the covenants set forth in Sections 9.08 through 9.11, inclusive, on a pro forma basis and (z) the Borrower shall have delivered an officer’s certificate of a senior officer of the Borrower certifying the
 
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satisfaction of the conditions set forth in clauses (x) and (y) above and setting forth the calculations of the permitted amount of such Dividend and such pro forma compliance in reasonable detail;
 
(iii)             provided that no Default or Event of Default is then in existence, the Borrower may pay Dividends to Holdings (x) so long as the proceeds of such Dividends are used promptly to pay fees and expenses relating to the Transaction and (y) in an aggregate amount not to exceed $250,000 in any fiscal year so long as the proceeds of such Dividends are used promptly to pay operating expenses of Holdings which are consistent with its operations as a holding company;
 
(iv)             provided that no Default or Event of Default is then in existence, the Borrower may pay Dividends to Holdings in an aggregate amount not to exceed $250,000 so long as the proceeds of such Dividends are used promptly by Holdings to repurchase stock held by officers and employees upon the death, retirement or disability of such officers or employees (it being understood that reductions to the $250,000 basket set forth in this clause (iv) may be negated by amounts equal to no more the Net Cash Proceeds received by Holdings from the issuance of stock to officers and employees after the Initial Borrowing Date to the extent that such Net Cash Proceeds are contributed by Holdings to the Borrower as an equity contribution); and
 
(v)              provided that no Default or Event of Default is then in existence, during any fiscal year the Borrower may pay Dividends under this clause (v) in an aggregate amount not to exceed the lesser of (a) $250,000 or (b) the product of (I) the excess of (A) the Borrower’s Subpart F income (within the meaning of Section 952 of the Code) for such fiscal year, over (B) the aggregate amount of Dividends, if any, paid by Borrower pursuant to clause (ii) of this Section 9.03 with respect to such fiscal year and (II) forty (40) percent, reduced by any credits for foreign income taxes allowable under Section 901(a) of the Code with respect to such fiscal year (without regard to Section 904 of the Code).
 
9.04 Indebtedness. (a) The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness (other than Indebtedness incurred pursuant to this Agreement and the other Credit Documents) except that:
 
(i)               after the Trigger Date, the Borrower may incur Indebtedness so long as (x) no Default or Event of Default has occurred and is continuing, (y) such Indebtedness would not cause any Default or Event of Default, either on a pro forma basis for the most recently ended Test Period (or at the time of such incurrence, as applicable), or on. a projected basis for the one year period following such incurrence, with each of the covenants set forth in Sections 9.08 through 9.11, inclusive, and (z) the Borrower shall have delivered an officer’s certificate from a senior officer of the Borrower certifying that the conditions set forth in clause (x) and (y) above are satisfied and setting forth the calculations of the pro forma compliance described in clause (y) above in reasonable detail;
 
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(ii)              the Borrower and its Subsidiaries may enter into and remain liable under Interest Rate Protection Agreements and Other Hedging Agreements entered into in the ordinary course of business and not for speculative purposes; and
 
(iii)             the Borrower and its Subsidiaries (other than a Subsidiary Guarantor) may incur unsecured Indebtedness in respect of letters of credit in the ordinary course of business; provided that the aggregate principal amount of such Indebtedness shall not exceed $1,000,000 at any one time outstanding.
 
(b) Notwithstanding anything to the contrary set forth above in this Section 9.04, (i) no Subsidiary Guarantor shall incur any Indebtedness for borrowed money (including Contingent obligation in respect thereof) except for (x) Indebtedness incurred pursuant to this Agreement and the other Credit Documents and (y) intercompany Indebtedness permitted pursuant to Section 9.05(iii) and (ii) the Borrower and the Subsidiary Guarantors shall not assume, incur or suffer to exist any Contingent Obligations in respect of any Indebtedness of Holdings or any of its Subsidiaries which is not a Credit Party.
 
9.05 Advances, Investments and Loans. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any Margin Stock, or make any capital contribution to any other Person (each of the foregoing an “Investment” and, collectively, “Investments”) except that the following shall be permitted:
 
(i)               the Borrower and its Subsidiaries may acquire and hold accounts receivable owing to any of them;
 
(ii)              so long as no Event of Default exists or would result therefrom, the Borrower and its Subsidiaries may make loans and advances in the ordinary course of business to its employees so long as the aggregate principal amount thereof at any time outstanding which are made on or after the Effective Date (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $250,000;
 
(iii)             the Subsidiary Guarantors may make intercompany loans and advances to the Borrower and between or among one another, and Subsidiaries of the Borrower other than the Subsidiary Guarantors may make intercompany loans and advances to the Borrower or any other Subsidiary of the Borrower, provided that any loans or advances to the Borrower or any Subsidiary Guarantors pursuant to this Section 9.05(iii) shall be subordinated to the Obligations of the respective Credit Party pursuant to written subordination provisions substantially in the form of Exhibit L;
 
(iv)             the Borrower and its Subsidiaries may sell or transfer assets to the extent permitted by Section 9.02;
 
(v)              the Borrower may make Investments in the Subsidiary Guarantors and, so long as no Event of Default exists and is continuing, the Borrower may make Investments in its other Wholly-Owned Subsidiaries so long as management of the Borrower in good faith believe that, after giving effect to such Investment, the Borrower shall be able to meet its payment obligations in respect of this Agreement;
 
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(vi)           so long as no Event of Default exists or could result therefrom, the Borrower and its Subsidiaries may make Investments in joint ventures in the ordinary course of business so long as the aggregate amount of all such Investments does not exceed $2,500,000; provided that prior to the Trigger Date the aggregate amount of such Investments shall not exceed $1,000,000; and
 
(vii)          the Borrower may acquire the stock of Top Glory Shipping Company Ltd. pursuant to the Sale and Purchase Agreement, dated November 19, 2004, between Top Glory Shipping (Holdings) Limited and the Borrower, provided that at the time of such acquisition Top Glory Shipping Company Ltd. becomes a party to the Subsidiaries Guaranty and all of the stock of Top Glory Shipping Company Ltd. shall he pledged by the Borrower pursuant to the Borrower/Subsidiaries Pledge Agreement.
 
9.06 Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of such Person, other than in the ordinary course of business and on terms and conditions no less favorable to such Person as would be obtained by such Person at that time in a comparable arm’s-length transaction with a Person other than an Affiliate, except that:
 
(i)             Dividends may be paid to the extent provided in Section 9.03;
 
(ii)              loans and Investments may be made and other transactions may be entered into between the Borrower and its Subsidiaries to the extent permitted by Sections 9.04 and 9.05;
 
(iii)           the Borrower may pay customary director’s fees;
 
(iv)             the Borrower and its Subsidiaries may enter into employment agreements or arrangements with their respective officers and employees in the ordinary course of business; and
 
(v)              the Borrower and its Subsidiaries may pay management fees to Wholly-Owned Subsidiaries of the Borrower in the ordinary course of business.
 
9.07 Capital Expenditures. The Borrower will not, and will not permit any of its Subsidiaries to, make any Capital Expenditures prior to the Trigger Date other than
 
(i)             Vessel Acquisitions,
 
(ii)            maintenance and dry dock capital expenditures related to the Top Glory Vessels (to the extent (x) such Top Glory Vessels are then owned by the Borrower or any of its Subsidiaries and (y) such amounts expended shall be reasonably necessary to maintain compliance with classification society requirements or to maintain such Top Glory Vessels in good working order in accordance with customary industry practice),
 
(iii)           capital expenditures made with net insurance proceeds received by the Borrower and its Subsidiaries to the extent related to an Event of Loss), and
 
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(iv)           other Capital Expenditures (other than acquisitions of Vessels) in an aggregate amount not to exceed $1,000,000.
 
9.08 Consolidated Interest Coverage Ratio. The Borrower will not permit the Consolidated Interest Coverage Ratio for any Test Period, in each case taken as one accounting period, ended on the last day of any fiscal quarter of the Borrower (commencing with the fiscal quarter ending March 31, 2005, to be less than 2.50:1.00.
 
9.09 Maximum Leverage Ratio. The Borrower will not permit the Leverage Ratio on the last day of any fiscal quarter of the Borrower (x) ended on or after January 1, 2006 and prior to January 1, 2007, to be greater than 0.70:1.00 and (y) ended after January 1, 2007, to be greater than 0.60:1.00.
 
9.10 Collateral Maintenance. The Borrower will not permit the Aggregate Appraised Value to equal (x) at any time prior to the first year anniversary of the Initial Borrowing Date, less than 105% of the aggregate principal amount of outstanding Loans at such time, (y) at any time on and after the first anniversary of the Initial Borrowing Date and prior to the second anniversary of the Initial Borrowing Date, less than 120% of the aggregate principal amount of outstanding Loans at such time and (z) at any time on and after the second anniversary of the Initial Borrowing Date, 135% of the aggregate principal amount of outstanding Loans at such time, provided that, so long as any Default in respect of this Section 9.10 is not caused by any voluntary Collateral Disposition, such Default shall not constitute an Event of Default so long as within 60 days after such shortfall, the Borrower makes such repayments of Loans (which may be funded by additional capital contributions made to the Borrower) in an amount sufficient to cure such Default (it being understood that any action taken in respect of this proviso shall only be effective to cure such default pursuant to this Section 9.10 to the extent that no Default or Event of Default exists hereunder immediately after giving effect thereto).
 
9.11 Minimum Cash Balance. The Borrower will not permit the cash and Cash Equivalents held by the Borrower and its Subsidiaries which is subject to the Lien of the Security Documents on the last day of any fiscal quarter (commencing with and including the fiscal quarter ended March 31, 2005) to be less than (x) in all cases where clause (y) is not applicable $8,000,000 and (y) in the event that on such last day, more than 50% of the Mortgaged Vessels are not employed under fixed rate charters which terminate no earlier than six months after such last day, $20,000,000 (the minimum amount of cash and Cash Equivalent required to be held by the Borrower and its Subsidiaries on any date pursuant to this Section 9.11, is hereinafter referred to as the “Minimum Cash Balance Amount” for such date).
 
9.12 Limitation on Modifications of Certificate of Incorporation and By-Laws; etc. (a) The Borrower will not, and will not permit any Subsidiary Guarantor to amend, modify or change its Certificate of Incorporation, Certificate of Emulation (including, without limitation, by the filing or modification of any certificate of designation), By-Laws, limited liability company agreement, partnership agreement (or equivalent organizational documents) or any agreement entered into by it with respect to its capital stock or membership interests (or equivalent equity interests), or enter into any new agreement with respect to its capital stock or membership interests (or equivalent interests), other than any amendments, modifications or
 
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changes or any such new agreements which are not in any way materially adverse to the interests of the Lenders.
 
(b) The Borrower will not, and will not permit any Subsidiary to, amend, modify or waive any (i) Vessel Acquisition Document in a manner which would modify the purchase price of a Top Glory Vessel, modify the delivery conditions or would otherwise be adverse to the interests of the Lenders in any respect, or (ii) any Initial Charter Arrangement in a manner which would reduce the charter term, or charter rates, make the early termination thereof more likely, change or release the charter parties or any guarantor(s) thereof or would otherwise be adverse to the interests of the Lenders in any respect.
 
{c) Notwithstanding the foregoing provisions of this Section 9.12 or Section 8.04, upon not less than 30 days prior written notice to the Administrative Agent and so long as no Default or Event of Default exists and is continuing, any Subsidiary Guarantor may (x) change its jurisdiction of organization to another jurisdiction and (y) change its form of organization to another form, in each case to the extent reasonably satisfactory to the Administrative Agent, provided that such Subsidiary Guarantor shall promptly take all actions reasonably deemed necessary by the Collateral Agent to preserve, protect and maintain, without interruption, the security interest and Lien of the Collateral Agent in any Collateral owned by such Subsidiary Guarantor to the satisfaction of the Collateral Agent, and such Subsidiary Guarantor shall have provided to the Administrative Agent and the Lenders such opinions of counsel as may be reasonably requested by the Administrative Agent to assure itself that the conditions of this proviso have been satisfied.
 
