DUE DILIGENCE REPORT on Damen Shipyards Okean Open Joint Stock Company

Kyiv 2008

TABLE OF CONTENTS I. II. A. B. C. D. E. F. G. H. III. IV. A. B. C. V. A. B. C. D. E. Summary Corporate Matters General General Meeting of Shareholders Shareholders Rights Dividends The Supervisory Council The Directorate The Auditing Commission Independent Auditor Corporate Documents Material Agreements Shipbuilding Contracts (In Detail) Delivery Contracts Miscellaneous Contracts (Over EUR 50,000) Employment Matters General Information on the Companys Employees Employment Agreements Companys Officers (Contracts) with p. 5 p. 7 p. 7 p. 7 p. 9 p. 10 p. 10 p. 13 p. 16 p. 18 p. 18 p. 24 p. 27 p. 67 p. 68 p. 72 p. 72 p. 73 the p. 74 p. 75 p. 78

Worker Collective and the Collective Agreement Wages, Salaries, Incentive Plans

F. G. H. I. J. VI. A. B. C. D. E.

Confidentiality and Non-Competition Absentee Rates Pension Scheme Consultants and Free-Lance Workers Disputes Intellectual Property Patents Trademarks Know-How Licenses Vessel Designs and Construction Documents and Other Data

p. 79 p. 80 p. 81 p. 81 p. 82 p. 82 p. 82 p. 82 p. 82 p. 83 Information, p. 84

VII. Property and Assets A. B. General Real Estate

p. 84 p. 84 p. 85 p. 91 p. 91 p. 92 p. 93 p. 95

VIII. Environmental Matters A. B. C. IX. A. General Galvanic Shop Sludge Pool Financial Matters: Credit Facility Agreements

Credit Agreements between Damen Shipyards Okean p. 95 OJSC (Borrower) and Okean B.V. (Lender) Connected Agreements
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B.

p. 100

X. A. B. C. XI.

Insurance Mandatory State Social Insurance Accident/Health Insurance Voluntary Insurance Litigation Matters

p. 109 p. 109 p. 115 p. 116 p. 121 p. 127

XII. Qualifications

I.

Summary

The following text sets forth the results of our review of the status of the Damen Shipyrards Okean, an open joint-stock company duly organized and existing under the laws of Ukraine (hereinafter the Company or DSO). Our due diligence investigation with respect to the Company was based entirely upon documents and information provided for review by the Company in the Data Room, located at the premises of the law firm Wikborg Rein & Co., Kronprinsesse Mrthas plass 1, Oslo, 2nd Floor (hereinafter the Data Room). Our review of the documents provided by the Companys administration at the Data Room revealed the following: 1. As evidenced by the information set forth in the Due Diligence Report prepared by the Law Firm of Shevchenko, Didkovsky and Partners in 2006 (Binder 14, document 14.1.3.2) (hereinafter the SDP DDR), the Company is duly registered as an open joint-stock company with a specific place of business (legal address) and the required corporate requisites. 2. In general, the Companys constituent documents (i.e., the Charter and relevant Minutes of General Meeting of Shareholders (hereinafter the GMS), etc.) comply with requirements of the effective legislation. According to the Companys Charter, the highest governing body of the Company is the GMS, which is authorized to decide upon any matter related to the Company's business activity. The GMS consists of the Shareholders of the Company. Its executive body is the Directorate, which is appointed and dismissed by the GMS. The Supervisory Council of the Company ensures protection of the Shareholders interests in between the sessions of the GMS. According to the Charter, control over the Directorates activities is carried out by the Auditing Commission. 3. In general, the Companys employment practices appear to be in compliance with the effective legislation. It also appears that the Company has not been in arrears with salary payments to its employees. The Company does not maintain any special pension or medical insurance plans with respect to their employees, although it does have a medical treatment plan for employees as described below. The Company appears to have an effective Collective Agreement entered into between the worker collective and the Directorate of the Company. The provisions of the Collective Agreement appear to comply with the requirements of the effective legislation. Please note, however, that we were not provided with the Ukrainian version of the Collective Agreement. Under Ukrainian law, the Company must keep on file a copy of the effective Collective Agreement drawn in the Ukrainian language. Please also note that we were not provided for review with the employment agreements (contracts) of the officers of the Company. While the law allows Ukrainian entities to hire Ukrainian nationals pursuant to the so-called verbal agreements, it appears that the Company must conclude written employment agreements (contracts) with foreign nationals. 4. The Company is a party to a great deal of various contracts and agreements. Our review of the Company's contracts and agreements revealed that most of their

provisions comply with the effective legislation. Please note, however, that certain agreements are valued over EUR 1,000,000 (one million euros) and, thus, require that a corporate approval to be granted to the person signing such agreements on behalf of the Company. We were not provided for review such corporate approvals. The absence of such corporate approvals poses a risk of challenging validity of the agreements, which require them. If such corporate approvals are not available, we recommend that the relevant governing body of the Company grant such approvals ex post. 5. It appears that the Company possesses a great deal of tangible and intangible assets. Please note that we were not provided title documents evidencing the Companys ownership rights to the assets in question, save for the title document evidencing the Companys ownership of a land plot. It should be also noted that most of the Companys assets are either pledged or mortgaged in order to secure fulfillment of its obligations under the effective loan facility agreements. 6. The Company does not appear to hold any intellectual property rights such as patents or know-how. The Company appears to hold a trademark and is a party to at least one license agreement, both of which appear to be in compliance with the effective legislation. 7. The Company is a party to a number of insurance policies with respect to its long-term assets. The Company is also compliant with mandatory social insurance requirements. 8. The Company undertook major and fruitful efforts in order to clean up polluted areas on its premises. At the moment, the Companys environmental status appears to be in compliance with the requirements of the effective legislation. However, further information about asbestos removal on the premises should be researched. 9. At the moment, the Company does not seem to be a party to any employmentrelated lawsuit or dispute. Please note, however, that the Company is a party to certain business-related disputes described below which may have a financial impact on the Companys business activity.

II. A.

Corporate Matters General

According to the Charter, the corporate governance structure of the Company is as follows: (i) The General Meeting of Shareholders (the GMS) is the highest governing body of the Company with competence determined by the Charter; the Supervisory Council is the supervisory body of the Company that exercises control over the activities of the Directorate and protects the rights of the Shareholders; the Directorate is the executive body of the Company that manages and supervises the day-to-day operations of the Company; the Auditing Commission is the controlling body of the Company with competence determined by the Charter.

(ii)

(iii) (iv)

B.

General Meeting of Shareholders Competence of GMS

The GMS is the highest governing body of the Company. Its powers, as established by the Charter, comply with the requirements of applicable Ukrainian law. According to the law, 1 and pursuant to Section 9.5 of the Charter, the GMS has the following exclusive authorities: (i) (ii) (iii) (iv) (v) introduction of amendments to the Charter, including a change of the amount of the Authorized Capital; decision on changing (increase or decrease) the Authorized Capital; decision on issuance of Shares; approval of the results of the subscription for Shares; determination of the number of persons sitting on, and the official composition of, the Supervisory Council, the Directorate, and/or the Auditing Commission; election and dismissal of the persons sitting on the Supervisory Council, the Directorate, and/or the Auditing Commission;

(vi)

See Article 159 of the Civil Code and Article 41 of the Law of Ukraine No. 1576-XII On Economic Associations, dated September 19, 1991, as amended (hereinafter the EA Law).

(vii)

approval of the annual results of the Companys activity, including its annual financial reports, approval of reports and conclusions of the Auditing Commission, the procedure for distribution of profits, the term and procedure for payment of a portion of profit as dividends, and defining the procedure for covering losses;

(viii) approval of a decision to liquidate the Company; (ix) (x) (xi) approval of a decision to reorganize the Company; appointment of the liquidation commission, approval of an intermediate liquidation balance sheet and the liquidation balance sheet; decision and creation, reorganization and liquidation of the subsidiary enterprises, branches and representative offices of the Company, and approval of their charters and bylaws; approval of a decision to transfer maintenance of the Register to another Registrar.

(xii)

Pursuant to the Charter, the powers, which are within the exclusive competence of the GMS, cannot be delegated to other bodies of the Company. Subject to relevant provisions of the Charter, all other powers, which the GMS has or may have under applicable Ukrainian law at the moment of the approval of the Charter by the GMS or in the future, had been expressly and irrevocably delegated and transferred to the Supervisory Council of the Charter. However, the GMS has the right to take decisions on any matters of the Company operations, including those within the competence of the Directorate and/or the Supervisory Council. Convocation of the GMS Pursuant to the Charter, the GMS shall be held no less than once a year. The extraordinary the GMS shall be convened: (i) (ii) (iii) (iv) (v) (vi) in the case of the Companys insolvency; in any other case should the interests of the Company so require; by the Directorate at the written demand of the Supervisory Council or the Auditing Commission; by the Supervisory Council or the Auditing Commission if the Directorate fails to meet their written demand within 20 days; by the Directorate at the demand for convocation from the Shareholders jointly holding more than 10% of the votes; by the Shareholders jointly holding more than 10% of votes if the Directorate fails to meet their demand within 20 days.

Under the Charter and consistent with applicable Ukrainian law, the holders of the Companys Shares shall be personally notified regarding the convening of the GMS, whether annual or extraordinary, in writing. Such notice shall be sent to the holders of Shares no later than 45 (forty five) days prior the date of holding the relevant GMS. In addition, a general notice shall be published in printed media, which are specified by applicable Ukrainian law, at least 45 (forty five) days prior to holding the GMS. Any Shareholder has the right to make proposals for the agenda of the GMS not later than 30 (thirty) days prior to holding the GMS. The Directorate shall decide on inclusion of these proposals in the agenda. Proposals for the agenda submitted by the Shareholders representing more than 10% of the votes shall be included in the agenda on a mandatory basis. All holders of the Shares shall be personally notified regarding a decision to make changes in the agenda no later than 10 (ten) days prior to holding the GMS by written notice. According to the Charter, the GMS shall be held on the territory of Ukraine, as a rule at the place where the Company is located, except for instance when on the day of the convocation of the GMS 100% of the Shares are held by foreigners, persons without citizenship, foreign legal entities and international organizations. Voting According to the Charter and the GMS Rules, voting at the GMS is carried out on a one Share one vote basis. The GMS shall be valid if the Shareholders or their proxies holding more than 60% of the votes are in attendance of the GMS. All Shareholders shall be entitled to participate in the GMS in person or by proxy. The proxy may be permanent or appointed for a specific period. Persons, who sit on the Directorate and are not Shareholders, may also participate in the GMS with the right to an advisory vote. Under the Charter, a majority vote of the Shareholders participating in the GMS is required for (i) the introduction of amendments to the Charter, including a change of the amount of the Authorized Capital, and (ii) approving of a decision to liquidate the Company. Other matters shall be resolved by a simple majority vote of the Shareholders participating in the GMS. According to the Charter and the GMS Rules, the minutes of the GMS shall be signed by the Chairman of the GMS and the Secretary of the GMS and shall be passed on to the Directorate no later than 3 (three) business days after closing the GMS. During the same term a copy of the minutes of the GMS shall be passed on to the Supervisory Council. C. Shareholders Rights

According to the Charter, the Shareholders of the Company have the following rights: (i) to participate in the governance of the Company in the manner provided by the Charter;

(ii) (iii)

to participate in the distribution of the Companys profit and to receive a portion thereof (dividends); to withdraw from the Company through a sale or other manner of alienation of their Shares in accordance with the Charter and applicable Ukrainian law; to receive information about the activity of the Company in the form, scope and cases explicitly provided by the Charter and applicable Ukrainian law.