9.13 Limitation on Certain Restrictions on Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any of the Borrower’s Subsidiaries or (c) transfer any of its properties or assets to the Borrower or any of the Borrower’s Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or a Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any agreement entered into by the Borrower or a Subsidiary of the Borrower in the ordinary course of business, (v) any holder of a Permitted Lien may restrict the transfer of the asset or assets subject thereto and (vi) restrictions which are not more restrictive than those contained in this Agreement contained in any documents governing any Indebtedness incurred after the Trigger Date in accordance with the provisions of this Agreement.
 
9.14 Limitation on Issuance of Capital Stock. (a) The Borrower will not issue, and will not permit any Subsidiary to issue, any preferred stock (or equivalent equity interests).
 
(b)            The Borrower will not permit any Subsidiary Guarantor to issue any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase,
 
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or securities convertible into, capital stock, except (i) for transfers and replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and additional issuances which do not decrease the percentage ownership of the Borrower or any of its Subsidiaries in any class of the capital stock of such Subsidiary and (iii) in the case of Foreign Subsidiaries of the Borrower, to qualify directors to the extent required by applicable law. All capital stock of any Subsidiary Guarantor issued in accordance with this Section 9.14(b) shall be delivered to the Collateral Agent pursuant to the Pledge Agreement.
 
9.15 Business. (a) The Borrower and its Subsidiaries will not engage in any business other than the businesses in which they are engaged in as of the Effective Date and activities directly related thereto, and similar or related businesses.
 
(b)            Holdings will not engage in any business other than its ownership of the capital stock of, and the management of, the Borrower and its other Subsidiaries, provided that Holdings may engage in those activities that are incidental to (i) the maintenance of its corporate existence in compliance with applicable law, (ii) legal, tax and accounting matters in connection with any of the foregoing or following activities, (iii) the entering into, and performing its obligations under, this Agreement, (iv) the issuance, sale or repurchase of its Equity Interests to the extent permitted under this Agreement, (v) dividends or distributions on its Equity Interests, (vi) the filing of registration statements, and compliance with applicable reporting and other obligations, under federal, state or other securities laws, (vii) the listing of its equity securities and compliance with applicable reporting and other obligations in connection therewith, (viii) the retention of (and the entry into, and exercise of rights and performance of obligations in respect of, contracts and agreements with) transfer agents, private placement agents, underwriters, counsel, accountants and other advisors and consultants, (ix) the performance of obligations under and compliance with its certificate of incorporation and by-laws, or any applicable law, ordinance, regulation, rule, order, judgment, decree or permit, including, without limitation, as a result of or in connection with the activities of its Subsidiaries, (x) the incurrence and payment of its operating and business expenses and any taxes for which it may be liable, and (xi) making loans to or other Investments in, or incurrence of Indebtedness from, its Subsidiaries as and to the extent not prohibited by this Agreement.
 
(c)            The Holdings and the Borrower will not, and will not permit any of their Subsidiaries to be (i) engaged in (A) the retailing, wholesaling, trading or importing of goods or services for or with residents of the Republic of the Marshall Islands; (B) any extractive industry in the Republic of Marshall Islands; (C) any regulated professional service activity in the Republic of the Marshall Islands; (D) the export of any commodity or goods manufactured, processed, mined or made in the Republic of the Marshall Islands; or (E) the ownership of real property in the Republic of the Marshall Islands; and (ii) do business in the Republic of the Marshall Islands except that Holdings, the Borrower and their Subsidiaries may (A) have its registered office in the Republic of the Marshall Islands and maintain their respective registered agent in the Republic of the Marshall Islands as required by the provisions of the Associations Law of 1990, as amended; and (B) secure and maintain registry in the Republic of the Marshall Islands solely related to the operation or disposition of any vessel outside of the Republic of the Marshall Islands.
 
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9.16 Vessel Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries to, consummate a Vessel Acquisition unless either (i) the conditions set forth in Sections 5 and 6 with respect to the Top Glory Vessel being acquired are complied with in all respects on the date of such acquisition whether or not Loans are incurred on the date of such Vessel Acquisition or (ii) an amount equal to 85% of the purchase price of such Top Glory Vessel is contributed to the Borrower.
 
9.17 Bank Accounts. The Borrower will not, and will not permit any Subsidiary Guarantor to, maintain any deposit, savings, investment or other similar accounts other than the Reserve Account and the Concentration Accounts, except that the Borrower may open and maintain any such account provided that it shall have granted to the Administrative Agent a first priority security interest in such account to secure the Obligations pursuant to documentation reasonably satisfactory to the Administrative Agent and all actions necessary or advisable in the reasonable opinion of the Administrative Agent to perfect such security interest shall have been taken.Events of Default. Upon the occurrence of any of the following specified events (each an “Event of Default”):
 
10.01 Payments. The Borrower shall (i) default in the payment when due of any principal of any Loan or any Note or (ii) default, and such default shall continue unremedied for three or more Business Days, in the payment when due of any interest on any Loan or Note, or any Commitment Commission or any other amounts owing hereunder or thereunder; or
 
10.02 Representations, etc. Any representation, warranty or statement made by any Credit Party herein or in any other Credit Document or in any certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or
 
10.03 Covenants. Any Credit Party shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in Section 8.01(f)(i), 8.03 (other than clause (i) and (ii) thereof), 8.12 through 8.14, inclusive, or Section 9 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement and, in the case of this clause (ii), such default shall continue unremedied for a period of 30 days after written notice to the Borrower by the Administrative Agent or any of the Lenders; or
 
10.04 Default Under Other Agreements. (i) Holdings or any of its Subsidiaries shall default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) Holdings or any of its Subsidiaries shall default in the observance or performance of any agreement or condition relating to any Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity, or (iii) any Indebtedness (other than the Obligations) of Holdings or any of its Subsidiaries shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior
 
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to the stated maturity thereof, provided that it shall not be a Default or Event of Default under this Section 10.04 unless the aggregate principal amount of all Indebtedness as described in preceding clauses (i) through (iii), inclusive, exceeds $2,500,000 at any time prior to the Trigger Date and $5,000,000 at any time thereafter; or
 
10.05 Bankruptcy, etc. Holdings or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against Holdings or any of its Subsidiaries and the petition is not controverted within 20 days after service of summons, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Holdings or any of its Subsidiaries or Holdings or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Holdings or any of its Subsidiaries or there is commenced against Holdings or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or Holdings or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Holdings or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or Holdings or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by Holdings or any of its Subsidiaries for the purpose of effecting any of the foregoing; or
 
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in sub-section .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or is reasonably likely to have a trustee appointed to administer such Plan, any Plan which is subject to Title IV of ERISA is, shall have been or is reasonably likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made with respect to a Plan or a Foreign Pension Plan is not timely made, the Borrower or any of its Subsidiaries or any ERISA Affiliate has incurred or events have happened, or reasonably expected to happen, that will cause it to incur any liability to or on account of a Plan under Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower, or any of its Subsidiaries, has incurred or is reasonably likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or Plans or Foreign Pension Plans; (b) there shall result from any such
 
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event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, individually, and/or in the aggregate, in the reasonable opinion of the Required Lenders, has had, or could reasonably be expected to have, a Material Adverse Effect; or
 
10.07 Security Documents. At any time after the execution and delivery thereof, any of the Security Documents shall cease to be in full force and effect, or shall cease in any material respect to give the Collateral Agent for the benefit of the Secured Creditors the Liens, rights, powers and privileges purported to be created thereby (including, without limitation, a perfected security interest in, and Lien on, all of the Collateral), in favor of the Collateral Agent, superior to and prior to the rights of all third Persons (except in connection with Permitted Liens), and subject to no other Liens (except Permitted Liens), or any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any of the Security Documents and such default shall continue beyond any grace period (if any) specifically applicable thereto pursuant to the terms of such Security Document, or any “event of default” (as defined in any Vessel Mortgage) shall occur in respect of any Vessel Mortgage; or
 
10.08 Guaranty. After the execution and delivery thereof, any Guaranty, or any provision thereof, shall cease to be in full force or effect as to the relevant Guarantor (unless such Guarantor is no longer a Subsidiary by virtue of a liquidation, sale, merger or consolidation permitted by Section 9.02) or any Guarantor (or Person acting by or on behalf of such Guarantor) shall deny or disaffirm such Guarantor’s obligations under the Guaranty to which it is a party, or Guarantor, shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Guaranty to which it is a party beyond any grace period (if any) provided therefor; or
 
10.09 Judgments. One or more judgments or decrees shall be entered against Holdings or any of its Subsidiaries involving in the aggregate for Holdings and its Subsidiaries a liability (not paid or fully covered by a reputable and solvent insurance company to the satisfaction of the Administrative Agent) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 60 consecutive days, and the aggregate amount of all such judgments, to the extent not covered by insurance, exceeds $2,500,000 at any time prior to the Trigger Date and $5,000,000 at any time thereafter; or
 
10.10 Change of Control. A Change of Control shall occur; or
 
10.11 Vessel Acquisition Documents. Any Credit Party shall default in the performance or observation of any agreement and conditions of any Vessel Acquisition Document and such defaults could be reasonably expected to have a Material Adverse Effect;
 
then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the written request of the Required Lenders, shall by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Lender or the holder of any Note to enforce its claims against any Credit Party (provided that, if an Event of Default specified in Section 10.05 shall
 
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occur, the result which would occur upon the giving of written notice by the Administrative Agent to the Borrower as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Commitments terminated, whereupon all Commitments of each Lender shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and the Notes and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party; and (iii) enforce, as Collateral Agent, all of the Liens and security interests created pursuant to the Security Documents.
 
 SECTION 11 . Definitions and Accounting Terms.
 
11.01 Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
 
“Acceptable Flag Jurisdiction” shall have the meaning provided in Section 8.14.
 
“Acceptable Replacement Vessel” shall mean, with respect to a Mortgaged Vessel, any Vessel with an equal or greater fair market value than the Appraised Value of such Mortgaged Vessel; provided that such Vessel must (i) be of at least 28,000 dwt, (ii) have been built after such Mortgaged Vessel it replaces, (iii) have a class complying with the requirements of Section 8.14(a), (iv) be registered and flagged in an Acceptable Flag Jurisdiction and (v) if such Mortgaged Vessel is subject to an Initial Charter Arrangement at the time of the Vessel Exchange, be subject to charter or other arrangements satisfactory to the Lead Arrangers.
 
“Acquisition Agreements” shall mean the Master Ship Sale and Purchase Agreement, dated as of November 19, 2004, by and among the Seller and the Borrower (the “Purchase Agreement”) and each MOA (as defined in the Purchase Agreement).
 
“Administrative Agent” shall have the meaning provided in the first paragraph of this Agreement, and shall include any successor thereto.
 
“Affiliate” shall mean, with respect to any Person, any other Person (including, for purposes of Section 9.06 only, all directors, officers and partners of such Person) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; provided, however, that for purposes of Section 9.06, an Affiliate of the Borrower shall include any Person that directly or indirectly owns more than 5% of any class of the capital stock of the Borrower and any officer or director of the Borrower or any of its Subsidiaries. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding anything to the contrary contained above, for purposes of Section 9.06, neither the Administrative Agent, nor the Collateral Agent, nor the Lead Arrangers nor any Lender (or any of their respective affiliates) shall be deemed to constitute an Affiliate of the Borrower or its Subsidiaries in connection with the Credit Documents or its dealings or arrangements relating thereto.
 
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“Agents” shall mean, collectively, the Administrative Agent, the Collateral Agent and the Lead Arrangers.
 