(iv)

As provided by the Charter, the Shareholders shall also enjoy other rights provided for by applicable Ukrainian legislation and the Charter. D. Dividends

The term and procedure of dividends payment shall be determined pursuant to the Charter, a resolution of the GMS and Ukrainian law. 2 According to the Charter, the Supervisory Council shall recommend to the GMS the amount and methods of payment of dividends. In the event the GMS adopts a decision on dividends payment, such payment shall be made once a year according to the results of the calendar year of the Companys activity from April 1st to May 1st of the year following such a calendar year and in the amount determined by the GMS. The Shareholders shall be notified in writing regarding dividends payment prior to the commencement of the term of the dividends payment. At the Shareholders discretion dividends shall be paid to him/her/it either in cash or by wire transfer to a bank account of such Shareholder. A Shareholders right to receive dividends due in accordance with the resolution of the GMS shall extinguish after 3 years from the date of commencement of the dividends payment determined by the GMS. According to the documents and information provided to us for our review, the Company has never declared or paid out dividends. E. The Supervisory Council

The Supervisory Council is elected by the GMS from among the Shareholders, exercises control over the activities of the Directorate, and protects the rights of the Companys Shareholders. The competence of the Supervisory Council is established by the Charter. Pursuant to the Charter, the Supervisory Council has the following exclusive authorities: (i) conclusion, amendment and termination of employment agreements (contracts) or civil-law agreements with persons sitting on the

See Article 159 of the Civil Code.

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Directorate, the Supervisory Council or the Auditing Commission regarding performance by these persons of their duties within these Companys bodies in case this is required by such a person or applicable law; (ii) (iii) (iv) deciding on holding the officers of the governing bodies of the Company pecuniary liable; consideration of the conclusions and examination documents, which are conducted by the Auditing Commission; analysis of the actions of the Directorate and/or the President related to the management of the Company, the implementation of investments, and technical and pricing policies; authorization of the Directorate, or the President, or an authorized Director to conclude an agreement or make other arrangement with regard to (i) alienation of, or creation of mortgage over, any real estate property, which is owned by the Company and which balance sheet value equal to or exceeds the equivalent of EUR 1,000,000 (one million euros) in Ukrainian Hryvnias (in one single or a series of related transactions) at the official exchange rate of the National Bank of Ukraine as of the date of such authorization; or (ii) acquisition into the Companys ownership or alienation from the Companys ownership of shares, equity interests or other corporate rights if the price of such acquisition or alienation is equal to or exceeds the equivalent of EUR 1,000,000 (one million euros) in Ukrainian Hryvnias (in one single or a series of related transactions) at the official exchange rate of the National Bank of Ukraine as of the date of such authorization. Should such an agreement or other arrangement be made without a prior authorization of the Supervisory Council, this agreement or other arrangement shall be null and void from the moment of such making (in particular, when a third party the Companys counterpart knew or by all circumstances must have known of such restrictions), except that any agreement or arrangement, which is or was subsequently approved by the Supervisory Council at any time, is not, and shall be considered at no time to have been, null and void; deciding on suspension from duties of a person sitting on the Directorate, including a person or persons performing such duties on an internal basis; deciding on election of an interim Chairman of the Commission, Secretary of the Commission or member of the Auditing Commission in the event of inability of the Auditing Commission to decide as set forth in certain provisions of the Charter;

(v)

(vi)

(vii)

(viii) providing its subsequent approval as referred to in a certain section of the Charter and/or provide its subsequent approval for any other

11

document or other actual or legal action of the Company, any body, official of the Company or an Employee. According to the Charter, the powers, which are within the exclusive authorities of the Supervisory Council, may not be delegated to the Directorate or the Auditing Commission. Sessions of the Supervisory Council shall be held as may be necessary but not less than once (1) per half year. Sessions are convened by the Chairman of the Supervisory Council. Extraordinary meeting are called by the Chairman of the Supervisory Council (or, in his/her absence, by the Deputy Chairman of the Council) at his/her own initiative, as well as upon a written demand of any person sitting on the Supervisory Council or the Auditing Commission, or upon written demand of the President of the Company. Pursuant to the Charter, persons sitting on the Supervisory Council shall be notified of (i) a regular session of the Supervisory Council by courier, registered mail or facsimile or telephone at least 5 (five) business days prior to the date thereof, and (ii) an extraordinary session of the Supervisory Council by a courier, facsimile or by telephone at least 2 (two) business days prior to the date thereof. The number of persons sitting on the Supervisory Council as well as its official and personal composition shall be determined by the GMS. A person sitting on the Supervisory Council cannot simultaneously sit on the Directorate or the Auditing Commission. The Supervisory Council shall be composed of the Chairman of the Council, the Deputy Chairman of the Council, and the Secretary of the Council. The Supervisory Council may also include one or more members of the Supervisory Council. The Chairman of the Council shall manage activities of the Supervisory Council. Under the Charter, each natural person sitting on the Supervisory Council shall perform his/her duties in person, and a legal entity that is sitting on the Supervisory Council shall be represented by its representative authorized by the corresponding constituent document or by a power of attorney issued by such legal entity. According to the Charter, a meeting of the Supervisory Council shall be deemed valid if attended by not less than a half of the persons sitting on the Supervisory Council. Resolutions on all matters shall be adopted by open voting and shall be deemed adopted if voted pro by more than half of the persons sitting on the Supervisory Council present. At the voting, each person sitting on the Supervisory Council shall have one vote. In the event of a tie vote, the vote of a Chairman of the Council shall be decisive. The Minutes of a meeting of the Supervisory Council shall be signed by the Chairman of the Council (or, in his/her absence, by the Deputy Chairman of the Council) and the Secretary of the Council or another person who sits on the Supervisory Council. Under the circumstance specified in the Charter, the Supervisory Council may appoint an interim Chairman of the Council, Deputy Chairman of the Council, secretary of the

12

Council, or member of the Supervisory Council from the among the Shareholders not sitting on the Directorate and Auditing Commission and who may lawfully sit on the Supervisory Council pursuant to applicable Ukrainian law. As evidenced by Minutes No. 5 of the GMS, dated October 11, 2005, and Minutes No. 6 of the GMS, dated October 16, 2006, the current composition of the Supervisory Council is as shown in Table 1. Table 1. Current composition of the Supervisory Council
No. 1. 2. 3. 4. Name Damen Okean SC-1 B.V. Damen Okean SC-2B.V. Scheepswerf Damen Vrachtschepen B.V. Damen Okean AC-2 B.V. Position Chairman Deputy Chairman Secretary Member

F.

The Directorate

According to the Charter, the Directorate manages and supervises the day-to-day operations of the Company within the authorities granted by the Charter. The Directorate reports to the GMS and the Supervisory Council and ensures implementations of their decisions. The Directorate shall be composed of the President, the General Director, the Material Management Director, the Production Director, the Financial Director, the Technical Director, and the Human Resources and Administration Director. By decision of the GMS the Directorate may also include one or more other Directors. The President shall chair the Directorate and manage its activities. The persons sitting on the Directorate shall be elected by the GMS for the period of 2 (two) years. The number of persons sitting on the Directorate and its official and personal composition shall be determined by the GMS taking into account certain provisions of the Charter. Persons sitting on the Directorate shall be collectively or individually elected and/or dismissed by the GMS. Under the Charter, the Directorate shall have the following exclusive authorities: (i) (ii) (iii) (iv) (v) deciding on convocation of a regular or extraordinary GMS; determination of the agenda of the GMS; deciding on inclusion of proposals of the Shareholders, who hold less than 10% (ten percent) of votes, in the agenda of GMS; drawing up draft resolutions of the GMS subject to certain provision of the Charter; approval of model (standard) contractual prices for products of, and tariffs for service and works of, the Company.

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The exclusive authorities of the Directorate shall not be delegated for individual consideration of the President or a Director. The Directorate also has other powers provided for by applicable Ukrainian law, the Charter, the bylaws of the Company, and resolutions of the GMS or the Supervisory Council. Resolutions of the Directorate shall be adopted jointly at meetings of the Directorate or individually by the President or a Director, provided that such powers have been delegated to him/her by the Directorate. Meetings shall be held as may be necessary. Meetings are convened by the President by oral or written notification of the Directors. A Directorate meeting shall be deemed valid if it is attended by more that half of the persons sitting on the Directorate. Each person sitting on the Directorate shall have 1 (one) vote. A resolution shall be adopted if voted pro by more than half of the persons sitting on the Directorate who are present at the meeting of the Directorate. In the event of a tie vote, the vote of the President shall be decisive. A person sitting on the Supervisory Council or the Auditing Commission may participate in the meetings of the Directorate with the right of an advisory vote. Items proposed to the agenda of a meeting of the Directorate by such a persons shall be included therein on a mandatory basis. Within the limit of powers granted by the Charter as well as the resolutions of the GMS and the Supervisory Council, the President shall be entitled to: (i) represent the interests of the Company and perform legal actions on behalf of the Company without a power of attorney. The Directorate may also empower any Director to represent certain interests of the Company and in certain cases to transact on behalf of the Company without a power of attorney, subject to prior approval or authorization of the Supervisory Council in cases stipulated in the Charter; (ii) (iii) (iv) (v) (vi) (vii) dispose the Companys funds and property; sign powers of attorney, contracts (agreements) and other documents on behalf of the Company; open and/or close bank accounts of the Company; assign responsibilities to the persons sitting on the Directorate; appoint an interim President or a Director; decide on other matters delegated to him/her by the Directorate.

The President shall report on activities of the Directorate to the GMS and the Supervisory Council at the demand of the latter.

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The minutes of the Directorates meetings shall be signed by (i) the President and (ii) the Secretary or one of the persons sitting on the Directorate and, if required by law, affixed with the Companys seal. In certain cases defined by the Charter, the President may appoint an interim President, Director, or Secretary of the Directorate for the term specified in the Presidents order, which, in any case, shall not exceed the period of time between the appointment of the interim President, Director or Secretary of the Directorate and the holding of the next GMS. As evidenced by Minutes No. 4 of the GMS, dated October 27, 2004, Minutes No. 5 of the GMS, dated October 11, 2005, Minutes No. 6 of the GMS, dated October 16, 2006, and Minutes No. 7 of the GMS, dated October 26, 2007, the current composition of the Directorate is as shown in Table 2. Table 2. Current composition of the Directorate
No. 1. 2. 3. 4. 5. 6. 7. Name Torben Levinsen Nikolai Romanchuk Roger McKay Oleksandr Afanasenko or Peter Viergutz Oleksandr Shamrai Michael Hake Anders Pedersen Position President General Director Material Management Director Production Director Financial Director Technical Director Human Resources and Administration Director

It should be noted, however, that we were provided only with hard copies of the mentioned Minutes of the GMS, which are not either signed by the authorized persons (i.e., Chairman of the GMS and the Secretary of the GMS) or stamped with the Companys seal and, therefore, we cannot comment on the validity of such Minutes. In addition, there is a discrepancy related to the official and personal composition of the Directorate of the Company as provided by the copies of the Charter together with the Minutes of the GMS of the Company, and the information stipulated in the document Summary of Directors and Managers as provided in a Binder 2, Section 2.1.3.3.6. in the Data Room. In particular, with respect to the official composition of the Directorate, the said document (i.e., the Summary of Directors and Managers as envisaged in Binder 2, Section 2.1.3.3.6 provides for the position of Vice-President of the Company, whereas both the Charter and the relevant Minutes of the Company do not envisage such position at all. Further, with respect to the personal composition of the Directorate, we were not provided with a copy of any official document (a copy of the relevant Minutes of the GMS), confirming the dismissal of Mr. Oleksandr Afanasenko from the position of the Production Director and the election of Mr. Peter Viergutz into such position. However, the above-mentioned document (i.e., the Summary of Directors and Managers as provided in Binder 2, Section 2.1.3.3.6) contains information, stipulating Mr. Peter Viergutz to be a Production Director and Mr. Oleksandr

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Afanasenko to be a Deputy Production Director. In addition, another document, containing the list of the members of the Directorate, stipulates that Mr. Peter Viergutz is an interim Production Director. As stated above, we failed to find any official document (or a copy thereof), confirming Mr. Peter Viergutzs election to the composition of the Directorate in any position. G. The Auditing Commission

The Auditing Commission is elected by the GMS from among the Shareholders and controls the financial and business activities of the Directorate. Under the Charter, the Auditing Commission has the following authorities: (i) (ii) inspection of financial documentation of the Company, the keeping of which is ensured by the Directorate; inspection of observance by the Directorate in its financial, business and production activities of the norms and rules established by applicable Ukrainian law, the Charter, the bylaws of the Company, and the resolutions of the GMS and the Supervisory Council; inspection of timelines and accuracy of payments to suppliers of goods, works and services, payments to the state budget, calculation and payment of dividends, payment of interests on bonds, as well as performance of other obligations of the Company that is ensured by the Directorate; inspection of the accuracy of the Companys balance sheet and reporting documents for the tax and statistics authorities; inspection of the use of money of the Reserve Fund and other funds of the Company; inspection of the observance of the procedure of the payment for Shares, as determined by the Charter and resolutions of the GMS; inspection of payment of a late penalty fee for untimely payment for Shares;

(iii)

(iv) (v) (vi) (vii)

(viii) analysis of the financial state of the Company, its solvency, liquidity of assets, debt to equity ratio, and analysis of ways to improve the economic state of the Company as well as drawing up recommendations for the governing bodies of the Company; (ix) analysis of compliance of accounting and statistical records of the Company with applicable Ukrainian law;

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(x) (xi)

other actions to control the financial and business activities of the Directorate at the discretion of the Auditing Commission; powers delegated to the Auditing Commission by a resolution of the GMS or the Supervisory Council.