“Aggregate Appraised Value” shall mean at any time, the sum of the Appraised Value of all Mortgaged Vessels owned by the Borrower and its Subsidiaries at such time.
 
“Agreement” shall mean this Credit Agreement, as modified, supplemented, amended or restated from time to time.
 
“Amortization Commencement Date” shall mean the Payment Date occurring in June, 2005.
 
“Applicable Margin” shall mean 1.375% per annum; provided that, so long as no Default or Event of Default is then continuing, from and after the date on which the Borrower has applied not less than $100,000,000 in repayment of the Loans from a source other than Collateral Disposition proceeds, the “Applicable Margin” shall be reduced to 1.250% per annum.
 
“Appraised Value” of any Vessel at any time shall mean the arithmetic average of the fair market values of such Vessel on an individual charter free basis as set forth on the Appraisals of at least two Approved Appraisers most recently delivered to, or obtained by, the Administrative Agent prior to such time pursuant to Sections 5.14, 6.09(iv), 8.01(c) or the definition of Vessel Exchange.
 
“Appraisal” shall mean, with respect to a Vessel, a written appraisal by an Approved Appraiser of the fair market value of such Vessel on an individual charter free basis.
 
“Approved Appraiser” shall mean H. Clarksons & Company Limited, Fearnleys Ltd., R.S. Platou Shipbrokers a.s. or such other independent appraisal firm as may be accepted to the Required Lenders.
 
“Assignment and Assumption Agreement” shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit M (appropriately completed).
 
“Assignment of Charters” shall have the meaning provided in Section 6.07.
 
“Assignment of Earnings” shall have the meaning provided in Section 6.07.
 
“Assignment of Insurances” shall have the meaning provided in Section 6.07.
 
“Authorized Officer” shall mean, with respect to (i) the delivery of Notices of Borrowing, the chairman of the board, or the treasurer of the Borrower, or any other officer of the Borrower designated in writing to the Administrative Agent by the chief executive officer, president or treasurer of the Borrower as being authorized to give notices under this Agreement, (ii) delivery of financial documents and officer’s certificates pursuant to this Agreement, the chairman of the board, the president, any vice president, the treasurer, any other financial officer or an authorized manager of any Credit Party and (iii) any other matter in connection with this Agreement or any other Credit Document, any officer (or a Person or Persons so designated by
 
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any two officers) of any Credit Party, in each case to the extent reasonably acceptable to the Administrative Agent.
 
“Available Cash” shall mean, at any time, (x) total cash and Cash Equivalents held by the Borrower and its Subsidiaries on the last day of the immediately preceding fiscal quarter (including, without limitation, the amounts on deposit in the Reserve Account and the Concentration Accounts) less (y) $5,000,000 less (z) the Minimum Cash Balance Amount at such time.
 
“Bankruptcy Code” shall have the meaning provided in Section 10.05.
 
“Base Rate” shall mean for any day, a rate of interest per annum’ equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Rate for such day plus ‘h of 1% per annum.
 
Agreement.
 
“Borrower” shall have the meaning provided in the first paragraph of this Section 5.08.
 
“Borrower/Subsidiary Pledge Agreement” shall have the meaning provided in
 
“Borrowing” shall mean the borrowing of Loans from all the Lenders having Commitments on a given date having the same Interest Period.
 
“Borrowing Date” shall mean each date (including the Initial Borrowing Date) on which Loans are incurred by the Borrower.
 
“Business Day” shall mean any day except Saturday, Sunday and any day which shall be in New York City, Hong Kong or London a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close.
 
“Capital Expenditures” shall mean, with respect to any Person, all expenditures by such Person which should be capitalized in accordance with generally accepted accounting principles and, without duplication, the amount of Capitalized Lease Obligations incurred by such Person.
 
“Capitalized Lease Obligations” of any Person shall mean all rental obligations which, under generally accepted accounting principles, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with such principles.
 
“Cash Equivalents” shall mean (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) time deposits and certificates of deposit of any commercial bank having, or which is the principal banking subsidiary of a bank holding company having capital, surplus and undivided profits aggregating in excess of $200,000,000, with maturities of not more than one year from the date of acquisition by such
 
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Person, (iii) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper issued by any Person incorporated in the United States rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s and in each case maturing not more than one year after the date of acquisition by such Person, and (v) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (iv) above.
 
“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. § 9601 et seq.
 
“Change of Control” shall mean, at any time and for any reason whatsoever, (a) Holdings shall fail to directly own 100% on a fully diluted basis of the Borrower’s Equity Interests, (b) the Borrower shall fail to directly own 100% on a fully diluted basis of each Subsidiary Guarantor’s Equity Interests, (c) prior to any Qualified IPO, (i) the Permitted Holders shall cease to own (directly or indirectly) in the aggregate more than 50% on a fully diluted basis of Holdings’ voting Equity Interests or (ii) Peter C. Georgiopoulos (including his immediate family members, trusts for his benefit and/or for the benefit of his immediate family members and any corporation or other entity directly or indirectly controlled by Peter Georgiopoulos) shall cease to own (directly or indirectly) at least 85% of the voting Equity Interests of Holdings held by him on the Initial Borrowing Date, (d) after a Qualified IPO has occurred, (i) any “person” or “group” (as such term is used in Section 13(d) and 14(d) under the Exchange Act) other than one or more of the Permitted Holders shall at any time become the owner, directly or indirectly, beneficially or of record, of interests representing more than 30% of the outstanding Equity Interests of Holdings (either voting or economic), or (ii) the Board of Directors of Holdings shall cease to consist of a majority of Continuing Directors, and (e) a “change of control” or similar event shall occur as provided in any outstanding Indebtedness of Holdings and its Subsidiaries (or the documentation governing same).
 
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.
 
“Collateral” shall mean all property (whether real or personal) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral, all Earnings and Insurance Collateral, all Mortgaged Vessels, all and all cash and Cash Equivalents at any time delivered as collateral thereunder or as required hereunder.
 
“Collateral Agent” shall mean the Administrative Agent acting as mortgagee, security trustee or collateral agent for the Secured Creditors pursuant to the Security Documents.
 
“Collateral Disposition ” shall mean (i) the sale, lease, transfer or other disposition other than pursuant to a charter by the Borrower or any of its Subsidiaries to any Person other
 
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than the Borrower or a Subsidiary Guarantor of any Mortgaged Vessel or (ii) any Event of Loss of any Mortgaged Vessel.
 
“Commitment” shall mean, for each Lender, the amount set forth opposite such Lender’s name in Schedule I hereto directly below the column entitled “Commitment,” as same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.12 or 13.04.
 
“Commitment Commission” shall have the meaning provided in Section 3.01(a).
 
“Commitment Termination Date” shall mean any the earlier of (x) the date upon which all Top Glory Vessels have been acquired pursuant to a Vessel Acquisition and (y) June 30, 2005.
 
“Common Equity Financing” shall mean the (x) contribution by Investors to Holdings of cash common equity financing in an aggregate amount of at least $75,000,000 and (y) the contribution thereof by Holdings to the Borrower as contemplated by Sections 5.05 and 6.04.
 
“Concentration Account” shall have the meaning provided in the Borrower/Subsidiary Pledge Agreement.
 
“Consolidated EBIT” shall mean, for any period, the Consolidated Net Income for such period, before interest expense and provision for taxes based on income and without giving effect to any extraordinary gains or losses or gains or losses from sales of assets other than inventory sold in the ordinary course of business.
 
“Consolidated EBITDA” shall mean, for any period, Consolidated EBIT, adjusted by adding thereto the amount of (i) all amortization of intangibles and depreciation, (ii) non-cash management incentive compensation and (iii) the amortization of fees and expenses paid in connection with the Transaction, in each case that were deducted in arriving at Consolidated EBIT for such period.
 
“Consolidated Indebtedness” shall mean, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness (but including in any event the then outstanding principal amount of all Loans, all Capitalized Lease Obligations and all letters of credit outstanding but excluding Indebtedness of a type described in clause (vii) of the definition thereof) of the Borrower and its Subsidiaries on a consolidated basis as determined in accordance with GAAP; provided that (i) Indebtedness outstanding pursuant to trade payables and accrued expenses incurred in the ordinary course of business, and (ii) guarantees of operating leases assigned to any of the Borrower or any Wholly-Owned Subsidiary of the Borrower to the extent such lease is not prohibited hereunder and such obligation does not exceed that which would otherwise be attributed to such Person under such operating lease, shall be excluded in deteimining Consolidated Indebtedness.
 
“Consolidated Interest Coverage Ratio” shall mean, for any period, the ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated Interest Expense for such period.
 
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“Consolidated Interest Expense” shall mean, for any period, (i) the total consolidated interest expense of the Borrower and its Subsidiaries for such period (calculated without regard to any limitations on the payment thereof) plus, without duplication, that portion of Capitalized Lease Obligations of the Borrower and its Subsidiaries representing the interest factor for such period, minus (ii) cash interest income of the Borrower and its Subsidiaries for such period and the amortization of any deferred financing costs incurred in connection with the Transaction to the extent otherwise included in the calculations thereof.
 
“Consolidated Net Income” shall mean, for any period, the consolidated net after tax income of the Borrower and its Subsidiaries determined in accordance with GAAP.
 
“Consolidated Net Worth” shall mean, with respect to any person, the Net Worth of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP after appropriate deduction for any minority interests in Subsidiaries.
 
“Consolidated Total Capitalization” shall mean, at any time of determination, the sum of Consolidated Indebtedness at such time and Consolidated Net Worth at such time.
 
“Contingent Obligation” shall mean, as to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business and any products warranties extended in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if the less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perfoum thereunder) as determined by such Person in good faith.
 
“Continuing Directors” shall mean the directors of Holdings on the Effective Date, after giving effect to the Transaction and each other director if, in each case, such other director’s nomination for election to the board of directors of Holdings is recommended by at least a majority of the then Continuing Directors or such other director receives the affirmative vote of those Permitted Holders which then hold a majority of the voting Equity Interests in Holdings then held by all Peunitted Holders, in his or her election by the shareholders of Holdings.
 
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“Credit Documents” shall mean this Agreement, each Note, each Security Document, the Subsidiaries Guaranty and, after the execution and delivery thereof, each additional guaranty or additional security document executed pursuant to Section 8.11.
 
“Credit Party” shall mean Holdings, the Borrower, each Subsidiary Guarantor, and any other Subsidiary of the Borrower which at any time executes and delivers any Credit Document.
 
“Default” shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.
 
“Dividend” with respect to any Person shall mean that such Person- has declared or paid a dividend or returned any equity capital to its stockholders or members or authorized or made any other distribution, payment or delivery of property (other than common stock or the right to purchase any of such stock of such Person) or cash to its stockholders or members as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock or membership interests outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of, or equity interests in, such Person outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock or other equity interests). Without limiting the foregoing, “Dividends” with respect to any Person shall also include all payments made or required to be made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes.
 
“Documents” shall mean the Credit Documents and the Vessel Acquisition Documents.
 
“Dollars” and the sign “I” shall each mean lawful money of the United States.
 
“Earnings and Insurance Collateral” shall mean all “Earnings Collateral” and “Insurance Collateral”, as the case may be, as defined in the respective Assignment of Earnings and the Assignment of Insurances.
 
“Effective Date” shall have the meaning provided in Section 13.10.
 
“Eligible Transferee” shall mean and include a commercial bank, insurance company, financial institution, fund or other Person which regularly purchases interests in loans or extensions of credit of the types made pursuant to this Agreement, any other Person which would constitute a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act as in effect on the Effective Date or other “accredited investor” (as defined in Regulation D of the Securities Act).
 
“Environmental Claims” shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law or any
 
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permit issued, or any approval given, under any such Environmental Law (hereafter, “Claims”), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief in connection with alleged injury or threat of injury to health, safety or the environment due to the presence of Hazardous Materials.
 
“Environmental Law” shall mean any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on the Borrower or any of its Subsidiaries, relating to the environment, and/or Hazardous Materials, including, without limitation, CERCLA; OPA; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); and any state and local or foreign counterparts or equivalents, in each case as amended from time to time.
 
“Environmental Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the environment.
 
“Equity Interests” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, any limited or general partner-ship interest and any limited liability company membership interest.
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.
 
“ERISA Affiliate” shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the Borrower would be deemed to be a “single employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code.
 
“Eurodollar Rate” shall mean with respect to each Interest Period for a Loan, (a) the offered rate (rounded upward to the nearest 1/16 of one percent) for deposits of Dollars for a period equivalent to such period at or about 11:00 A.M. (London time) on the second Business Day before the first day of such period as is 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 dated August 1985)), provided that if on such date no such rate is so displayed or, in the case of the initial Interest
 
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Period in respect of a Loan, if less than three Business Days’ prior notice of such Loan shall have been delivered to the Administrative Agent, the Eurodollar Rate for such period shall be the rate quoted to the Administrative Agent as the offered rate for deposits of Dollars in an amount approximately equal to the amount in relation to which the Eurodollar Rate is to be determined for a period equivalent to such applicable Interest Period by prime banks in the London interbank Eurodollar market at or about 11:00 A.M. (London time) on the second Business Day before the first day of such period, in each case divided (and rounded upward to the nearest 1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D).
 
“Event of Default” shall have the meaning provided in Section 10.
 
“Event of Loss” shall mean any of the following events: (x) the actual or constructive total loss of a Vessel or the agreed or compromised total loss of a Vessel; or (y) the capture, condemnation, confiscation, requisition, purchase, seizure or forfeiture of, or any taking of title to, a Vessel. An Event of Loss shall be deemed to have occurred: (i) in the event of an actual loss of a Vessel, at the time and on the date of such loss or if that is not known at noon Greenwich Mean Time on the date which such Vessel was last heard from; (ii) in the event of damage which results in a constructive or compromised or arranged total loss of a Vessel, at the time and on the date of the event giving rise to such damage; or (iii) in the case of an event referred to in clause (y) above, at the time and on the date on which such event is expressed to take effect by the Person making the same. Notwithstanding the foregoing, if such Vessel shall have been returned to any Credit Party following any event referred to in clause (y) above prior to the date upon which payment is required to be made under Section 4.02(c) hereof, no Event of Loss shall be deemed to have occurred by reason of such event.
 
“Exchange Act” shall mean the Securities Exchange Act of 1934.
 
“Existing Indebtedness” shall have the meaning provided in Section 7.21.
 
“Federal Funds Rate” shall mean, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 A.M. (New York time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion.
 
“Flag Jurisdiction Transfer” shall mean the transfer of the registration and flag of a Mortgaged Vessel from one Acceptable Flag Jurisdiction to another Acceptable Flag Jurisdiction, provided that the following conditions are satisfied with respect to such exchange:
 
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(i) On each Flag Jurisdiction Transfer Date, the Credit Party which is consummating a Flag Jurisdiction Transfer on such date shall have duly authorized, executed and delivered, and caused to be recorded in the appropriate vessel registry a Vessel Mortgage with respect to the Mortgaged Vessel being transferred (the “Transferred Vessel”) and such Vessel Mortgage shall be effective to create in favor of the Collateral Agent and/or the Lenders a legal, valid and enforceable first priority security interest, in and lien upon such Transferred Vessel, subject only to Permitted Liens. All filings, deliveries of instruments and other actions necessary or desirable in the reasonable opinion of the Collateral Agent to perfect and preserve such security interests shall have been duly effected and the Collateral Agent shall have received evidence thereof in form and substance reasonably satisfactory to the Collateral Agent.
 
(ii) On each Flag Jurisdiction Transfer Date, the Administrative Agent shall have received from counsel to the Credit Parties consummating the relevant Flag Jurisdiction Transfer reasonably satisfactory to the Administrative Agent practicing in those jurisdictions in which the Transferred Vessel is registered and/or the Credit Party owning such Transferred Vessel is organized, opinions which shall be addressed to the Administrative Agent and each of the Lenders and dated such Flag Jurisdiction Transfer Date, which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests granted pursuant to the Vessel Mortgage(s) and such other matters incident thereto as the Administrative Agent may reasonably request.
 
(iii) On each Flag Jurisdiction Transfer Date:
 
(A)                                    The Administrative Agent shall have received (x) certificates of ownership from appropriate authorities showing (or confirmation updating previously reviewed certificates and indicating) the registered ownership of the Transferred Vessel transferred on such date by the relevant Subsidiary Guarantor and (y) the results of maritime registry searches with respect to the Transferred Vessel transferred on such date, indicating no record liens other than Liens in favor of the Collateral Agent and/or the Lenders and Permitted Liens; and
 
(B)                                      The Administrative Agent shall have received a report, in form and scope reasonably satisfactory to the Administrative Agent, from a firm of independent marine insurance brokers reasonably acceptable to the Administrative Agent with respect to the insurance maintained by the Credit Party in respect of the Transferred Vessel transferred on such date, together with a certificate from such broker certifying that such insurances (i) are placed with such insurance companies and/or underwriters and/or clubs, in such amounts, against such risks, and in such form, as are customarily insured against by similarly situated insureds for the protection of the Administrative Agent and/or the Lenders as mortgagee and (ii) conform with the insurance requirements of the respective Vessel Mortgages.
 
(iv) On or prior to each Flag Jurisdiction Transfer Date, the Administrative Agent shall have received a certificate, dated the Flag Jurisdiction Transfer Date, signed by an
 
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Authorized Officer, member or general partner of the Credit Party consummating such Flag Jurisdiction Transfer, certifying that (A) all necessary governmental (domestic and foreign) and third party approvals and/or consents in connection with the Flag Jurisdiction Transfer being consummated on such date and otherwise referred to herein shall have been obtained and remain in effect, (B) there exists no judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon such Flag Jurisdiction Transfer or the other transactions contemplated by this Agreement and (C) copies of resolutions approving the Flag Jurisdiction Transfer of such Credit Party and any other matters the Administrative Agent may reasonably request.
 
(v) On each Flag Jurisdiction Transfer Date, the Administrative Agent shall have received such other agreements, documents and certificates as it shall have reasonably requested.
 
“Flag Jurisdiction Transfer Date” shall mean the date on which a Flag Jurisdiction Transfer occurs.
 
“Fleet LLC Company Agreement” shall have the meaning provided in Section 7.13.
 
“Foreign Pension Plan” shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code.
 
“GAAP” shall have the meaning provided in Section 13.07(a).
 
“Guaranteed Creditors” shall mean and include each of the Administrative Agent, the Collateral Agent, the Lenders and each party (other than any Credit Party) party to a Interest Rate Protection Agreement or a Other Hedging Agreement to the extent such party constitutes a Secured Creditor under the Security Documents.
 
“Guaranteed Obligations” shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal and interest on each Note issued by, and all Loans made to, the Borrower under this Agreement, together with all the other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), indebtedness and liabilities (including, without limitation, indemnities, fees and interest (including any interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided for herein, whether or not such interest is an allowed claim in any such proceeding) thereon) of the Borrower to the Lenders and the Agents now existing or hereafter incurred under, arising out of or in connection with this Agreement and each other Credit Document to which the Borrower is a party and the due perfounance and compliance by the Borrower with all the terms, conditions and agreements contained in the Credit Agreement and in each such other Credit Document and (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or
 
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otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness (including any interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided for herein, whether or not such interest is an allowed claim in any such proceeding) of the Borrower owing under each Interest Rate Protection Agreement and Other Hedging Agreement entered into by the Borrower with any Lender or any affiliate thereof (even if such Lender subsequently ceases to be a Lender under this Agreement for any reason) so long as such Lender or affiliate participates in such interest Rate Protection Agreement or Other Hedging Agreement and their subsequent assigns party to any such Interest Rate Protection Agreement or Other Hedging Agreement, if any, whether now in existence or hereafter arising, and the due performance and compliance with all terms, conditions and agreements contained therein.
 
“Guarantor” shall means Holdings and each Subsidiary Guarantor.
 
“Guaranty” shall mean each of the Holdings Guaranty and the Subsidiaries Guaranty.
 
“Hazardous Materials” shall mean: (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous waste,” “hazardous materials,” “extremely hazardous substances,” “restricted hazardous waste,” “toxic substances,” “toxic pollutants,” “contaminants,” or “pollutants,” or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority under Environmental Laws.
 
“Holdings” shall have the meaning provided in the first paragraph of this Agreement.
 
“Holdings Loan” shall have the meaning provided in Section 7.13(a).
 
“Holdings Guaranty” shall mean the guaranty of Holdings pursuant to Section 14.
 
“Holdings Pledge Agreement” shall have the meaning provided in Section 5.09.
 
“Indebtedness” shall mean, as to any Person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the maximum amount available to be drawn under all letters of credit issued for the account of such Person and all unpaid drawings in respect of such letters of credit, (iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any Lien on any property owned by such Person, whether or not such Indebtedness has been assumed by such Person (to the extent of the value of the respective property), (iv) the aggregate amount required to be capitalized under leases under which such Person is the lessee, (v) all obligations of such person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e., take-or-pay and similar
 
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obligations, (vi) all Contingent Obligations of such Person and (vii) all obligations under any Interest Rate Protection Agreement or Other Hedging Agreement or under any similar type of agreement; provided that Indebtedness shall in any event not include trade payables and expenses accrued in the ordinary course of business.
 
“Initial Borrowing Date” shall mean the date occurring on or after the Effective Date on which the initial Borrowing of Loans hereunder occurs.
 
“Initial Charter Arrangements” shall have the meaning provided in Section 6.10(a).
 
“Interest Determination Date” shall mean, with respect to any Loan, the second Business Day prior to the commencement of any Interest Period relating to such Loan.
 
“Interest Period” shall have the meaning provided in Section 1.08.
 
“Interest Rate Protection Agreement” shall mean any interest rate swap agreement, interest rate cap agreement, interest collar agreement, interest rate hedging agreement, interest rate floor agreement or other similar agreement or arrangement.
 
“Investments” shall have the meaning provided in Section 9.05.
 
“Investors” shall mean Peter C. Georgiopoulos, 0CM Principal Opportunities Fund III, L.P., 0CM Principal Opportunities Fund IIIA, L.P., John Georgiopoulos, Constantine Georgiopoulos, John Tavlarios, Jeffrey Pribor, Leonidas Vrondissis and Matthew Gruber.
 
“Lead Arrangers” shall have the meaning provided in the first paragraph of this Agreement.
 
“Leaseholds” of any Person means all the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures.
 
“Lender” shall mean each financial institution listed on Schedule I, as well as any Person which becomes a “Lender” hereunder pursuant to 13.04(b).
 
“Leverage Ratio” shall mean, at any date of determination, the ratio of Consolidated Indebtedness on such date to Consolidated Total Capitalization on such date.
 
“Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any fmancing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing).
 
“Loan” shall have the meaning provided in Section 1.01.
 
“Management Agreements” shall have the meaning provided in Section 5.06.
 
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“Margin Stock” shall have the meaning provided in Regulation U.
 
“Material Adverse Effect” shall mean a material adverse effect on the (i) Transaction, (ii) business, property, assets, liabilities, condition (financial or otherwise), operations or prospects (x) of the Top Glory Vessels or (y) the Borrower and the Subsidiary Guarantors taken as a whole, (iii) the rights and remedies of the Administrative Agent or the Lenders or (iv) the ability of any Credit Party to perform its obligations under the Credit Documents to which it is a party.
 
“Maturity Date” shall mean the first Business Day to occur in April, 2010.
 
“Maximum Loan Amount” for a Top Glory Vessel shall mean the amount set forth opposite such Top Glory Vessel on Schedule IX hereto under the column “Maximum Loan Amount.”
 