According to the Charter, the number of persons sitting on the Auditing Commission as well as its official and personal composition shall be determined by the GMS. Persons sitting on the Auditing Commission shall be collectively or individually elected and/or dismissed by the GMS. A person sitting on the Supervisory Council may not simultaneously sit on the Directorate or the Supervisory Council. The Auditing Commission shall be composed of the Chairman of the Commission and the Secretary of the Commission. The Auditing Commission may also include one or more members of the Auditing Commission. The Chairman of the Auditing Commission shall manage activities of the Auditing Commission. In certain cases defined by the Charter, the Auditing Commission may elect an interim Chairman of the Commission, Secretary of the Commission or a member of the Auditing Commission from among the Shareholders, who do not sit on the Supervisory Council or the Directorate and who may lawfully sit on the Auditing Commission pursuant to applicable Ukrainian law, in certain events. The term of such election shall be specified in the resolution of the Auditing Commission, which, in any case, shall not exceed the period of time between the appointment of the interim Chairman of the Commission, Secretary of the Commission or a member of the Auditing Commission, and holding of the next General Meeting of Shareholders. The work of the Auditing Commission shall be carried out in the form of inspections and meetings. The procedures of the Auditing Commissions work are defined by the Charter. The Auditing Commission must carry out regular and extraordinary inspections. The Auditing Commission must carry out regular inspections based on year-end results of the financial and business activity of the Company in order to submit its conclusions regarding the annual report and balance sheet of the company to the Supervisory Council and the GMS. The Auditing Commission shall carry out extraordinary inspections at the demand of (i) the GMS, (ii) the Supervisory Council, and (iii) the Shareholders who jointly hold more than 10% (ten percent) of votes, or at its own initiative. Conclusions as to the results of the inspections shall be approved at meetings of the Auditing Commission. Pursuant to the Charter, the meetings of the Auditing Commission shall be held as may be necessary, but not less than once per half year, as well as before commencement of inspections and upon their completion. A meeting shall be deemed valid if attended by more than half of the persons sitting on the Auditing Commission. During the voting each person sitting on the Auditing Commission shall have one (1) vote. In the event of a tie vote, the vote of the Chairman of the Commission shall be decisive. Resolution on all matters shall be

17

adopted by open voting and shall be deemed adopted if voted for by more than half of the persons sitting on the Auditing Commission present at the meeting. As evidenced by Minutes No. 6 of the GMS, dated October 16, 2006, the current composition of the Auditing Commission is as shown in Table 3 below. Table 3. Current composition of the Auditing Commission
No. 1. 2. Name Aker Yards AC-1 B.V. Aker Yards AC-2 B.V Chairman Secretary Position

H.

Independent Auditor

According to the Charter, the accuracy and completeness of the annual balance sheet and reporting of the Company must be confirmed by an internationally recognized accountant firm. The auditors shall inform the Directorate, the Supervisory Council and the Auditing Commission of their findings and comments related thereto. An audit of the Company shall be performed at any time if requested by the Shareholders, which hold in aggregate at least 10% (ten percent ) of the Shares. The procedure for auditing the Company operations is provided by applicable Ukrainian law. 3 Costs associated with such audit shall be borne by the persons requesting such audit, unless otherwise decided by the GMS. According to the Charter, and as required by applicable law 4 , the audit procedures related to the Companys financial statements are currently provided by Kyiv-based Ernst & Young Audit Services Limited Liability Company. Pursuant to information made available to us 5 , the relevant agreement has been concluded by the parties for the term of 5 (five) years as of the date of signing thereof. III. Corporate Documents The Charter Please note that we were provided only with a copy of a restated Charter, the Minutes of the GMS, and certain Minutes of the Supervisory Council. Generally, the Charter, which is the sole constituent document of a Ukrainian open joint stock company, shall comply with the various requirements of the Civil Code of Ukraine, the Commercial Code of Ukriane, the Law on Economic Associations and the Securities Law of Ukraine.

3 4

See the Law of Ukraine On Auditing Activity, dated April 22, 1993, No. 3125-XIII, as amended.

See Article 18 of the EA Law, Article 90 of the Commercial Code of Ukraine, and Article 162 of the Civil Code of Ukraine. A copy of the duly executed Agreement No. AABS-2008-689, dated November 12, 2007, by and between the Company and Ernst & Young Audit Services Limited Liability Company.

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Historically, the Charter of the Company was amended and restated by the GMS several times. The last restatement of the Charter approved by the GMS on October 16, 2006, appears to comply with applicable law in all material aspects. Minutes of General Meeting of Shareholders According to the Law On Economic Associations 6 and the Charter of the Company 7 , the GMS shall be convened at least once a year. From the documents and information made available to us, we conclude that this requirement has been complied with over the last two years. Since 2005, the Company held two GMSs, i.e., the GMS was held at least once a year as required by the Charter. We were provided only with hard copies of the mentioned Minutes of the GMS, which are not either signed by the authorized persons (i.e., Chairman of the GMS and the Secretary of GMS) or stamped with the Companys seal and, therefore, we cannot comment on the validity of such Minutes and their proper execution. Table 4. Minutes of the GMS
No. 1. 2. Title Minutes No. 6 of the General Meeting of the Shareholders of Damen Shipyards Okean Open Joint Stock Company Minutes No. 7 of the General Meeting of the Shareholders of Damen Shipyards Okean Open Joint Stock Company GMS Date October 16, 2006 October 23, 2007 Percentage of the Shares Participated 98,8 % 98,81 %

Based on the documents and information provided for our review, we conclude that the said Companys GMSs have been duly convened and held. Their resolutions have been duly adopted by the majority votes prescribed by law. All items included in the agenda of the GMSs were within the powers of the GMS. Both GMSs were regular session, and we were not provided with any evidence that extraordinary GMSs have ever been convened by the Company. Minutes of the Supervisory Council Meetings According to the Charter 8 , the meetings of the Supervisory Council shall be held as may be necessary, but, at least, with semi-annual periodicity. Thus, it appears that there should be held no less than 4 (four) meetings of the Supervisory Council during the past 2 (two) years. However, we were presented with the copies of 10 (ten) Minutes of the Supervisory Council being held during 2006. It appeared that only in 2006 the Supervisory Council of the Company held at least 10 meetings most of which were held through a

6 7 8

See Article 45 of the EA Law. See Sub-Section 9.19 of the Charter. See Sub-section 10.12 of the Charter.

19

telephone conference as stipulated by Subsection 10.13.2 of the Charter. We were not provided with any copies of the Minutes of the Supervisory Council for 2007. Therefore, as we were not provided with a complete list of such minutes, we cannot confirm that we have reviewed all of them, and that all minutes comply with law in terms of their form of substance. Table 5. The chronological order of the sessions of the SC meetings in 2006.
No. Date of Holding April 2006 17, Agenda Authorizing the Directorate of the Company to conclude on behalf of the Company Mortgage Agreement No. 5 by and among the Company and B.V. Damen Finance and, as the case may be, within the effective term of the Mortgage Agreement, conclusion of any other agreements, annexes, deeds, documents, etc., which are specified in the Mortgage Agreement, related thereto, required by one or more parties to the mortgage Agreement, and/or necessary for duly performance by the Company. Authorizing the Directorate of the Company to make a drawdown under TLFA No. 3, dated March 15, 2004, with subsequent amendments, additions and annexes thereto by & between the Company and Okean B.V. in the amount of EUR 6,343.024.00. To give the approval to the Directorate of the Company to introduce the new tariff rates per positions and categories of the employees of the Company Resolutions To authorize the Directorate to conclude, on behalf of the Company, the Mortgage Agreement and, as the case may be, the Related Deeds.

2-63

2-73

August 2006

15,

To authorize the Directorate to make the drawdown.

2-74

August 2006

16,

To agree on the proposal to increase the tariff rates and salary propositions according to the norms of the Collective Agreement for 2006, calculated in compliance with minimal living standard 483 UAH from September 1, 2006 and 505 UAH from November 1, 2006. To give the right to sign payments for amounts less than or equal to 250,000,00 EUR to the following persons: first signature to Mr. Romanchuk, Mr. Shamray, Mr. Pagulich; and second signature to Mr. Marshtupa, Mrs. Sergienkova. Also payment of an amount more than the equivalent of 250,000.00 EUR must be acknowledged by one of the following representatives of Aker Group: Mr. Torben

2-76

August 2006

31,

Definition of people allowed to approve payments

20

Levinsen, Kennemann. 2-77 September 01, 2006 To authorize the General Director of the Company to present sale and purchase agreement for buildings and relevant land plot for the approval of the SC.

Mr.

Jurgen

To authorize General Director to develop the draft sale and purchase agreements for the approval of the SC on behalf of the Company for the buildings, constructions and relevant land plot described in the Letter of Intent with Mykolayiv-Korabel LLC company, which is the Addendum to this Minutes (not provided to us) at the price that is in line with the expert appraisals. To authorize the Directorate to conclude on behalf of the Company the Restatement and, as the case may be, the Related Deeds.

2-79

October 2006

04,

1) Approving, pursuant to Sub-Section 10.7.20 and 10.7.25 of the Charter, of the Contract by and between the Company and Sagro Aannemingsmaatschappij Zealand B.V., dated June 15, 2006 for the asbestos removal work (Contract); 2) Authorizing the Directorate of the Company to conclude on behalf of the Company (i) Restatement No. 1, dated October 04, 2006 of the Contract and, as the case may be, (ii) within the effective term of the Contract, any other agreements, annexes, deeds, documents, which are specified in the Contract related thereto, required by either one or both parties to the Contract and/or necessary for duly performance thereof by the Company provided that the SC will authorize the Directorate to conclude on behalf of the Company the Restatement and, as the case may be, the Related Deeds. Preliminary review of the matters on the agenda of the regular General Meeting of the Shareholders of the Company, to be convened on October 16, 2006 and approval draft resolutions of the Meeting. To authorize the General Director of the Company to make sales and purchase agreement for buildings and constructions against the price equal or above 15,000 UAH excluding VAT, and the sales and purchase agreement for the relevant land plot against the price equal or above 255,900 UAH.

2-80

October 2006

12,

To approve the Resolutions in the presented version and to recommend that the GMS adopt the Resolutions.

3-1

October 2006

24,

To authorize the General Director of the Company to make sales and purchase agreement for buildings and constructions against the price equal or above 15,000 UAH excluding VAT, and the sales and purchase agreement for the relevant land plot against the price equal or above 255,900 UAH, and to allow to make, if necessary, small changes that do

21

not have principle character. 3-2 November 15, 2006 To prohibit any land sale of the parts of the land plot that belongs to the Company To prohibit the Directorate of the Company to sell any parts of the land plot belonging to the Company until the shipyards development plan is completed. The order is valid until further notice in writing (we were not provided with any subsequent documents). 1) To unconditionally approve the Plan proposed by the Directorate with respect to taking certain actions to resolve the situation beneficially for the Company in light of its Debt (225,683,045.12 UAH) under the payment to the claimant. The said Plan envisages the following actions: (i) continuing to challenge the Commercial Court Ruling, related court decisions, and the enforcement procedures, if commenced, related to the Commercial Court Ruling, in the due course of law and by all legal means available under Ukrainian and international law; (ii) if the actions envisaged under point (i) above turns out unsuccessful negotiating with the Claimant (1) an amicable settlement and purchase of the promissory notes at discount or (2) the Payment by installments during a long period of time; (iii) if the action envisaged under point (ii)(1) above turns out unsuccessful approaching the Creditor with a request for waivers under the Facility Agreements and approaching the Creditor and Ukrainian banks for long-term loans allowing the Company to make the Payment, in case of successful enforcement of the Commercial Court Ruling by the Claimant, and/or to repay the Debt to the Creditor, in case of the Default Notices receipt from the Creditor. 2) To authorize the

3-3

December 22, 2006

1) Hearing, pursuant to Subsection 10.7.15 of the Charter, of the current report of the Directorate of the Company on the litigation between the Company and the special partnership Boxhaul Holding Limited and the company IFC KonversInvest in connection with 16 promissory notes issued by the Company on October 9, 1997; 2) Analysis, pursuant to Subsection 10.7.16 of the Charter, of actions of the Directorate related to the Litigation.