“Minimum Borrowing Amount” shall mean $5,000,000.
 
“Minimum Cash Balance Amount” shall have the meaning provided in Section 9.11.
 
“Modified Trigger Date” shall mean the first date after the Commitment Termination Date on which (x) the Loans shall have been repaid by at least $165,000,000 from a source other than Collateral Dispositions, (y) the ratio of Consolidated Indebtedness to the Aggregate Appraised Value is less than 0.50:1.00 and (z) no Default or Event of Default exists.
 
“Moody’s” shall mean Moody’s Investors Service, Inc. and its successors.
 
“Mortgaged Vessels” shall mean, at any time, each Vessel which is subject to the first priority perfected Vessel Mortgage at such time.
 
“Multiemployer Plan” shall mean a Plan which is defined in Section 3(37) of ERISA.
 
“NAIC” shall mean the National Association of Insurance Commissioners (and its successors from time to time).
 
“Net Cash Proceeds” shall mean, with respect to any Collateral Disposition, the aggregate cash payments (including any cash received by way of deferred payment pursuant to a note receivable issued in connection with such Collateral Disposition or equity issuance, other than the portion of such deferred payment constituting interest, but only as and when received) received by the Borrower from such Collateral Disposition or equity issuance, net of (i) reasonable transaction costs (including, without limitation, reasonable attorney’s fees) and sales commissions and (ii) the estimated marginal increase in income taxes and any stamp tax payable by the Borrower or any of its Subsidiaries as a result of such Collateral Disposition.
 
“Net Worth” shall mean, as to any Person, the sum of its capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other
 
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account which, in accordance with GAAP, constitutes stockholders’ equity, but excluding any treasury stock.
 
“Note” shall have the meaning provided in Section 1.05(a).
 
“Notice of Borrowing” shall have the meaning provided in Section 1.03.
 
“Notice Office” shall mean the office of the Administrative Agent located at 437 Madison Avenue, 21 ” Floor, New York, NY 10022, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto.
 
“Obligations” shall mean all amounts owing to the Administrative Agent, the Collateral Agent or any Lender pursuant to the terms of this Agreement or any other Credit Document.
 
“OPA” shall mean the Oil Pollution Act of 1990, as amended, 33 U.S.C. § 2701 et seq.
 
“Other Hedging Agreement” shall mean any foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency or commodity values.
 
“PATRIOT Act” shall have the meaning provided in Section 13.21.
 
“Payment Date” shall mean the first Business Day of each April, July, October and January, commencing with April 1, 2005 and through, and including, the Maturity Date.
 
“Payment Office” shall mean the office of the Administrative Agent located at 437 Madison Avenue, 21 s’ Floor, New York, NY 10022, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto.
 
“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto.
 
“Permitted Encumbrance” shall mean easements, rights-of-way, restrictions, encroachments, exceptions to title and other similar charges or encumbrances on any Mortgaged Vessel or any other property of the Borrower or any of its Subsidiaries arising in the ordinary course of business which do not materially detract from the value of such Mortgaged Vessel or the property subject thereto.
 
“Permitted Holders” shall mean (i) Peter Georgiopoulos (including his immediate family members and trusts for his benefit and/or for the benefit of his immediate family members) and any corporation or other entity directly or indirectly controlled by Peter Georgiopoulos and (ii) Oaktree Capital Management, LLC and any corporation or other entity directly or indirectly controlled by Oaktree Capital Management, LLC.
 
“Permitted Liens” shall have the meaning provided in Section 9.01.
 
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“Person” shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof.
 
“Plan” shall mean any pension plan as defined in Section 3(2) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) the Borrower or a Subsidiary of the Borrower or any ERISA Affiliate, and each such plan for the five-year period immediately following the latest date on which the Borrower, or a Subsidiary of the Borrower or any ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan.
 
“Pledge Agreement” shall mean and include the Borrower/Subsidiary Pledge Agreement and/or the Holdings Pledge Agreement.
 
“Pledge Agreement Collateral” shall mean all “Collateral” as defined in the Pledge Agreements.
 
“Pledged Securities” shall mean “Securities” as defined in the Pledge Agreements pledged (or required to be pledged) pursuant thereto.
 
“Prime Rate” shall mean the rate which the Administrative Agent announces from time to time as its prime lending rate, the Prime Rate to change when and as such prime lending rate changes. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.
 
“Projections” shall have the meaning provided in Section 5.02.
 
“Qualified IPO” shall mean a bona fide underwritten sale to the public of Holdings’ Equity Interests pursuant to a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of Holdings or any of its subsidiaries, as the case may be) that is declared effective by the Securities and Exchange Commission and such offering results in gross cash proceeds (exclusive of underwriter’s discounts and commissions and other expenses) of at least $50,000,000.
 
“Qualified Preferred Stock” shall mean any preferred stock so long as the terms of any such preferred stock (i) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision occurring prior to one year after the Maturity Date, (ii) do not require the cash payment of dividends, (iii) do not contain any covenants other than periodic reporting requirements, (iv) do not grant the holder thereof any voting rights except for voting rights on fundamental matters such as mergers, consolidations, sales of all or substantially all of the assets of the issuer thereof, or liquidations involving the issuer thereof and other voting rights which holders of common stock may have and (v) any other preferred stock that satisfies (i), (ii), and (iii) of this definition of Qualified Preferred Stock and that is otherwise issuable or may be distributed pursuant to a shareholder’s rights plan of the Borrower.
 
“Real Property” of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds.
 
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“Register” shall have the meaning provided in Section 13.17.
 
“Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements.
 
“Regulation T” shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.
 
“Regulation U” shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.
 
“Regulation X” shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.
 
“Replaced Lender” shall have the meaning provided in Section 1.12.
 
“Replacement Lender” shall have the meaning provided in Section 1.12.
 
“Reportable Event” shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
 
“Required Debt Service Amount” shall mean for any Payment Date the sum of (x) the Scheduled Repayment for such Payment Date plus (y) the aggregate amount of interest in respect of the Loans with an Interest Period in excess of one month required to be paid during the period commencing on the day after the immediately preceding Payment Day and ending on such Payment Date.
 
“Required Lenders” shall mean Lenders, the sum of whose outstanding Commitments and the then principal amount of outstanding Loans at such time represent 66-2/3% of the sum of all outstanding Commitments and the then principal amount of outstanding Loans at such time.
 
“Reserve Account” shall have the meaning provided in Section 2.
 
“Reserve Transfer” shall have the meaning provided in Section 2.
 
“Returns” shall have the meaning provided in Section 7.09.
 
“S&P” shall mean Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc., and its successors.
 
“Scheduled Repayment” shall have the meaning provided in Section 4.02(a).
 
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“Secured Creditors” shall mean the “Secured Creditors” as defined in the Security Documents.
 
“Securities Act” shall mean the Securities Act of 1933, as amended.
 
“Security Documents” shall mean the Vessel Acquisition Document Assignment, each Pledge Agreement, each Assignment of Earnings, each Assignment of Insurances, each Assignment of Charters, each Vessel Mortgage and, after the execution and delivery thereof, each additional security document executed pursuant to Section 8.11.
 
“Service Agreements” shall have the meaning provided in Section 5.06.
 
“Seller” shall mean Top Glory Shipping (Holdings) Limited.
 
“Subsidiaries Guaranty” shall have the meaning provided Section 5.07.
 
“Subsidiary” shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time.
 
“Subsidiary Guarantor” shall mean each direct and indirect Subsidiary of the Borrower which is party to the Subsidiaries Guaranty, or which executes a counterpart thereof after the Initial Borrowing Date.
 
“Taxes” shall have the meaning provided in Section 4.04(a).
 
“Tax Benefit” shall have the meaning provided in Section 4.04(c).
 
“Test Period” shall mean each period of four consecutive fiscal quarters then last ended, in each case taken as one accounting period, provided that in the case of any first quarter ending prior to December 31, 2005, the “Test Period” shall be the period commencing on January 1, 2005 and ending on the last day of such fiscal quarter.
 
“Top Glory Vessel” shall mean, collectively, all sea going vessels and tankers listed on Schedule III, and, individually, any of such vessels.
 
“Total Commitment” shall mean, at any time, the sum of the Commitments of each of the Lenders at such time.
 
“Transaction” shall mean, collectively, (i) the consummation of each Vessel Acquisition, (ii) the entering into of the Credit Documents and the incurrence of Loans hereunder and (iii) the payment of all fees and expenses in connection with the foregoing.
 
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“Transferred Vessel” shall have the meaning provided in the definition of “Flag Jurisdiction Transfer” in this Section 11.
 
“Trigger Date” shall mean the later of (i) the first Business Day occurring after the Payment Date occurring in March 2007 and (ii) the first date on which (x) the ratio of Consolidated Indebtedness to the Aggregate Appraised Value is less than 0.60:1.00 and (y) no Default or Event of Default exists.
 
“UCC” shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction.
 
“Unfunded Current Liability” of any Plan shall mean the amount, if any, by which the value of the accumulated plan benefits under the Plan determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions).
 
“United States” and “U.S.” shall each mean the United States of America.
 
“Vessel” shall mean sea going vessels and tankers.
 
“Vessel Acquisition” shall have the meaning provided in Section 1.01.
 
“Vessel Acquisition Documents” shall have the meaning provided in Section
 
“Vessel Acquisition Document Assignment” shall have the meaning provided in Section 5.10.
 
“Vessel Exchange” shall mean the exchange of a Mortgaged Vessel for a Vessel which Vessel shall constitute an Acceptable Replacement Vessel and provided that the following conditions are satisfied with respect to such exchange:
 
(i)                                                On each Vessel Exchange Date, if the Subsidiary owning the Acceptable Replacement Vessel is not a Credit Party, (A) such Subsidiary shall (1) grant to the Collateral Agent a first priority Lien (subject only to Permitted Liens) on all property of such Subsidiary by executing and delivering a counterpart of the Borrower/Subsidiary Pledge Agreement, taking all actions required pursuant to Section [25] of the Borrower/Subsidiary Pledge Agreement to become a Pledgor thereunder, and taking any other action reasonably requested by the Administrative Agent and (2) execute and deliver a counterpart of the Subsidiaries Guaranty and (B) the Borrower shall pledge and deliver, or cause to be pledged and delivered, all of the capital stock of such Subsidiary owned by any Credit Party to the Collateral Agent.
 
(ii)                                             On each Vessel Exchange Date, the Administrative Agent shall have received from counsel to the Credit Parties acceptable to the Administrative Agent consummating the relevant Vessel Exchange opinions reasonably satisfactory to the
 
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Administrative Agent practicing in those jurisdictions in which the Acceptable Replacement Vessel is registered and/or the Credit Party owning such Acceptable Replacement Vessel is organized, which opinions shall be addressed to the Administrative Agent and each of the Lenders and dated such Vessel Exchange Date, which shall (x) be in form and substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the security interests granted pursuant to the Vessel Mortgage(s) and such other matters incident thereto as the Administrative Agent may reasonably request.
 
(iii) On each Vessel Exchange Date, the Credit Party which is consummating a Vessel Exchange on such date shall have duly authorized, executed and -delivered an Assignment of Earnings, an Assignment of Insurances, and (if applicable) an Assignment of Charters, together covering all of such Credit Party’s present and future Earnings and Insurance Collateral, in each case together with:
 
(A)                               proper Financing Statements (Form UCC-1) fully executed for filing under the UCC or in other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Assignment of Earnings, the Assignment of Insurances and the Assignment of Charters;
 
(B)                                 certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name any Credit Party as debtor and that are filed in the jurisdictions referred to in clause (A) above, together with copies of such other financing statements (none of which shall cover the Collateral except to the extent evidencing Permitted Liens unless in respect of which the Collateral Agent shall have received Form UCC-3 Termination Statements (or such other termination statements as shall be required by local law) fully executed for filing if required by applicable laws); and
 
(C)                                 evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Assignment of Earnings, the Assignment of Insurances and (if applicable) the Assignment of Charters have been taken.
 