22

Directorate to resolve the situation subject to the rights of the Council; (iii) To continue business in the ordinary course with the Directorate reporting on any measures taken against the Company or its assets.

It should be noted, however, that no powers of attorney were presented for our review to evidence the duly authorized representatives of the above members of the Supervisory Council at the relevant sessions of the Supervisory Council. Minutes of the Executive Body Meetings The Executive Body of the Company is the Directorate, the official composition of which had been extended in favor of seven (7) positions as of October 16, 2006, and currently consists of the President, the General Director and the Directors as determined by the GMS. According to the Charter, resolutions of the Executive Body shall be adopted jointly at meetings of the Directorate or individually by the President or a Director, provided that such powers have been delegated to him/her by the Directorate. The meetings shall be held as may be necessary. As we have not been provided with any copies of any minutes of the Executive Body, we cannot conclude whether the above rules had been complied with. Neither can we confirm the legal compliance of such meetings in terms of their form and substance. Minutes of Meetings and Conclusions of the Auditing Commission Pursuant to the Charter, the meetings of the Auditing Commission shall be held as may be necessary, but not less than once per half year, as well as before commencement of inspections and upon their completion. As we have not been provided with any copies of any minutes of the Auditing Commission, we cannot conclude whether the above rules have been complied with. Neither can we confirm the legal compliance of such meetings in terms of their form and substance. To summarize, we believe that the Companys practices related to corporate matters, including the maintenance of its corporate documents, are in compliance with the requirements of the effective legislation of Ukraine. Please note, however, that the Company must keep the recorded minutes of its governing bodies on file as required by law. Otherwise, the Company may face certain risks. This may be, for example, the risk of challenging the validity of its contracts whenever the corporate approvals, as required by the Charter and reflected in the minutes of the Companys governing bodies, are not available.

23

IV.

Material Agreements

As the Company is involved in shipbuilding, it is a party to a good deal of shipbuilding contracts, as well as to other contracts, directly connected to shipbuilding. Table 6. Overview of Effective Shipbuilding Contracts of the Company
No. 1. Contract Contract No. SDH-DSO/YN 7403 MAIN Shipbuilding Contract No. 003/DSO/UKR Date May 12, 2006 as restated on July 28, 2006 February 7, 2007 Parties DSO (Seller) Okean (Buyer) OJSC and BV Delivery date September 31, 2007 Vessel Geared Combi Freighter 12,000 metric dead-weight ton (DWT) 3 Multipurpose vessels

2.

DSO OJSC (Builder), Ukrshipping Limited (Buyer) and JSSC Ukrrichflot (Witness of the Buyer)

3.

Shipbuilding Contract No. 002/DSO/UKR

February 2005

18,

DSO OJSC (Builder) and Damen Okean Cargo Vessels (Builder) and Ukrshipping Limited (Buyer) and Ukrrichflot (Witness of the Buyer)

4.

Shipbuilding Contract No. DSO-AKF/T149 Shipbuilding Contract No. DSOAKF/T150F Shipbuilding Contract No. DSOAKF/T150A Shipbuilding Contract No.

September 2006

4,

5.

October 4, 2006

6.

November 2006 November 2006

30,

7.

30,

DSO OJSC (Seller) and Aker Yards Floro AS (Customer) DSO OJSC (Seller) and Aker Yards Floro AS (Customer) DSO OJSC (Seller) and Aker Yards Floro AS (Customer) DSO OJSC (Seller) and Aker

1st vessel (no later than April 30, 2009); 2nd vessel (no later than August 15, 2009); 3rd vessel (no later than November 30, 2009) 1st vessel (no later than October 31, 2006); 2nd vessel (no later than February 28, 2007); 3rd vessel (no later than June 30, 2007); 4th vessel (no later than October 31, 2007); 5th vessel (no later than February 28, 2008) No later than May 31, 2007 No later than August 30, 2007 No later than September 30, 2006 No later than September 30,

5 Multipurpose vessels

1 (one) foreship part of chemical tanker T149 1 (one) foreship part of chemical tanker T150 1 (one) aftship part of chemical tanker T150 1 (one) short hull of T150

24

8.

9.

DSOAKF/T150AF Shipbuilding Contract No. DSO-AKF/151S (preliminary agreement for purchase of steel) Shipbuilding Contract No. DSO-AKF/T151 Shipbuilding Contract No. DSO-AKF/T152 Shipbuilding Contract No. DSO-AKF/T153 Shipbuilding Contract No. DSOBRA/YN1094 Shipbuilding Contract No. DSOBREV/YN1054 Shipbuilding Contract No. DSOBREV/YN1055 Shipbuilding Contract No. DSOBRA/YN1095 Shipbuilding Contract No. DSO-AUKRA9128

March 27, 2007

Yards Floro AS (Customer) DSO OJSC (Builder) and Aker Yards Floro AS (Customer) DSO OJSC (Seller) and Aker Yards Floro AS (Buyer) DSO OJSC (Seller) and Aker Yards Floro AS (Buyer) DSO OJSC (Seller) and Aker Yards Floro AS (Buyer) DSO OJSC (Seller) and S.C. Aker Braila S.A. (Buyer) DSO OJSC (Builder) and Brevik Constructions AS (Purchaser) 4, DSO OJSC (Builder) and Brevik Constructions AS (Purchaser) DSO OJSC (Builder) and Brevik Constructions AS (Purchaser) DSO OJSC (Seller) and Aker Yards AS, Aukra (Buyer)

2006 Purchase of steel till May 15, 2007.

chemical tanker For yard number 9151 (which is YN151 of the Customer) 1 (one) short hull of T150 chemical tanker 1 (one) short hull of T152 chemical tanker 1 (one) short hull of T153 chemical tanker 1 (one) hull of the tanker hull 15,000 dwt BRAMAX project 1 (one) Tanker for Oil Products and Petroleum Products, type IMO 2 1 (one) Tanker for Oil Products and Petroleum Products, type IMO 2 1 (one) hull of the tanker hull 15,000 dwt BRAMAX project A hull for a Platform Supply Vessel type UT 755 LN

May 3, 2007

On/or before February 29, 2008 On/or before August 31, 2008 On/or before January 31, 2009 No later than May 25, 2007

10.

August 22, 2007

11.

November 2007 December 2006

12,

12.

13,

13.

April 24, 2007

March 2008

15,

14.

September 2007

May 31, 2008

15.

February 2007

20,

No later than February 10, 2008 July 30, 2007

16.

December 2006

21,

Table 7. Overview of Contracts of the Company related to purchasing of technical equipment for vessels
No. 1. Contract Contract No. 9130-320.2018_ALFA Contract No. Date October 15, 2007 Parties DSO OJSC (Buyer) and Alfa Laval Tumba AB (Seller) DSO OJSC Goods Delivery date Wk 44_2008 No. of Vessel Multi-purpose vessel DWT 6300t_Yard No. 9130 Multi-purpose

2.

October 15, 2007

Wk 05_2009

25

9131-320.2018_ALFA 3. Contract No. 9132-320.2018_ALFA Contract No. 9130-601-001 Contract No. 9131-601-001 Contract No. 9132-601-001 Contract No. 9130-400.800020_RET October 15, 2007

4.

February 2007 February 2007 February 2007

16,

5.

16,

6.

16,

7.

August 14, 2007

(Buyer) and Alfa Laval Tumba AB (Seller) DSO OJSC (Buyer) and Alfa Laval Tumba AB (Seller) DSO OJSC (Buyer) and MAN Diesel A/S (Seller) DSO OJSC (Buyer) and MAN Diesel A/S (Seller) DSO OJSC (Buyer) and MAN Diesel A/S (Seller) DSO OJSC (Buyer) and SC RETEC S.A. (Seller)

Wk 09_2009

Wk 46/2008

Wk 07/2009

Wk 20/2009

According to Annex No. 2 to the Contract Wk 44/2007, Wk 42, 3008, Wk 47/2008, Wk 04/2009, According to Annex No. 2 to the Contract Wk 45/2007 Wk 06/2009 Wk 12/2009 Wk 21/2009 According to Annex No. 2 to the Contract Wk 49/2007 Wk 19/2009 Wk 25/2009 Wk 34/2009

vessel DWT 6300t_Yard No. 9131 Multi-purpose vessel DWT 6300t_Yard No. 9132 Multi-purpose vessel DWT 6300t_Yard No. 9130 Multi-purpose vessel DWT 6300t_Yard No. 9131 Multi-purpose vessel DWT 6300t_Yard No. 9132 Multi-purpose vessel DWT 6300t_Yard No. 9130

8.

Contract No. 9131-400.800020_RET

August 14, 2007

DSO OJSC (Buyer) and SC RETEC S.A. (Seller)

Multi-purpose vessel DWT 6300t_Yard No. 9131

9.

Contract No. 9132-400.800020_RET

August 14, 2007

DSO OJSC (Buyer) and SC RETEC S.A. (Seller)

Multi-purpose vessel DWT 6300t_Yard No. 9132

Table 8. Overview of Contract of the Company related to delivering of goods

No. 1. Contract Contract No. DSO-DS-002 Date November 2005 30, Parties DSO OJSC (Buyer) and Drahtzug Stein (Seller) Goods Delivery date Within 2 (two) weeks after receipt of the payment No. of Vessel One set welding materials of

Our review is limited to material non-compliances of the Shipbuilding Contracts and their appendices with Ukrainian law, which non-compliances may, in our opinion, serve as a ground for challenging the validity and enforceability thereof in Ukrainian courts from perspectives of Ukrainian law and relevant Ukrainian business custom. Our review is also limited to Shipbuilding Contracts pertaining to the vessels, which

26

are being built or are actually intended to be built by the Company as of the date hereof. A. Shipbuilding Contracts (In Detail)

The Company concluded shipbuilding contracts with various companies which act as buyers of the newly built complete vessels or hulls. The Company also is a party to a number of contracts necessary for construction of the above-mentioned vessels or hulls. These shipbuilding contracts are discussed hereinafter. 1. Contract No. SDH-DSO/YN 7403 - MAIN

On May 12, 2006, the Company initially concluded the contract with B.V. Scheepswerf Damen Hoogezand. Pursuant to Amendment and Replacement Agreement Main Ship Building Contract No. SDH-DSO/YN 7403 Main dated 12 May 2006, B.V. Scheepswerf Damen Hoogezand transferred all of its rights and obligations to the contract to Okean BV. For purposes of this transaction, B.V. Scheepswerf Damen Hoogezand provided a credit facility to Okean BV in the amount of USD 8,726,707 (eight million seven hundred twenty six thousand seven hundred seven United States Dollars) and EUR 2,180,373 (two million one hundred eighty thousand three hundred seventy three euros) pursuant to the Credit Facility Agreement dated August 2, 2006. There are 8 Additions to the Contract; however, they were not provided for our review. These documents include technical documents, specifications, work schedules, and delivery schedules. Contract No. SDH-DSO/YN 7403 corresponds to the requirements of foreign economic agreements established by Ukrainian legislation. Our review revealed the following non-compliances with Ukrainian legislation: 1. 2. Non-availability of a corporate approval for Director to sign the Contract. The copy does not have the signature of the General Director of the Seller (Mr. Mykola Romanchuk) and there are no corporate seals affixed to the document.