(iv) On each Vessel Exchange Date, the Credit Party which is consummating a Vessel Exchange on such date shall have duly authorized, executed and delivered, and caused to be recorded in the appropriate vessel registry a Vessel Mortgage with respect to each of such Acceptable Replacement Vessel and such Vessel Mortgages shall be effective to create in favor of the Collateral Agent and/or the Lenders a legal, valid and enforceable first priority security interest, in and lien upon such Acceptable Replacement Vessels, subject only to Permitted Liens. Except as specifically provided above, all filings, deliveries of instruments and other -actions necessary or desirable in the reasonable opinion of the Administrative Agent to perfect and preserve such security interests shall have been duly effected and the Administrative Agent shall have received
 
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evidence thereof in form and substance reasonably satisfactory to the Administrative Agent.
 
(v) On each Vessel Exchange Date, the Administrative Agent shall have received each of the following with respect to the relevant Acceptable Replacement Vessel:
 
(A)                                    certificates of ownership from appropriate authorities showing (or confirmation updating previously reviewed certificates and indicating) the registered ownership of such Acceptable Replacement Vessel by the relevant Subsidiary Guarantor,
 
(B)                                      the results of maritime registry searches with respect to such Acceptable Replacement Vessel, indicating no record liens other than Liens in favor of the Collateral Agent and/or the Lenders and Permitted Liens,
 
(C)                                      class certificates from a classification society listed on Schedule VIII hereto or another internationally recognized classification society acceptable to the Administrative Agent, indicating that such Acceptable Replacement Vessel meets the criteria specified in Section 7.25,
 
(D)                                     Appraisals of recent date and from at least two Approved Appraisers in scope, form and substance reasonably satisfactory to the Administrative Agent, and
 
(E)                                       a report, in form and scope reasonably satisfactory to the Administrative Agent, from a firm of independent marine insurance brokers reasonably acceptable to the Administrative Agent with respect to the insurance maintained by the Credit Party in respect of such Acceptable Replacement Vessel, together with a certificate from such broker certifying that such insurances (i) are placed with such insurance companies and/or underwriters and/or clubs, in such amounts, against such risks, and in such form, as are customarily insured against by similarly situated insureds for the protection of the Administrative Agent and/or the Lenders as mortgagee and (ii) conform with the insurance requirements of the respective Vessel Mortgages.
 
{vi) On or prior to each Vessel Exchange Date:
 
(A)                               the Administrative Agent shall have received a certificate, dated the Vessel Exchange Date, signed by a senior financial officer of the Borrower which certificate shall set forth the calculations required to establish whether the Borrower is in compliance with the provisions of Section 9.10 after giving effect to such Vessel Exchange,
 
(B)                                 the Administrative Agent shall have received a certificate, dated the Vessel Exchange Date, signed by an Authorized Officer, member or general partner of the Credit Party commencing such Vessel Exchange, certifying that (1) all necessary governmental (domestic and foreign) and third party approvals
 
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and/or consents (including any necessary anti-trust approvals or consents) in connection with the Vessel Exchange being consummated on such date and other-wise referred to herein shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which, in the reasonable judgment of the Administrative Agent, restrains, prevents or imposes materially adverse conditions upon the consummation of such Vessel Exchange or the transactions contemplated by this Agreement and (2) there exists no judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon such Vessel Exchange or the other transactions contemplated by this Agreement,
 
(C)                                 the Administrative Agent shall have received such other documents, certificates and opinions as it shall have reasonably requested.
 
“Vessel Exchange Date” shall mean each date on which a Vessel Exchange is consummated.
 
“Vessel Mortgage” shall mean a first preferred mortgage in substantially the forma of Exhibit N-1 or N-2, or such other form as may be reasonably satisfactory to the Administrative Agent, as such first preferred mortgage may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.
 
“Wholly-Owned Subsidiary” shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director’s qualifying shares) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time.
 
 SECTION 12. A gency and Security Trustee Provisions.
 
12.01 Appointment. (a) The Lenders hereby designate Nordea Bank Finland plc, New York Branch, as Administrative Agent (for purposes of this Section 12, the term “Administrative Agent” shall include Nordea Bank Finland plc, New York Branch (and/or any of its affiliates) in its capacity as Collateral Agent pursuant to the Security Documents and in its capacity as security trustee pursuant to the Vessel Mortgages) to act as specified herein and in the other Credit Documents. The Lenders hereby designate Citigroup Global Markets Limited and Nordea Bank Finland plc, New York Branch, as Lead Arrangers to act as specified herein and in the other Credit Documents. Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Agents to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agents by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agents may perform any of its duties hereunder by or through its respective officers, directors, agents, employees or affiliates and, may assign from
 
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time to time any or all of its rights, duties and obligations hereunder and under the Security Documents to any of its banking affiliates.
 
(b) The Lenders hereby irrevocably appoint Nordea Bank Finland plc, New York Branch as security trustee solely or the purpose of holding legal title to the Vessel Mortgages on each of the flag vessels of an Acceptable Flag Jurisdiction on behalf of the applicable Lenders, from time to time, with regard to the (i) 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 the Vessel Mortgages (including, without limitation, the benefit of all covenants, undertakings, representations, warranties and obligations given, made or undertaken by any Lender in the Vessel Mortgages), (ii) all money, 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 the Vessel Mortgages, whether from the Borrower or any Subsidiary Guarantor 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). Nordea Bank Finland plc, New York Branch, hereby accepts such appointment as security trustee.
 
12.02 Nature of Duties . The Agents shall have no duties or responsibilities except those expressly set forth in this Agreement and the Security Documents. None of the Agents nor any of their respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by such Person’s gross negligence or willful misconduct (any such liability limited to the applicable Agent to whom such Person relates). The duties of each of the Agents shall be mechanical and administrative in nature; none of the Agents shall have by reason of this Agreement or any other Credit Document any fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon any Agents any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein.
 
12.03 Lack of Reliance on the Agents. Independently and without reliance upon the Agents, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrower and its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrower and its Subsidiaries and, except as expressly provided in this Agreement, none of the Agents shall have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. None of the Agents shall be responsible to any Lender or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection here-with or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the
 
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financial condition of the Borrower and its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of the Borrower and its Subsidiaries or the existence or possible existence of any Default or Event of Default.
 
12.04 Certain Rights of the Agents. If any of the Agents shall request instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Agents shall be entitled to refrain from such act or taking such action unless and until the Agents shall have received instructions from the Required Lenders; and the Agents shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender or the holder of any Note shall have any right of action whatsoever against the Agents as a result of any of the Agents acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders.
 
12.05 Reliance. Each of the Agents shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that the applicable Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent.
 
12.06 Indemnificatio n. To the extent any of the Agents is not reimbursed and indemnified by the Borrower, the Lenders will reimburse and indemnify the applicable Agents, in proportion to their respective “percentages” as used in determining the Required Lenders, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by such Agents in performing their respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document; provided that no Lender shall be liable in respect to an Agent 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.
 
12.07 The Administrative A gent in its Individual Capacity. With respect to its obligation to make Loans under this Agreement, each of the Agents shall have the rights and powers specified herein for a “Lender” and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term “Lenders,” “Secured Creditors”, “Required Lenders”, “holders of Notes” or any similar terms shall, unless the context clearly otherwise indicates, include each of the Agents in their respective individual capacity. Each of the Agents may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Credit Party or any Affiliate of any Credit Party as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower or any other Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Lenders.
 
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12.08 Holders . The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor.
 
12.09 Resignation by the Administrative Agent. (a) The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days’ prior written notice to the Borrower and the Lenders. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below.
 
(b)                                  Upon any such notice of resignation by the Administrative Agent, the Required Lenders shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower.
 
(c)                                   If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrower (which shall not be unreasonably withheld or delayed), shall then appoint a commercial bank or trust company with capital and surplus of not less than $500,000,000 as successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Lenders appoint a successor Administrative Agent as provided above.
 
(d)                                  If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 25th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent’s resignation shall become effective and the Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent as - provided above.
 
 SECTION 13. Miscellaneous.
 
13.01 Payment o f Expenses, etc. The Borrower agrees that it shall: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of each of the Agents (including, without limitation, the reasonable fees and disbursements of White & Case LLP, Johnson Stokes & Master, other counsel to the Administrative Agent and the Lead Arrangers and local counsel) in connection with the preparation, execution and delivery of this Agreement and the other Credit Documents and the documents and inst r uments referred to herein and therein and any amendment, waiver or consent relating hereto or thereto, of the Agents in connection with their respective syndication efforts with respect to this Agreement and of the Agents and each of the Lenders in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) for each of the Agents and for each of the Lenders); (ii) pay and hold each of the Lenders harmless from and against any and all present
 
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and future stamp, documentary, transfer, sales and use, value added, excise and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify the Agents, the Collateral Agent and each Lender, and each of their respective officers, directors, trustees, employees, representatives and agents from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys’ and consultants’ fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any of the Agents, the Collateral Agent or any Lender is a party thereto) related to the entering into and/or performance of this Agreement or any other Credit Document or the proceeds of any Loans hereunder or the consummation of any transactions contemplated herein, or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents, or (b) the actual or alleged presence of Hazardous Materials on any Vessel or in the air, surface water or groundwater or on the surface or subsurface of any property at any time owned or operated by the Borrower or any of its Subsidiaries, the generation, storage, transportation, handling, disposal or Environmental Release of Hazardous Materials at any location, whether or not owned or operated by the Borrower or any of its Subsidiaries, the non-compliance of any Vessel or property with foreign, federal, state and local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any Vessel or property, or any Environmental Claim asserted against the Borrower, any of its Subsidiaries or any Vessel or property at any time owned or operated by the Borrower or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel and other consultants incurred in connection with any such investigation, litigation or other proceeding (but excluding any losses, liabilities, claims, damages, penalties, actions, judgments, suits, costs, disbursements or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). To the extent that the undertaking to indemnify, pay or hold harmless each of the Agents or any Lender set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. Notwithstanding the foregoing, neither any Agent nor any Lender shall be responsible to any Person for any consequential, indirect, special or punitive damages which may be alleged by such Person arising out of this Agreement or the other Documents.
 
13.02 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Subsidiary or the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of the Borrower or any Subsidiary but in any event excluding assets held in trust for any such Person against and on account of the Obligations and liabilities of the Borrower or such Subsidiary, as
 
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applicable, to such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Lender pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured.
 
13.03 Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telexed, telegraphic or telecopier communication) and mailed, telexed, telecopied or delivered: if to the Borrower, at the Borrower’s address specified under its signature below; if to any Lender, at its address specified opposite its name on Schedule II below; and if to the Administrative Agent, at its Notice Office; or, as to any other Credit Party, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Lender, at such other address as shall be designated by such Lender in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, (i) when mailed, be effective three Business Days after being deposited in the mails, prepaid and properly addressed for delivery, (ii) when sent by overnight courier, be effective one Business Day after delivery to the overnight courier prepaid and properly addressed for delivery on such next Business Day, or (iii) when sent by telex or telecopier, be effective when sent by telex or telecopier, except that notices and communications to the Administrative Agent shall not be effective until received by the Administrative Agent.
 
13.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, that (i) no Credit Party may assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of the Lenders, (ii) although any Lender may transfer, assign or grant participations in its rights hereunder, such Lender shall remain a “Lender” for all purposes hereunder (and may not transfer or assign all or any portion of its Commitments hereunder except as provided in Section 13.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a “Lender” hereunder and (iii) no Lender shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (x) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or Commitment Commission thereon (except (m) in connection with a waiver of applicability of any post-default increase in interest rates and (n) that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (x)) or reduce the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitments shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof), (y) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (z) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Credit Documents) securing the Loans
 
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hereunder in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation.
 