Subject of the Contract the construction of 1 (one) Multi Purpose Cargo Vessel of approximately 12,000 metric dead-weight ton (the Vessel), and sale the Vessel to the Buyer, and purchasing and payment for the Vessel by the Buyer according to the term and conditions of the Contract. The Vessel shall be built and certified under the Buyer Yard Number 7403. Price of Contract the Contract price is USD 8,726,707 (eight million seven hundred twenty six thousand seven hundred seven United States Dollars) plus EUR 2,180,373 (two million one hundred eighty thousand three hundred seventy three euros). The Contract price is the net sum receivable by the Seller in consideration of the performance of the Sellers scope of work under and subject to the terms of this Contract. The Contract price includes, inter alia, the B.V. Scheepswerf Damen

27

Hoogezand under the Contract No. DSCV-DSO/YN 7403/March 30, 2006 for the purchasing of steel for the Vessel. Delivery and Acceptance the Seller shall deliver the complete outfitted Vessel to the Buyer, delivery basis EXW Mykolaiv Yards quay, on or before September 31, 2007. The Delivery Date may be adjusted by mutual agreement in writing by and between the parties. The Technical Acceptance Protocol will be signed by the parties stating that the vessel is built in accordance with the terms and conditions of this Contract and is accepted technically by the Buyer and is ready for transport/sailing. The date of delivery was stipulated as September 31, 2007; however, we were not provided with copies of a mutual agreement of the parties to extend the date of delivery. We were also not provided with a copy of the Technical Acceptance Protocol, evidencing the transfer and acceptance of the finished vessel by the parties. Therefore, we are unable to verify whether the Contract was completed. According to Article 6 of the Contract, in case the Vessel is not delivered on the Date of Delivery, the Seller will be subject to a penalty of EUR 2,000 (two thousand euros) per calendar day. If the vessel is not delivered on the first agreed upon delayed Date of Delivery, then the Seller will be subject to a penalty of EUR 3,750 (three thousand seven hundred fifty euros) per calendar day. However, the maximum penalty that can be applied is 3% (three percent) of the Purchase Price. Subcontracting The Seller is entitled, if necessary for any reason whatsoever, to subcontract part of the work hereunder to third parties, provided that prior thereto the Seller shall always need the consent in writing of the Buyer which consent shall not be withheld unreasonably. Intellectual and Industrial Property The Data (any and all design(s), drawings, plans, specifications, information and other data, any and all copyrights and/or other intellectual and/or industrial property relating thereto, and any and all physical documents containing the same in whole or in part, whether or not in modified or amended form provided by the Buyer) are and shall remain the exclusive property of the Buyer, and the Seller herewith acknowledges the Buyers exclusive ownership thereof. Risk and Insurance The Vessel and any and all parts thereof will be for the risk and account of the Seller until the Delivery Date. The Buyer should insure the Vessel and the Buyers deliveries until the Delivery Date. The Buyer will bear risk as well as insurance costs relating to its deliveries to be made until arrival of the same at the building location as mentioned in Article 1.1 of the Agreement Termination of the Contract -- The Buyer, without limitation of any other rights or remedies he may possess under the Contract, may terminate the Contract forthwith upon the occurrence or threatening, all in the sole discretion of the Buyer, of one or more of the following events by giving a written notice of termination to the Seller: 1. if the Seller becomes bankrupt or insolvent, or has received an order for its bankruptcy issued against it, or compounds with its creditors, or a resolution is passed or order it made for its winding up or a receiver is appointed over any

28

part of its undertaking or assets; or if the Seller takes or suffers any other analogous action in consequence of debt and as a result is unable to continue performance of its obligation hereunder in due time; 2. if the Seller assigns or transfers the Contract or any right or interest herein without a prior written approval of the Buyer, or has abandoned or repudiated the Contract; if the Seller sells or transfers in any other manner, or purports to sell or transfer in any other manner all or a substantial part of its assets; if the Seller fails to perform, in a material manner (such to be determined by the Buyer in its sole discretion), any provision of the Contract; if the Seller, without the prior written consent of the Buyer, removes the Vessel hull from the shipyard; if the Delivery Date is exceeded by more than 90 (ninety) calendar days for whatever reason; or if a duly authorized body or the Buyers representative(s) decides to terminate the contract for whatever reason at its/his/her sole discretion, such decision being conclusively evidenced by its/his/her signing and sending of the termination notice to the Seller.

3. 4. 5. 6. 7.

The Contract enters into force on the date of signing by the Seller. This Contract must be signed by Mr. Mykola Romanchuk (DSO) and signed by Mr. Chris Groninger (Aker Yard Floro), however, their signatures are absent on the last page of the Contract.. The Contract is governed by and interpreted in accordance with laws of The Netherlands and arbitration takes place in the city of Rotterdam, The Netherlands according to the Arbitration Rules of the Netherlands Arbitration Institute. We were provided with the Title Transfer Protocol to Main Shipbuilding Contract No. SDH-DSO/YN 7403 MAIN, dated May 12, 2006, as restated on July 28, 2006. According to this Protocol, upon the mere receipt by the Seller of a transfer event notice signed by the Buyer, the transfer of the title to the Vessel and, to the extent permitted by applicable law and observing all pertinent procedures as required by applicable law, all other transfers and assignments stipulated by the Shipbuilding Contract and the Title Transfer Protocol shall become immediately effective. This Protocol was signed by Mr. Romanchuk (DSO) and Mr. Gerrit Jan van Ommen. We were provided with copies of the following Supplementary Agreements to Contract No. SDH-DSO/YN 7403 MAIN: 1. Supplementary Agreement No. 1, dated August 04, 2006, in which the parties agreed to amend the terms and conditions of the Main Contract related to payment of the purchase price.

29

This Supplementary Agreement was signed by Mr. Oleksandr Afenasenko (Interim General Director) (DSO) and Mr. Rene Berkvens (Director) (B.V. Holding Maatschappij Damen). 2. Supplementary Agreement No. 33, dated July 05, 2007, in which the parties agreed to change the date of delivery of the Vessel under the yard number 7403 to the Buyer and to deliver the above-mentioned Vessel till January 31, 2007. This Supplementary Agreement was signed by Mr. Torben Levinsen (DSO) and Mr. John Winsnes (Okean B.V.). 3. Supplementary Agreement No. 52, dated August 13, 2007, in which the parties agreed due to increase the contract price by the amount of USD 224,771.00 (two hundred twenty four thousand seven hundred seventy one United States Dollars) due to an increase in the scope of works. 4. Supplementary Agreement No. 53, dated August 13, 2007, in which the parties agreed due to an increase of the scope of works to increase the contract price by the amount of EUR 356,490.00 (three hundred fifty six thousand four hundred ninety euros). 5. Supplementary Agreement No. 55, dated September 28, 2007, in which the parties agreed due to an increase of the scope of works to increase the contract price by the amount of EUR 80,000.00 (eighty thousand euros). 6. Supplementary Agreement No. 60, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 25,675 (seventy five thousand six hundred seventy five euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 60. 7. Supplementary Agreement No. 61, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 11,702 (eleven thousand seven hundred two euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 61. 8. Supplementary Agreement No. 62, dated December 17, 2007, in which the parties agreed to amend the Contract in connection with the increasing of the weight of the Vessel by 175,8 tons. Consequently, the Contract price was increased by the amount of EUR 386,760 (three hundred eighty six thousand seven hundred sixty euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 62. 9. Supplementary Agreement No. 63, dated December 17, 2007, in which the parties agreed to amend the Contract due to a decrease in the scope of works. Consequently, the Contract price was decreased by the amount of EUR 9,610.35 (nine thousand six hundred ten euros and thirty five cents). The said amount should have

30

been paid by the Seller to the Buyer within 5 (five) days after the signing of Supplementary Agreement No. 63. Please note that we were not provided with Supplementary Agreement No. 64; however, it was provided for review in Binder 80 after the Data Room was closed. 10. Supplementary Agreement No. 65, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 239,941 (two hundred thirty nine thousand nine hundred forty one euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 65. 11. Supplementary Agreement No. 66, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 6,483 (six thousand four hundred eighty three euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 66. 12. Supplementary Agreement No. 67, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 150 (one hundred fifty euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 67. 13. Supplementary Agreement No. 68, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 530 (five hundred thirty euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 68. 14. Supplementary Agreement No. 69, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 700 (seven hundred euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 69. 15. Supplementary Agreement No. 70, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 361.11 (three hundred sixty one euros and eleven cents). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 70. 16. Supplementary Agreement No. 71, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 18,493.37 (eighteen thousand four hundred ninety three euros and thirty seven cents). The said

31

amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 71. 17. Supplementary Agreement No. 72, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 193,425 (one hundred ninety three thousand four hundred twenty five euros). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 72. 18. Supplementary Agreement No. 73, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of EUR 224,505.18 (two hundred twenty four thousand five hundred five euros and eighteen cents). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 73. 19. Supplementary Agreement No. 74, dated December 17, 2007, in which the parties agreed to amend the Contract due to an increase in the scope of works. Consequently, the Contract price was increased by the amount of USD 1,164,291.33 (one million one hundred sixty four thousand two hundred ninety one United States Dollars and 33 cents). The said amount should have been paid by the Buyer to the Seller within 5 (five) days after the signing of Supplementary Agreement No. 74. The remaining addenda to the Contract set forth the lists of imported equipment supplied as the Buyers property for the construction of the hull under the Contract. The equipment is temporarily imported as the Buyers property, which was to be installed on YN 7403 and exported from Ukraine as part of the vessel. These costs are not reflected in the contract price. Please note that we were not provided for review copies of the documents confirming that the payments were made under the Supplementary Agreements below. All of the above Supplementary Agreements to Contract No. SDH-DSO/YN 7403 MAIN were signed and affixed by the seals of the parties as required by Ukrainian legislation except those in the description of which we mentioned otherwise. The Supplementary Agreements themselves are governed by the laws of The Netherlands. We did not review and verify whether the relevant payments were timely made under the above Supplementary Agreements. Shipbuilding Contract No. 002/DSO/UKR In General, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. Oue review of the Contract revealed the following minor non-compliances with Ukrainian legislation: 1. No confirmation of corporate approval for Director to sign Contract;

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2.

We did not see any confirmation of payments.

The Buyer is financed by the European Bank of Reconstruction and Development. The subject of the contract is the construction of 5 (five) multi-purpose vessels for carrying general cargo (the Vessels) 1st Vessel 9123; 2nd Vessel 9124; 3rd Vessel 9125; 4th Vessel 9126; 5th Vessel - 9127. The price of each Vessel, Delivered Ex Quay (DEQ, INCOTERMS 2000) safely afloat in the water area of the Builders yard, Mykolaiv, Ukraine, comprises USD 6,377,700 (six million three hundred seventy seven thousand seven hundred Unites States Dollars) and EUR 2,800,000 (two million eight hundred thousand euros). The price of the contract can only be adjusted for the 3rd, 4th and 5th Vessels as a result of price changes of steel due to market price fluctuation, if any. The amount of the price adjustment is the variation in the cost of steel for the hull and superstructure. The amount of steel is estimated at 2,150 gross tons (reference price on the date of the signing of the Contract is USD 650 per ton, excl. VAT). Thus, the total price consists of USD 31,888,500 (thirty one million eight hundred eighty eight thousand United States Dollars) and EUR 14,000,000 (fourteen million euros), including any adjustments. During the construction period each Vessel remains the Builders property. On signing of the Delivery-Acceptance Protocol of the Vessel, every responsibility for the safety and generally for the condition of the Vessel is transferred to the Buyer and thereafter all responsibilities on the part of the Builder shall cease, with the exception of the guarantee obligations. From the date of the signing the Delivery-Acceptance Protocol the property right for the Vessel is transferred from the Builder to the Buyer. We were not provided with page 14 of the Contract; therefore, we are not able to provide our comments with respect to insurance and assignment provisions. The total aggregate amount of liquidated damages for each Vessel payable under this Contract by the Builder to the Buyer is limited to 5% of the price of each vessel. The Contract is governed and construed in accordance with the legislation of The Netherlands and arbitration takes place in the city of Rotterdam, The Netherlands. For purposes of this report, we assume that the following events have occurred for the Contract to become effective: 1. 2. 3. 4. All parties signed the Contract; and The Contract was approved by the Board of Directors of the Buyer; and The Contract is approved by the Board of Directors of DAMEN SHIPYARDS GROUP; and A letter from EBRD was delivered to the Builder confirming that EBRD has agreed to finance the Buyer to purchase the Vessels subject

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to the Buyer meeting all of the conditions precedent as set out in any relevant financing agreement and confirming a payment procedure from the EBRD directly to the Builder and that such a letter has been accepted and approved by the Builder. As a security towards the Buyer, the Builder is required to issue ban guarantees for the first 4 (four) payment events pertaining to each of the Vessels valid up to the delivery of each Vessel. All costs incurred in respect of the issuance of such bank guarantees are to be borne by the Builder and should not exceed 1,9 % computed on a yearly basis. Please note, however, that we were not provided with the copies of the bank guarantees issued with respect to the Contract. Shipbuilding Contract No. 003/DSO/UKR In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for the Director to sign this contract. This contract involves the construction of 3 (three) multi-purpose vessels for carrying general cargo (the Vessels) 1st Vessel 9130; 2nd Vessel 9131; 3rd Vessel 9132. According to the contract, the Buyer is financed by the European Bank of Reconstruction and Development. The price of each Vessel, Delivered Ex Quay (DEQ, INCOTERMS 2000) safely afloat at the quay of the Builders yard, Mykolaiv, Ukraine, comprises USD 6,805,500 (six million eight hundred five thousand five hundred United States Dollars) and EUR 3,400,000 (three million four hundred thousand euros). Additionally to the price of each Vessel the Buyer shall pay the difference between (i) the cost of the steel package at the reference steel price of USD 650 per ton, exclusive VAT, effective on the Contract signing date and (ii) the reference steel price on ordering date, if the steel prices shall increase. In case the steel prices shall decrease, the price of each Vessel shall be decrease by respective difference. Moreover, in case of non-adopting or/and impossibility of implementation of legislation concerning customs preferences and privileges for the Builder, the customs duty expenses to be evidenced by respective documents upon incurring such expenses, but not more than USD 200,000 (two hundred thousand United States Dollars), shall be included in the price. Thus, the total price consists of USD 20,416,500 (twenty million four hundred sixteen thousand five hundred United States Dollars) and EUR 10,200,000 (ten million two hundred thousand euros), including any adjustments. During the construction period, each Vessel shall remain the Builders property. However, upon signing of the Delivery-Acceptance Protocol of the Vessel, every responsibility for the safety and generally for the condition of the Vessel is transferred to the Buyer or a Designee, if any, and thereafter all responsibilities on the part of the Builder shall cease, with the exception of the guarantee obligations. From the date of the signing the Delivery-Acceptance Protocol the property right for the Vessel is transferred from the Builder to the Buyer or a Designee, if any.

34

The insurance of the Vessel is the Builders responsibility until delivery to Buyer. With the exception of a general assignment in favor of EBRD, the Buyers subsidiary company registered in Cyprus or a Designee, the Buyer shall not be entitled to assign or transfer all rights and obligations under the Contract to a third party except with the previous consent in writing of the Builder. The total aggregate amount of liquidated damages for each Vessel payable under the Contract by the Builder to the Buyer is limited to 5% of the price of each vessel. The Contract is governed by Norwegian law and arbitration takes place in the city of Oslo according to the procedures set forth in the Norwegian Civil Procedure Code in English. This Contract was signed by Mr. Torben Levinsen (DSO), Mr. Mikhail Chubai (Ukrshipping) and Mr. Pavlo Pidlisnyy (Ukrrichflot). For purposes of this Report, we assume that the following events have occurred for the Contract to become effective: 1. 2. 3. 4. All parties signed the Contract; and The Contract was approved by the Board of Directors of the Buyer; and The Contract is approved by the Board of Directors of Aker Yards; and A letter from EBRD was delivered to the Builder confirming that the EBRD has agreed to finance the Buyer to purchase the Vessels subject to the Buyer meeting all of the conditions precedent as set out in any relevant financing agreement and confirming a payment procedure from the EBRD directly to the Builder and that such a letter has been accepted and approved by the Builder.

In addition, we were provided with a copy of Annex No. 1, dated August 14, 2007, to Shipbuilding Contract No. 003/DSO/UKR, dated February 7, 2007. According to this Annex, the parties had adjusted the price of the Vessel under number 9130, due to the increase of the price for steel. As a result, the price of Vessel 9130 was increased to USD 7,117,250 (seven million one hundred seventeen thousand two hundred fifty United States Dollars) and EUR 3,400,000 (three million four hundred thousand euros) and, thus, the total value of the Contract increased to USD 20,728,250 (twenty million seven hundred twenty eight thousand two hundred fifty United States Dollars) and EUR 10,200,000 (ten million two hundred thousand euros). The remaining terms and conditions of Contract No. 003/DSO/UKR remained unchanged. As security towards the Buyer, the Builder is required to issue ban guarantees for the first 5 (five) payment events pertaining to each of the Vessels valid up to the delivery of respective Vessel. All costs incurred in respect of such bank guarantees issuing are to be borne by the Builder. Below we describe the copies of the bank guarantees issued to date with respect to the Contract:

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1.

Guarantee No. 935-02-0740717 Re: Hull no. 9130

Guarantee for the obligations of DSO of the sum of USD 235,000 (two hundred thirty five thousand United States Dollars) being the first installment under Shipbuilding Contract No. 003/DSO/UKR dated February 7, 2007 issued by DnB NOR Bank ASA. 2. Guarantee No. 935-02-0740726 Re: Hull no. 9131

Guarantee for the obligations of DSO of the sum of USD 235,000 (two hundred thirty five thousand United States Dollars) being the first installment under Shipbuilding Contract No. 003/DSO/UKR dated February 7, 2007 issued by DnB NOR Bank ASA. 3. Guarantee No. 935-02-0740717 Re: Hull no. 9132

Guarantee for the obligations of DSO of the sum of USD 235,000 (two hundred thirty five thousand United States Dollars) being the first installment under Shipbuilding Contract No. 003/DSO/UKR dated February 7, 2007 issued by DnB NOR Bank ASA. 4. Guarantee No. 935-02-0782404 Re: Hull no. 9130

Guarantee for the obligations of DSO of the sum of USD 155,875.00 (one hundred fifty five thousand eight hundred seventy five United States Dollars) being the first installment under Annex No. 1 dated August 14, 2007 to Shipbuilding Contract No. 003/DSO/UKR dated February 7, 2007 issued by DnB NOR Bank ASA. This bank guarantee was apparently issued by the bank in connection with the increase in the price of steel. 5. Guarantee No. 935-02-0782280 Re: Hull no. 9130

Guarantee for the obligations of DSO of the sum of EUR 1,000,000 (one million euros) being the second installment under Shipbuilding Contract No. 003/DSO/UKR dated February 7, 2007 issued by DnB NOR Bank ASA. 6. Guarantee No. 935-02-0782333 Re: Hull no. 9130

Guarantee for the obligations of DSO of the sum of USD 325,000 (three hundred twenty five thousand United States Dollars) being the second installment under Shipbuilding Contract No. 003/DSO/UKR dated February 7, 2007 issued by DnB NOR Bank ASA. As mentioned above, the Company is also a party to sale-purchase contracts related to the purchasing of technical equipment for its constructed vessels. Contract No. 9130-320.2-018_ALFA In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law with the exception of its non-compliance with the requirement of Ukrainian legislation that foreign economic agreements must be written in the Ukrainian language and the language of the other party to the agreement

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as required by the Law of Ukraine No. 8312-XI On Languages of the Ukrainian SSR, dated October 28, 1989, as amended (hereinafter referred to as the Ukrainian Language Rule). According to the subject of the Contract, the Seller is obliged to render services involving the development of design documentation and to deliver one fuel oil separation system PU100, one lube oil separation system of PU 100, and one set of fresh water generator of JWP 16-C40 type under delivery terms FCA/Monza, Italy (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300t_Yard No. 9130. The total price for the delivered goods under this Contract is EUR 51,999.00 (fifty one thousand nine hundred ninety nine euros) based on FCA Monza, Italy. The Buyer has the right to change delivery terms on DDU taking into account related transport costs. Should the delivery of the Vessel exceed one week from the agreed upon delivery date, the Seller is subject to a penalty of 0.3% of the total value of non-delivered goods for each calendar day of delay, but not more than 7.5 % of the value of that part of the total equipment which cannot be used in time. Disputes under this contract are subject to submission to a Dutch Court in the city of Rotterdam. This contract does not contain a provision regarding governing law. According to the Law of Ukraine No. 2709-IV On International Private Law, dated June 23, 2005, in case a choice of governing law is absent from a contract, then the law with the closest connection to the transaction in question will apply. Contract No. 9131-320.2-018_ALFA In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. According to the subject of the Contract, the Seller is obliged to render services involving the development of design documentation and to deliver one fuel oil separation system PU100, one lube oil separation system of PU 100, and one set of fresh water generator of JWP 16-C40 type under delivery terms FCA/Monza, Italy (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300t_Yard No. 9131. The total price for the delivered goods under this Contract is EUR 51,999.00 (fifty one thousand nine hundred ninety nine euros) based on FCA Monza, Italy. The Buyer has the right to change delivery terms on DDU taking into account related transport costs. Should the delivery of the Vessel exceed one week from the agreed upon delivery date, the Seller is subject to a penalty of 0.3% of the total value of non-delivered goods for each calendar day of delay, but not more than 7.5 % of the value of that part of the total equipment which cannot be used in time.

37

Disputes under this contract are subject to submission to a Dutch Court in the city of Rotterdam. This contract does not contain a provision regarding governing law. According to the Law of Ukraine No. 2709-IV On International Private Law, dated June 23, 2005, in case a choice of governing law is absent from a contract, then the law with the closest connection to the transaction in question will apply. Contract No. 9132-320.2-018_ALFA In general, this contract corresponds with the requirements for foreign economic contracts established by Ukrainian law. According to the subject of the Contract, the Seller is obliged to render services involving the development of design documentation and to deliver one fuel oil separation system PU100, one lube oil separation system of PU 100, and one set of fresh water generator of JWP 16-C40 type under delivery terms FCA/Monza, Italy (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300t_Yard No. 9132. The total price for the delivered goods under this Contract is EUR 51,999.00 (fifty one thousand nine hundred ninety nine euros) based on FCA Monza, Italy. The Buyer has the right to change delivery terms on DDU taking into account related transport costs. Should the delivery of the Vessel exceed one week from agreed upon date of delivery, the Seller is subject to a penalty of 0.3% of the total value of non-delivered goods for each calendar day of delay, but not more than 7.5 % of the value of that part of the total equipment which cannot be used in time. Disputes under this contract are subject to submission to a Dutch Court in the city of Rotterdam. This contract does not contain a provision regarding governing law. According to the Law of Ukraine No. 2709-IV On International Private Law, dated June 23, 2005, in case a choice of governing law is absent from a contract, then the law with the closest connection to the transaction in question will apply. Contract No. 9130-601-001 In general, this contract corresponds with the requirements for foreign economic contracts established by Ukrainian law. We have revealed the following non-compliances with Ukrainian legislation: 1. 2. The Contract is written in the English and Russian languages in violation of the Ukrainian Language Rule. The Preamble does not contain the names of the persons who are authorized to sign such Contract and on the basis of which documents they act.

According to the subject of the contract, the Seller is obliged to sell one set of MAN Diesel Propulsion Package type 9L21/31-subcon-VBS, with continuous rating of

38

1935kW at 1000 rpm under delivery terms CIP, Nikolaev, Ukraine (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300t_Yard No. 9130. The total price for the delivered goods under this Contract is EUR 920,000.00 (nine hundred twenty thousand euros). Should the delivery of the equipment exceeds 1 (one) week from the agreed upon delivery date, the Seller is subject to a 0.5 % penalty of the total value of nondelivered goods for each calendar week of delay, but not more than 5% of the value of that part of the total equipment which cannot be used in time. Any disputes arising from or in connection with this Contract should to be submitted to and processed by an Arbitration Court in Germany. This Contract is regulated by the German legislation. Contract No. 9131-601-001 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. Our review revealed the following non-compliances with Ukrainian legislation: 1. 2. The Contract is written in the English and Russian languages in violation of the Ukrainian Language Rule. The Preamble does not contain the names of the persons who are authorized to sign such Contract and on the basis of which documents they act.