(b)                                  Notwithstanding the foregoing, any Lender (or any Lender together with one or more other Lenders) may (x) assign all or a portion of its Commitment and/or its outstanding Loans to its (i) parent company and/or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company or (ii) in the case of any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is managed or advised by the same investment advisor of such Lender or by an Affiliate of such investment advisor or (iii) to one or more Lenders or (y) assign with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed and shall not be required if any Event of Default is then in existence) all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender or assigning Lenders, of such Commitments and outstanding principal amount of Loans hereunder to one or more Eligible Transferees (treating any fund that invests in bank loans and any other fund that invests in bank loans and is managed or advised by the same investment advisor of such fund or by an Affiliate of such investment advisor as a single Eligible Transferee), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Assumption Agreement, provided that (i) at such time Schedule I shall be deemed modified to reflect the Commitments (and/or outstanding Loans, as the case may be) of such new Lender and of the existing Lenders, (ii) new Notes will be issued, at the Borrower’s expense, to such new Lender and to the assigning Lender upon the request of such new Lender or assigning Lender, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments (and/or outstanding Loans, as the case may be), (iii) the consent of the Administrative Agent shall be required in connection with any assignment pursuant to preceding clause (y) (which consent shall not be unreasonably withheld or delayed), and (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,000. To the extent of any assignment pursuant to this Section 13.04(b), the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Commitments (it being understood that the indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 4.04, 13.01 and 13.06) shall survive as to such assigning Lender). To the extent that an assignment of all or any portion of a Lender’s Commitments and related outstanding Obligations pursuant to Section 1.12 or this Section 13.04(b) would, at the time of such assignment, result in increased costs under Section 1.09, 1.10 or 4.04 from those being charged by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment).
 
(c)                                   Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank and, with the consent of the
 
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Administrative Agent, any Lender which is a fund may pledge all or any portion of its Notes or Loans to a trustee for the benefit of investors and in support of its obligation to such investors.
 
13.05 No Waiver; Remedies Cumulative . No failure or delay on the part of the Administrative Agent or any Lender or any holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any other Credit Party and the Administrative Agent or any Lender or the holder of any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Credit Document expressly. provided are cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent or any Lender or the holder of any Note would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or any Lender or the holder of any Note to any other or further action in any circumstances without notice or demand.
 
13.06 Payments Pro Rata. (a) Except as otherwise provided in this Agreement, the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations hereunder, it shall distribute such payment to the Lenders (other than any Lender that has consented in writing to waive its pro rata share of any such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received.
 
(b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker’s lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans or Commitment Commission, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Credit Party to such Lenders in such amount as shall result in a proportional participation by all the Lenders in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.
 
13.07 Calculations; Computations . (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders). In addition, all computations determining compliance with Sections 9.08 through 9.11, inclusive, shall utilize accounting principles and policies in conformity with those in effect on the Effective Date (with the foregoing generally accepted accounting principles, subject to the preceding proviso, herein called “GAAP”). Unless otherwise noted, all references in this
 
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Agreement to “generally accepted accounting principles” shall mean generally accepted accounting principles as in effect in the United States.
 
(b) All computations of interest and Commitment Commission hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or Commitment Commission are payable.
 
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a)  THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE VESSEL MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW). ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY  BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION. IF AT ANY TIME DURING WHICH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT REMAINS IN EFFECT, THE BORROWER DOES NOT MAINTAIN A REGULARLY FUNCTIONING OFFICE IN NEW YORK CITY, IT WILL DULY APPOINT, AND AT ALL TIMES MAINTAIN, AN AGENT IN NEW YORK CITY FOR THE SERVICE OF PROCESS OR SUMMONS, AND WILL PROVIDE TO THE ADMINISTRATIVE AGENT AND THE LENDERS WRITTEN NOTICE OF THE IDENTITY AND ADDRESS OF SUCH AGENT FOR SERVICE OF PROCESS OR SUMMONS; PROVIDED THAT ANY FAILURE ON THE PART OF THE BORROWER TO COMPLY WITH THE FOREGOING PROVISIONS OF THIS SENTENCE SHALL NOT IN ANY WAY PREJUDICE OR LIMIT THE SERVICE OF PROCESS OR SUMMONS IN ANY OTHER MANNER DESCRIBED ABOVE IN THIS SECTION 13.08 OR OTHERWISE PERMITTED BY LAW.
 
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(b)                                  THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a)  ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
 
(c)                                   EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
 
13.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent.
 
13.10 Effectiveness . This Agreement shall become effective on the date (the “Effective Date”) on which Holdings, the Borrower, the Administrative Agent and each of the Lenders who are initially parties hereto shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written or facsimile notice (actually received) at such office that the same has been signed and mailed to it. The Administrative Agent will give the Borrower and each Lender prompt written notice of the occurrence of the Effective Date.
 
13.11 Headings Descriptive . The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.
 
13.12 Amendment or Waiv er; etc. (a) Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Lenders, provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (with Obligations being directly affected in the case of following clause (i)) and in the case of the following clause (vi), to the extent (in the case of the following clause (vi)) that any such Lender would be required to make a Loan in excess of its pro rata portion provided for in this Agreement or would receive a payment or prepayment of Loans or a commitment reduction that (in any case) is less than its pro rata portion provided for in this Agreement, in each case, as a result of any such amendment, modification or waiver referred to in the following clause (vi)), (i) extend the final scheduled maturity of any Loan or Note, extend the timing for or reduce the principal amount of
 
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any Scheduled Repayment, or reduce the rate or extend the time of payment of interest on any Loan or Note or Commitment Commission (except (x) in connection with the waiver of applicability of any post-default increase in interest rates and (y) any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (i)), or reduce the principal amount thereof (except to the extent repaid in cash), (ii) release any Vessel Mortgage (except as expressly provided in the Credit Documents), (iii) amend, modify or waive any provision of this Section 13.12, (iv) reduce the percentage specified in the definition of Required Lenders (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the extensions of Loans and Commitments are included on the Effective Date), (v) Consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement, (vi) amend, modify or waive Section 1.06 or amend, modify or waive any other provision in this Agreement to the extent providing for payments or prepayments of Loans or reductions in Commitments, in each case, to be applied pro rata among the Lenders entitled to such payments or prepayments of Loans or reductions in Commitments (it being understood that the provision of additional extensions of credit pursuant to this Agreement, or the waiver of any mandatory commitment reduction or any mandatory prepayment of Loans by the Required Lenders shall not constitute an amendment, modification or waiver for purposes of this clause (vi)), or (vii) release any Subsidiary Guarantor from a Subsidiaries Guaranty to the extent same owns a Mortgaged Vessel; provided, further, that no such change, waiver, discharge or termination shall (u) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Commitments shall not constitute an increase of the Commitment of any Lender, and that an increase in the available portion of any Commitment of any Lender shall not constitute an increase in the Commitment of such Lender), (v) without the consent of each Agent, amend, modify or waive any provision of Section 12 as same applies to such Agent or any other provision as same relates to the rights or obligations of such Agent or (w) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent.
 
(b) If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first proviso to Sections 13.12(a), the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clauses (A) or (B) below, to either (A) replace each such non-consenting Lender or Lenders (or, at the option of the Borrower if the respective Lender’s consent is required with respect to less than all Loans (or related Commitments), to replace only the respective Commitments and/or Loans of the respective non-consenting Lender which gave rise to the need to obtain such Lender’s individual consent) with one or more Replacement Lenders pursuant to Section 1.12 so long as at the time of such replacement, each such Replacement Lender consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Lender’s Commitment (if such Lender’s consent is required as a result of its Commitment), and/or repay outstanding Loans and terminate any outstanding Commitments of such Lender which gave rise to the need to obtain such Lender’s consent, in accordance with Sections 3.02(b) and/or 4.01(iv), provided that, unless the
 
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Commitments are terminated, and Loans repaid, pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Required Lenders (determined before giving effect to the proposed action) shall specifically consent thereto, provided, further, that in any event the Borrower shall not have the right to replace a Lender, terminate its Commitment or repay its Loans solely as a result of the exercise of such Lender’s rights (and the withholding of any required consent by such Lender) pursuant to the second proviso to Section 13.12(a).
 
13.13 Survival. All indemnities set forth herein including, without limitation, in Sections 1.09, 1.10, 4.04, 13.01 and 13.06 shall, subject to Section 13.15 (to the extent applicable), survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Loans.
 
13.14 Domicile of Loans . Each Lender may transfer and carry its Loans at, to or for the account of any office, Subsidiary or Affiliate of such Lender. Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 13.14 would, at the time of such transfer, result in increased costs under Section 1.09, 1.10 or 4.04 from those being charged by the respective Lender prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer).
 
13.15 Limitation on Additional Amounts, etc. Notwithstanding anything to the contrary contained in Sections 1.09, 1.10 or 4.04 of this Agreement, unless a Lender gives notice to the Borrower that it is obligated to pay an amount under any such Section within one year after the later of (x) the date the Lender incurs the respective increased costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital or (y) the date such Lender has actual knowledge of its incurrence of the respective increased costs, Taxes, loss, expense or liability, reductions in amounts received or receivable or reduction in return on capital, then such Lender shall only be entitled to be compensated for such amount by the Borrower pursuant to said Section 1.09, 1.10 or 4.04, as the case may be, to the extent the costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital are incurred or suffered on or after the date which occurs one year prior to such Lender giving notice to the Borrower that it is obligated to pay the respective amounts pursuant to said Section 1.09, 1.10 or 4.04, as the case may be. This Section 13.15 shall have no applicability to any Section of this Agreement other than said Sections 1.09, 1.10 and 4.04.
 
13.16 Confidentiality . (a) Subject to the provisions of clauses (b) and (c) of this Section 13.16, each Lender agrees that it will use its best efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors, advisors or counsel or to another Lender if the Lender or such Lender’s holding or parent company or board of trustees in its sole discretion determines that any such party should have access to such information, provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Lender) any information with respect to the Borrower or any of its Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document, provided that
 
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any Lender may disclose any such information (a) as has become generally available to the public other than by virtue of a breach of this Section 13.16(a) by the respective Lender, (b) as may be required in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required in respect to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, (e) to the Administrative Agent or the Collateral Agent and (f) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by such Lender, provided that such prospective transferee expressly agrees to be bound by the confidentiality provisions contained in this Section 13.16.
 
(b) The Borrower hereby acknowledges and agrees that each Lender may share with any of its affiliates any information related to the Borrower or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of the Borrower or its Subsidiaries), provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Lender.
 
13.17 Register. The Borrower hereby designates the Administrative Agent to serve as the Borrower’s agent, solely for purposes of this Section 13.17, to maintain a register (the “Register”) on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment and prepayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower’s obligations in respect of such Loans. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.17, except to the extent caused by the Administrative Agent’s own gross negligence or willful misconduct.
 
13.18 Judgment Currency . If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder or under any of the Notes in the currency expressed to be payable herein or under the Notes (the “specified currency”) into
 
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another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent’s New York office on the Business Day preceding that on which final judgment is given. The obligations of the Borrower in respect of any sum due to any Lender or the Administrative Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency; if the amount of the specified currency.so purchased is less than the sum originally due to such Lender or the Administrative Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds the sum originally due to any Lender or the Administrative Agent, as the case may be, in the specified currency, such Lender or the Administrative Agent, as the case may be, agrees to remit such excess to the Borrower.
 
13.19 Language . All correspondence, including, without limitation, all notices, reports and/or certificates, delivered by any Credit Party to the Administrative Agent, the Collateral Agent or any Lender shall, unless otherwise agreed by the respective recipients thereof, be submitted in the English language or, to the extent the original of such document is not in the English language, such document shall be delivered with a certified English translation thereof.
 