According to the subject of the contract, the Seller is obliged to sell one set of MAN Diesel Propulsion Package type 9L21/31-subcon-VBS, with continuous rating of 1935kW at 1000 rpm under delivery terms CIP, Nikolaev, Ukraine (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300t_Yard No. 9131. The total price for the delivered goods under this Contract is EUR 920,000.00 (nine hundred twenty thousand euros). Should the delivery of the equipment exceeds 1 (one) week from the agreed upon delivery date, the Seller is subject to a 0.5 % penalty of the total value of nondelivered goods for each calendar week of delay, but not more than 5% of the value of that part of the total equipment which cannot be used in time. Any disputes arising from or in connection with this Contract should to be submitted to and processed by an Arbitration Court in Germany. This Contract is regulated by the German legislation. Contract No. 9132-601-001 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law.

39

Our review revealed the following non-compliances with Ukrainian legislation: 1. 2. The Contract is written in the English and Russian languages in violation of the Ukrainian Language Rule. The Preamble does not contain the names of the persons who are authorized to sign such Contract and on the basis of which documents they act.

According to the subject of the contract, the Seller is obliged to sell one set of MAN Diesel Propulsion Package type 9L21/31-subcon-VBS, with continuous rating of 1935kW at 1000 rpm under delivery terms CIP, Nikolaev, Ukraine (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300t_Yard No. 9132. The total price for the delivered goods under this Contract is EUR 920,000.00 (nine hundred twenty thousand euros). Should the delivery of the equipment exceeds 1 (one) week from the agreed upon delivery date, the Seller is subject to a 0.5 % penalty of the total value of nondelivered goods for each calendar week of delay, but not more than 5% of the value of that part of the total equipment which cannot be used in time. Any disputes arising from or in connection with this Contract should to be submitted to and processed by an Arbitration Court in Germany. This Contract is regulated by the German legislation. Contract No. 9130-400.800-020_RET In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. Our review revealed the following non-compliances with Ukrainian legislation: 1. 2. The Contract is written in the English and Russian languages in violation of the Ukrainian Language Rule. The Preamble does not contain the names of the persons who are authorized to sign such Contract and on the basis of which documents they act.

According to the subject of the contract, the Seller is obliged to perform development of design documentation as well as delivery of set of materials and equipment for power supply system as well as for radio navigation and vessel positioning system under delivery terms DDU, Nikolaev, Ukraine (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300 - Yard No. 9130. The total price for the delivered goods under this Contract is EUR 620,000.00 (six hundred twenty thousand euros). Under the contract, the Sellers liability is limited to persons and/or material damages, indirect damages excluded. For fire or explosion

40

cases, the Sellers liability is limited to a maximum of EUR 1,200,000 (one million two hundred thousand euros). For other damages, the Sellers liability is limited to a maximum of EUR 5,000,000 (five million euros) per claim. Should the delivery of the equipment exceeds one week from the agreed upon delivery date, the Seller is subject to a 0.3% penalty of the total value of nondelivered goods for each calendar day of delay, but not more than 7,5% of the value of that part of the total equipment which cannot be used in time. Any disputes arising from or in connection with this Contract should be submitted for final resolution to a Dutch court in the city of Rotterdam. The Law applicable to this contract is Dutch Law. The Contract may be terminated: (i) (ii) by written agreement of the parties; if one of the parties infringes one of its obligations after having been notified in writing by the other party upon the fact that a further nonobservance of these obligations would lead to the cancellation of this contract; no agreement was reached as per the contract re-negotiation within 15 (fifteen) days after negotiation initiation in case of force majeure; if one of the parties assigns its rights and obligations provided in the contract without the other partys consent.

(iii) (iv)

The party setting forth a cause of termination must notify the other party no later than 30 (thirty) days prior to the date when the termination is to start producing effects. According to the payment and delivery schedule (Annex No. 2), the date of the final payment will be due during week 13 of 2009. Contract No. 9131-400.800-020_RET In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. Our review revealed the following non-compliances with Ukrainian legislation: 1. 2. The Contract is written in the English and Russian languages in violation of the Ukrainian Language Rule. The Preamble does not contain the names of the persons who are authorized to sign such Contract and on the basis of which documents they act.

According to the subject of the contract, the Seller is obliged to perform development of design documentation as well as delivery of set of materials and equipment for

41

power supply system as well as for radio navigation and vessel positioning system under delivery terms DDU, Nikolaev, Ukraine (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300 - Yard No. 9131. The total price for the delivered goods under this Contract is EUR 620,000.00 (six hundred twenty thousand euros). Under the contract, the Sellers liability is limited to persons and/or material damages, indirect damages excluded. For fire or explosion cases, the Sellers liability is limited to a maximum of EUR 1,200,000 (one million two hundred thousand euros). For other damages, the Sellers liability is limited to a maximum of EUR 5,000,000 (five million euros) per claim. Should the delivery of the equipment exceeds one week from the agreed upon delivery date, the Seller is subject to a 0.3% penalty of the total value of nondelivered goods for each calendar day of delay, but not more than 7,5% of the value of that part of the total equipment which cannot be used in time. Any disputes arising from or in connection with this Contract should be submitted for final resolution to a Dutch court in the city of Rotterdam. The Law applicable to this contract is Dutch Law. The Contract may be terminated: (i) (ii) by written agreement of the parties; if one of the parties infringes one of its obligations after having been notified in writing by the other party upon the fact that a further nonobservance of these obligations would lead to the cancellation of this contract; no agreement was reached as per the contract re-negotiation within 15 (fifteen) days after negotiation initiation in case of force majeure; if one of the parties assigns its rights and obligations provided in the contract without the other partys consent.

(iii) (iv)

The party setting forth a cause of termination must notify the other party no later than 30 (thirty) days prior to the date when the termination is to start producing effects. According to the payment and delivery schedule (Annex No. 2), the date of the final payment will be due during week 31 of 2009. Contract No. 9132-400.800-020_RET In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. Our review revealed the following non-compliances with Ukrainian legislation: 1. The Contract is written in the English and Russian languages in violation of the Ukrainian Language Rule.

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2.

The Preamble does not contain the names of the persons who are authorized to sign such Contract and on the basis of which documents they act.

According to the subject of the contract, the Seller is obliged to perform development of design documentation as well as delivery of set of materials and equipment for power supply system as well as for radio navigation and vessel positioning system under delivery terms DDU, Nikolaev, Ukraine (Incoterms 2000) for construction of multipurpose dry cargo vessel DWT 6300 - Yard No. 9132. The total price for the delivered goods under this Contract is EUR 620,000.00 (six hundred twenty thousand euros). Under the contract, the Sellers liability is limited to persons and/or material damages, indirect damages excluded. For fire or explosion cases, the Sellers liability is limited to a maximum of EUR 1,200,000 (one million two hundred thousand euros). For other damages, the Sellers liability is limited to a maximum of EUR 5,000,000 (five million euros) per claim. Should the delivery of the equipment exceeds one week from the agreed upon delivery date, the Seller is subject to a 0.3% penalty of the total value of nondelivered goods for each calendar day of delay, but not more than 7,5% of the value of that part of the total equipment which cannot be used in time. Any disputes arising from or in connection with this Contract should be submitted for final resolution to a Dutch court in the city of Rotterdam. The Law applicable to this contract is Dutch Law. The Contract may be terminated: (i) (ii) by written agreement of the parties; if one of the parties infringes one of its obligations after having been notified in writing by the other party upon the fact that a further nonobservance of these obligations would lead to the cancellation of this contract; no agreement was reached as per the contract re-negotiation within 15 (fifteen) days after negotiation initiation in case of force majeure; if one of the parties assigns its rights and obligations provided in the contract without the other partys consent.

(iii) (iv)

The party setting forth a cause of termination must notify the other party no later than 30 (thirty) days prior to the date when the termination is to start producing effects. According to the payment and delivery schedule (Annex No. 2), the date of the final payment will be due during week 44 of 2009. Shipbuilding Contract No. DSO-AKF/T149

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In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for the Director to sign this contract. The subject of the contract is the fabrication of one foreship part of chemical tanker T149 (the T149 Chemical Tanker Forepart) according to the documentation provided by the Customer. The Chemical Tanker T149 to be classified by Det Norske Veritas. The contract price is USD 5,883,462 (five million eight hundred eighty three thousand four hundred sixty two United States Dollars). The contract price is based on an estimated weight of 2,125 tons of the T149 Chemical Tanker Forepart. The contract price and delivery date can be adjusted in case of changes in the scope of works, including changes in documentation by the written agreement signed by the parties. According to the contract, the Seller must prepare the T149 Chemical Tanker Forepart for sea towing EXW Mykolaiv at Damen Shipyards Okean on or before May 31, 2007. After acceptance of the finally assembled and painted T149 Chemical Tanker Forepart, the Customer and the Seller will sign a Protocol of Delivery and Acceptance. The Customer is responsible for providing insurance for the period of construction of the T149 Chemical Tanker Forepart. The Customer has the right to terminate this Contract in case of delayed delivery more than 75 (seventy five) calendar days (including grace period) after the scheduled delivery date. The Party, forwarding the reason for termination of this Contract, must notify the other Party not later than 30 (thirty) days before the date when such termination becomes effective. The contract entered into force on the date of its signing by the Seller and the Customer and receipt of the required down payment by Seller and is valid until December 31, 2007. This Contract was signed by Mr. N. Romanchuk (DSO) and Mr. Gustav Johan Nydal (AYF). As the contract does not contain a provision regarding governing law, according to the Law of Ukraine No. 2709-IV On International Private Law, dated June 23, 2005, the law with the closest connection to the transaction in question will apply. Arbitration is stipulated for the city of Geneva, Switzerland in the International Arbitrage according to its standing orders procedure. Please note that we were not provided with any documents confirming the completion of this contract and the current status thereof. Shipbuilding Contract No. DSO-AKF/T150F In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for the Director to sign this contract.

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The subject of the contract is the fabrication of one foreship part of chemical tanker T150 (the T150 Chemical Tanker Forepart) according to the documentation provided by the Customer. The Chemical Tanker T150 to be classified by Det Norske Veritas. The Contract price is USD 5,636,215 (five million six hundred thirty six thousand two hundred fifteen United States Dollars). The Contract price is based on an estimated weight of 2,125 tons of the T150 Chemical Tanker Forepart. The Contract price and delivery date can be adjusted in case of changes in the scope of works, including changes in documentation by the written agreement signed by the parties. According to the contract, the Seller will prepare T150 Chemical Tanker Forepart for sea towing EXW Mykolaiv at Damen Shipyards Okean on or before August 30, 2007. After acceptance of the finally assembled and painted T150 Chemical Tanker Forepart the Customer and the Seller will sign a Protocol of Delivery and Acceptance. The Customer is responsible for providing insurance for the period of the construction of the T150 Chemical Tanker Forepart. The Customer has the right to terminate this Contract in case of delayed delivery more than 75 (seventy five) calendar days (including grace period) after the scheduled delivery date. The Party, forwarding the reason for termination of this Contract, must notify the other Party not later than 30 (thirty) days before the date when such termination becomes effective. The Contract enters into force on the date of its signing by the Seller and the Customer and the receipt of down payment by Seller, and is valid until December 31, 2007. The Contract is governed by and interpreted in accordance with Norwegian Law and arbitration takes place in the city of Oslo, Norway according to Norwegian standing procedures as laid down in Norwegian Civil Procedure Code. Please note that we were not provided with any documents confirming the completion of this contract and the current status thereof. Shipbuilding Contract No. DSO-AKF/T150A In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for the Director to sign this contract. The subject of the contract is the fabrication of one aftship part of chemical tanker T150 (the T150 Chemical Tanker Aftpart) according to the documentation provided by the Customer. The Chemical Tanker T150 to be classified by Det Norske Veritas. The Contract price is USD 8,520,000 (eight million five hundred twenty thousand United States Dollars). The Contract price is based on an estimated weight of 2,845 tons of the T150 Chemical Tanker Aftpart. The Contract price and delivery date can be adjusted in case of changes in the scope of works, including changes in documentation by the written agreement signed by the parties to this Contract.