13.20 Waiver of Immunity . The Borrower, in respect of itself, each other Credit Party, its and their process agents, and its and their properties and revenues, hereby irrevocably agrees that, to the extent that the Borrower, any other Credit Party or any of its or their properties has or may hereafter acquire any right of immunity from any legal proceedings, whether in the United States, the Republic of the Marshall Islands, Hong Kong or elsewhere, to enforce or collect upon the Obligations of the Borrower or any other Credit Party related to or arising from the transactions contemplated by any of the Credit Documents, including, without limitation, immunity from service of process, immunity from jurisdiction or judgment of any court or tribunal, immunity from execution of a judgment, and immunity of any of its property from attachment prior to any entry of judgment, or from attachment in aid of execution upon a judgment, the Borrower, for itself and on behalf of the other Credit Parties, hereby expressly waives, to the fullest extent permissible under applicable law, any such immunity, and agrees not to assert any such right or claim in any such proceeding, whether in the United States, the Republic of the Marshall Islands, Hong Kong or elsewhere.
 
13.21 USA PATRIOT Act Notice . Each Lender hereby notifies each Credit Party that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub.: 107-56 (signed into law October 26, 2001)) (the “PATRIOT Act”), it is required to obtain, verify, and record information that identifies each Credit Party, which information includes the name of each Credit Party and other information that will allow such Lender to identify each Credit Party in
 
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accordance with the PATRIOT Act, and each Credit Party agrees to provide such information from time to time to any Lender.
 
 SECTION 14. Holdings Guaranty.
 
14.01 Guaranty. In order to induce the Agents and the Lenders to enter into this Agreement and to extend credit hereunder, and to induce the other Guaranteed Creditors to enter into Interest Rate Protection Agreements and Other Hedging Agreements and in recognition of the direct benefits to be received by Holdings from the proceeds of the Loans and the entering into of such Interest Rate Protection Agreements and Other Hedging Agreements, Holdings hereby agrees with the Guaranteed Creditors as follows: Holdings hereby unconditionally and irrevocably guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, acceleration or otherwise, of any and all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors. If any or all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors becomes due and payable hereunder, Holdings, unconditionally and irrevocably, promises to pay such indebtedness to the Administrative Agent and/or the other Guaranteed Creditors, or order, on demand, together with any and all expenses which may be incurred by the Administrative Agent and the other Guaranteed Creditors in collecting any of the Guaranteed Obligations. This Guaranty is a guaranty of payment and not of collection. This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. If claim is ever made upon any Guaranteed Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event Holdings agrees that any such judgment, decree, order, settlement or compromise shall be binding upon Holdings, notwithstanding any revocation of this Guaranty or other instrument evidencing any liability of the Borrower, and Holdings shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee.
 
14.02 Bankruptcy. Additionally, Holdings unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors whether or not due or payable by the Borrower upon the occurrence of any of the events specified in Section 10.05, and irrevocably and unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money of the United States.
 
14.03 Nature of Liability. The liability of Holdings hereunder is primary, absolute and unconditional, exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of the Borrower, whether executed by any other guarantor or by any other party, and the liability of Holdings hereunder shall not be affected or impaired by any circumstances whatsoever, including, without limitation, (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed
 
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Obligations of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking (other than payment in cash of the Guaranteed Obligations), or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to any Guaranteed Creditor on the Guaranteed Obligations which any such Guaranteed Creditor repays to the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and Holdings waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding, or (f) any action or inaction by the Guaranteed Creditors as contemplated in Section 14.05, or (g) any invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor, including, without limitation, any such invalidity, irregularity or unenforceability caused by a change in law.
 
14.04 Independent Obligation. The obligations of Holdings hereunder are independent of the obligations of any other guarantor, any other party or the Borrower, and a separate action or actions may be brought and prosecuted against Holdings whether or not action is brought against any other guarantor, any other party or the Borrower and whether or not any other guarantor, any other party or the Borrower be joined in any such action or actions. Holdings waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to Holdings.
 
14.05 Authorization. Holdings authorizes the Guaranteed Creditors without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to:
 
(i)                                      change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the principal amount thereof or the rate of interest or fees thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the Guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;
 
(ii)                                   take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, impair, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst;
 
(iii)                                exercise or refrain from exercising any rights against the Borrower, any other Credit Party or others or otherwise act or refrain from acting;
 
(iv)                               release or substitute any one or more endorsers, guarantors, the Borrower, other Credit Parties or other obligors;
 
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(v)                                  settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Guaranteed Creditors;
 
(vi)                               apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Guaranteed Creditors regardless of what liability or liabilities of the Borrower remain unpaid;
 
(vii)                            consent to or waive any breach of, or any act, omission or default under, this Agreement, any other Credit Document, any Interest Rate Protection Agreement or any Other Hedging Agreement or any of the instruments or agreements referred to herein or therein, or otherwise amend, modify or supplement this Agreement, any other Credit Document, any Interest Rate Protection Agreement or any Other Hedging Agreement or any of such other instruments or agreements; and/or
 
(viii)                         take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of Holdings from its liabilities under this Guaranty.
 
14.06 Reliance. It is not necessary for any Guaranteed Creditor to inquire into the capacity or powers of Holdings or any of its Subsidiaries or the officers, directors, partners or agents acting or purporting to act on their behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder.
 
14.07 Subordination. Any indebtedness of the Borrower now or hereafter owing to Holdings is hereby subordinated to the Guaranteed Obligations of the Borrower owing to the Guaranteed Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness of the Borrower to Holdings shall be collected, enforced and received by Holdings for the benefit of the Guaranteed Creditors and be paid over to the Administrative Agent on behalf of the Guaranteed Creditors on account of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors, but without affecting or impairing in any manner the liability of Holdings under the other provisions of this Guaranty. Prior to the transfer by Holdings of any note or negotiable instrument evidencing any such indebtedness of the Borrower to Holdings, Holdings shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, Holdings hereby agrees with the Guaranteed Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash.
 
14.08 Waiver. (a) Holdings waives any right (except as shall be required by applicable statute and cannot be waived) to require any Guaranteed Creditor to (i) proceed against the Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other guarantor or any other party or (iii) pursue any other remedy in any Guaranteed Creditor’s power whatsoever. Holdings waives any defense based on
 
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or arising out of any defense of the Borrower, any other guarantor or any other party, other than payment of the Guaranteed Obligations to the extent of such payment, based on or arising out of the disability of the Borrower, Holdings, any other guarantor or any other party, or the validity, legality or unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment of the Guaranteed Obligations to the extent of such payment. The Guaranteed Creditors may, at their election, foreclose on any security held by the Administrative Agent, the Collateral Agent or any other Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Guaranteed Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of Holdings hereunder except to the extent the Guaranteed Obligations have been paid. Holdings waives any defense arising out of any such election by the Guaranteed Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Holdings against the Borrower or any other party or any security.
 
(b) Holdings waives all presentments, demands for perfoiuiance, protests and notices, including without limitation notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incur-ring of new or additional Guaranteed Obligations. Holdings assumes all responsibility for being and keeping itself informed of the Borrower’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which Holdings assumes and incurs hereunder, and agrees that neither the Administrative Agent nor any of the other Guaranteed Creditors shall have any duty to advise Holdings of information known to them regarding such circumstances or risks.
 
14.09 Maximum Liability . It is the desire and intent of Holdings and the Guaranteed Creditors that this Guaranty shall be enforced against Holdings to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If, however, and to the extent that, the obligations of Holdings under this Guaranty shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), then the amount of Holdings’ obligations under this Guaranty shall be deemed to be reduced and Holdings shall pay the maximum amount of the Guaranteed Obligations which would be permissible under applicable law.
 
14.10 Payments. All payments made by Holdings pursuant to this Section 14 will be made without setoff, counterclaim or other defense, and shall be subject to the provisions of Sections 4.03 and 4.04.
 
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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written.

 	GENCO SHIPPING & TRADING LIMITED,
as Borrower	
 	 	
 	By:	 	/s/ John Georgiopoulos	 	
 	 	 	Title: Vice President	
 	 	Address:	c/o M. J. Gruber & Co., LTD.	
 	 	 	425 Park Avenue, 27 ’h Floor, New York, NY 10022	
 	 	 	
 	With a copy to:	
 	 	 	
 	 	Kramer Levin Naftalis & Frankel LLP
919 Third Avenue	
 	 	New York, NY 10022	
 	 	Attention: Thomas E. Molner, Esq.
Telephone: (212) 715-9100	
 	 	Facsimile: (212) 715-8000	
 	 	 	
 	FLEET ACQUISITION LLC, as Holdings	
 	 	 	
 	 	By:	 	Is/ John Georgiopoulos	 	
 	 	 	Title: Vice President	 	
 	 	 	
 	NORDEA BANK FINLAND PLC, NEW YORK BRANCH,
as Administrative Agent and Lead Arranger	
 	 	 	
 	By:	 	Is/ Hans Christian Kjelsrud	 	
 	 	Title: Senior Vice President	
 	 	 	
 	By:	 	Is! Gerald E. Chelius, Jr.	 	
 	 	Title: Senior Vice President Credit	
 	 	 	
 	 	CITIGROUP GLOBAL MARKETS LIMITED, as
Lead Arranger	
 	 	 	
 	By:	 	/s/ Pareejat.Singhal	 	
 	 	Title: Director	

 

 	 	NORDEA BANK NORGE ASA, GRAND CAYMAN
BRANCH	
 	 	 	
 	By:	 	Is/ Hans Christian Kjelsrud	 	
 	 	Title: Senior Vice President	

 	 	 	
 	 	 	
 	By:	 	/s/ Gerald E. Chelius, Jr.	Title:	
 	 	Senior Vice President Credit	

 	 	CITIBANK, N.A.	
 	 	 	
 	By:	Is/ Charles R. Delamater	 	
 	 	Title: Managing Director
Senior Credit Officer	

 
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 Exhibit 23.2
 
 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        We consent to the use in Amendment No. 1 to this Registration Statement No. 333-124718 on Form S-1 of our report dated May 6, 2005 relating to the financial statements of Genco Shipping & Trading Limited as of December 31, 2004 and for the period September 27, 2004 (date of inception) through December 31, 2004 appearing in this Prospectus, which is part of this Registration Statement.
        We also consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
New York, NY
June 15, 2005

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Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
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 Exhibit 23.3
Genco Shipping & Trading Limited.
35 West 56 th Street
New York, New York 10019
United States of America
June 15, 2005
Dear Sir/Madam
        At your request we have reviewed the sections of the Prospectus contained in the Registration Statement on Form S-1, as amended, filed by Genco Shipping & Trading Limited entitled:
•
"Risk Factors—The international drybulk shipping industry is cyclical and volatile, which may lead to reductions and volatility in our charter rates, vessel values and results of operations."

•
"Risk Factors— Charter rates for drybulk carriers have recently been at historically high levels and future growth will depend on continued growth in the world economy."

•
"Risk Factors—A decline in the market value of our vessels could lead to a default under our proposed new credit facility and the loss of our vessels which would adversely affect our business" and

•
"The International Drybulk Shipping Industry," and the statistical and graphical information contained therein, and in any other instance where we are identified as the source of information included in the Prospectus of Genco Shipping & Trading Limited.
        Based on our review of his material, we confirm that such sections of the Prospectus and the statistical and graphical informational contained therein accurately describe the international drybulk shipping industry in all material respects based on available data. We hereby consent to the filing of this letter as an exhibit to the Registration Statement of the Company of Form S-1, as amended, to be filed with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, and to the reference to our firm under the heading "Experts" in the Prospectus and to all other references to our firm therein.

Yours faithfully,	 	 	 	 	 	 	

/s/   NIGEL GARDINER       

Managing Director
Drewry Shipping Consultants Ltd.	

 	

 	

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Exhibit 23.3