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According to the contract, the Seller must prepare ready T150 Chemical Tanker Aftpart for sea towing EXW Mykolaiv at Damen Shipyards Okean on or before September 30, 2007. After acceptance of the finally assembled and painted T150 Chemical Tanker Aftpart the Customer and the Seller must sign a Protocol of Delivery and Acceptance. The Customer is responsible for providing insurance for the period of construction of the T150 Chemical Tanker Aftpart. The Customer has the right to terminate this Contract in case of delayed delivery more than 75 (seventy five) calendar days (including grace period) after the scheduled delivery date. The Party, forwarding the reason for termination of this Contract, must notify the other Party not later than 30 (thirty) days before the date when such termination becomes effective. The contract enters into force on the date of its signing by the Seller and the Customer and the receipt of down payment under by the Seller and is valid until June 30, 2008. The Contract is governed by and interpreted in accordance with Norwegian Law and arbitration takes place in the city of Oslo, Norway according to Norwegian standing procedures as laid down in Norwegian Civil Procedure Code. Please note that we were provided with the copy of Addendum No. 2, dated June 17, 2007, to Shipbuilding Contract No. DSO-AKF/T150A, dated November 30, 2006. According to this Addendum, the parties agreed to change the Delivery Date of YN T150 Chemical Tanker aftpart to on or before November 30, 2007. We were also provided with the copy of Addendum No. 3, dated August 31, 2007, to Shipbuilding Contract No. DSO-AKF/T150A, dated November 30, 2006. According to this Addendum, the parties agreed to make an agreement on optional works for YN250 according to the Chapter 5 Optional works of Annex 4 to the Contract No. DSO-AKF/T150, dated November 30, 2006. As we were not provided with a coyp of Annex 4, however, we are unable to provide any useful comments except that the price for the said optional works is USD 205,000.00 (two hundred five thousand United States Dollars). Addendum No. 4, dated September 14, 2007, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, sets forth that the parties have agreed that due to a decrease in the scope of work at vessel yard No. 250, the Contract price will also decrease by the amount of USD 281,690.00 (two hundred eighty one thousand United States Dollars). Addendum No. 5, dated October 18, 2007, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed to change the Delivery Date of YN T150 Chemical Tanker aftpart from the Seller to the Buyer and deliver the above aftpart on or before December 31, 2007. Addendum No. 6, dated November 27, 2007, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed to change the

46

Delivery Date of YN T150 Chemical Tanker aftpart from the Seller to the Buyer and deliver the above aftpart on or before February 29, 2008. Addendum No. 7, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to a decrease of the scope of work at vessel yard No. 250, the contract price will decrease by the amount of USD 95,050,00 (ninety five thousand fifty United States Dollars). Addendum No. 8, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to an increase of the scope of work at vessel yard No. 250, the contract price will increase by the amount of USD 28,665,33 (twenty eight thousand six hundred sixty five United States Dollars and thirty three cents). Addendum No. 9, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to a decrease of the scope of work at vessel yard No. 250, the contract price will decrease by the amount of USD 117,000.00 (one hundred seventeen thousand United States Dollars). Addendum No. 10, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to a decrease of the scope of work at vessel yard No. 250, the contract price will decrease by the amount of USD 333,655.20 (three hundred thirty three thousand six hundred fifty five United States dollars and twenty cents). Addendum No. 11, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to an increase of the scope of work at vessel yard No. 250, the contract price will increase by the amount of USD 1,795.50 (one thousand seven hundred ninety five United States Dollars and fifty cents). Addendum No. 12, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to an increase of the scope of work at vessel yard No. 250, the contract price will increase by the amount of USD 1,141,631.90 (one million one hundred forty one thousand six hundred thirty one United States Dollars and ninety cents). Addendum No. 13, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to a decrease of the scope of work at vessel yard No. 250, the contract price will decrease by the amount of USD 350,000,00 (three hundred fifty thousand United States Dollars). Addendum No. 14, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to an increasing of the scope of work at vessel yard No. 250, the contract price will increase by the amount of USD 97,683.30 (ninety seven thousand six hundred eighty three United States Dollars and thirty cents).

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Addendum No. 15, dated January 29, 2008, to Shipbuilding Contract No. DSOAKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to a decrease of the scope of work at vessel yard No. 250, the contract price will decrease by the amount of USD 440,375.00 (four hundred forty thousand three hundred seventy five United States Dollars). Addendum No. 16, dated January 29, 2008, to the Shipbuilding Contract No. DSOKF/T150A, dated November 30, 2006, set forth that the parties agreed that due to an increase of the scope of work at vessel yard No. 250, the contract price will increase by the amount of USD 35,000.00 (thirty five thousand United States Dollars). Shipbuilding Contract No. DSO-AKF/T150AF In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for the Director to sign this contract. The subject of the contract is the delivery to the Customer of one short hull of T150 Chemical Tanker consisting of the foreship part of Chemical Tanker T150, built according to Contract No. DSO-AKF/T150F, dated October 4, 2006, and aft part of the Chemical Tanker T150, built according to Contract No. DSO-AKF/T150A, dated November 30, 2006, assembled together to a complete hull with a total weight of 4,995 tons (the T150 Chemical Tanker Short Hull) according to the information delivered by the Customer. The Contract price is USD 14,226,215 (fourteen million two hundred twenty six thousand two hundred fifteen United States Dollars) and includes (i) the cost of the foreship part of the Chemical Tanker T150, built according to Contract No. DSOAKF/T150F, dated October 4, 2006, (USD 5,636,215 already paid according to contract), (ii) the cost of the aftship part of the Chemical Tanker T150, built according to Contract No. DSO-AKF/150A, dated November 30, 2006 (USD 8,520,000 already paid according to contract), and (iii) the cost of assembling the said foreship and aftship of T150 Chemical Tanker in such a way to form T150 Chemical Tanker Short Hull, which is USD 70,000 (seventy thousand United States Dollars). The Contract price and delivery date can be adjusted in case of changes in the scope of works, including changes in documentation by the written agreement signed by the parties to this Contract. According to the contract, the Seller will prepare ready T150 Chemical Tanker Short Hull for sea towing EXW Mykolaiv at Damen Shipyards Okean on or before September 30, 2007. On the delivery date, the Customer and the Seller must sign a Protocol of Delivery and Acceptance of T150 Chemical Tanker Short Hull. The Contract enters into force on the date of its signing by the Seller and the Customer and the receipt of down payment by the Seller and is valid until June 30, 2008.

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The Contract is governed by and interpreted in accordance with Norwegian Law and arbitration takes place in the city of Oslo, Norway according to Norwegian standing procedures as laid down in Norwegian Civil Procedure Code. Addendum No. 1 to the Contract No. DSO-AKF/T150AF was provided for review in Binder No. 80 after access to the Data Room documentation was closed. Shipbuilding Contract No. DSO-AKF/151S In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law with the exception of the violation of the Ukrainian Language Rule (the contract is drawn up in English and Russian). In order to keep delivery time of yard number 9151 (YN151 of the Customer) according to the detailed Main Contract for building YN9151 at the yard of the Builder, the Builder and the Customer agreed that before the Main Contract comes into force the Customer, who will order the construction of YN9151 under the Main Contract, will perform partial preliminary financing of it in order to provide partial steel purchasing for its construction in the amount as specified in the contract.. The contract price is USD 733,000.00 (seven hundred thirty three thousand United States Dollars) and the Builder is obliged to the complete amount of this Contract purely and only for the payment of steel for yard number 9151. In case, for any reason, the order for steel does not get materialized and documented towards the Customer on or before May 15, 2007, the Builder is to refund the same amount as received until that date from the Customer. However, we were not provided with any documents evidencing the delivery of steel and the completion of the contract for our review. This Contract does not contain a provision regarding governing law. According to the Law of Ukraine No. 2709-IV On International Private Law, dated June 23, 2005, in case a choice of governing law is absent from a contract, then the law with the closest connection to the transaction in question will apply. Shipbuilding Contract No. DSO-AKF/T151 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for Director to sign the contract. The subject of the contract is the construction by the Seller of one short hull of T150 chemical tanker consisting of the foreship part of chemical tanker T151 and the aft part of chemical tanker T151, assembled together to a complete hull (the Hull) of Chemical Tanker T151 (the Tanker) and sale of the Hull to the Buyer, and purchasing and paying for the Hull by the Buyer in accordance with the terms and conditions of the contract.

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The Hull shall be built and certified under the Buyer Yard Number 151 and the Seller Yard Number 9151. The Chemical Tanker T151 shall be classified by Det Norske Veritas. The contract price is USD 14,679,167 (fourteen million six hundred seventy nine thousand one hundred sixty seven United States Dollars). The Contract price is the net sum receivable by the Seller in consideration of the performance of the Sellers scope of work under and subject to the terms of the contract. The contract price includes inter alia the amounts of payments made under the Contract No. DSOAKF/151S, dated March 27, 2007, for the purchasing of steel for the Chemical Tanker T151 Hull, Seller Yard Number 9151. The Seller undertakes to deliver the Hull to the Buyer, duly built, partly outfitted and completed in accordance with the contract, safely afloat EXW at the Sellers quay ready for towing on or before February 29, 2008. The Technical Acceptance Protocol will be signed by the Parties hereto stating that the Hull is built in accordance with the terms and conditions hereof and is accepted technically by Buyer and is ready for transport/sailing. Under the contract, the Data (any and all design(s), drawings, plans, specifications, information and other data, any and all copyrights and/or other intellectual and/or industrial property relating thereto, and any and all physical documents containing the same in whole or in part, whether or not in modified or amended form provided by the Buyer) are and shall remain the exclusive property of the Buyer. The Hull and any and all parts thereof will be for the risk and account of the Seller until the Delivery Date. The Buyer should insure the Hull and the Buyers deliveries until the Delivery Date. The Buyer will bear the risk as well as insurance costs relating to its deliveries to be made pursuant to the contract until the arrival of the same at the building location. The maximum liquidated damages to be paid under the contract shall not be more than 4% (four percent) of the Purchase Price. The Buyer has the right to terminate this Contract in case of delayed delivery more than 90 (ninety) calendar days (including grace period) after the scheduled Delivery Date. The Buyer, without limitation of any other rights or remedies he may possess under the Contract, may terminate the Contract forthwith upon the occurrence or threatening, all in the sole discretion of the Buyer, of one or more of the following events by giving a written notice of termination to the Seller: 1. if the Seller becomes bankrupt or insolvent, or has received an order for its bankruptcy issued against it, or compounds with its creditors, or a resolution is passed or order it made for its winding up or a receiver is appointed over any part of its undertaking or assets; or if the Seller takes or suffers any other analogous action in consequence of debt and as a result is unable to continue performance of its obligation hereunder in due time;

50

2.

if the Seller assigns or transfers the contract or any right or interest herein without a prior written approval of the Buyer, or has abandoned or repudiated the contract; if the Seller sells or transfers in any other manner, or purports to sell or transfer in any other manner all or a substantial part of its assets; if the Seller fails to perform, in a material manner (such to be determined by the Buyer in its sole discretion), any provision of the contract; if the Seller, without the prior written consent of the Buyer, removes the Hull from the shipyard; if the delivery date is exceeded by more than 90 (ninety) calendar days for whatever reason; or if a duly authorized body or the Buyers Representative(s) decides to terminate this contract for whatever reason at its/his/her sole discretion, such decision being conclusively evidenced by its/his/her signing and sending of the termination notice to the Seller.

3. 4. 5. 6. 7.

The Contract is governed by and interpreted in accordance with Norwegian Law and arbitration takes place in the city of Bergen, Norway according to Norwegian Law On Arbitration, date May 14, 2004. Addendum No. 1, dated May 22, 2007, to Shipbuilding Contract No. DSOAKF/T151, dated May 03, 2007, sets forth that the parties agreed that the Seller additionally will fabricate a superstructure. Please note that the reviewed copy of Addendum No. 1 to the Shipbuilding Contract No. DSO-AKF/T151 is neither signed by the parties nor stamped with the parties corporate seals. Addendum No. 2, dated July 17, 2007, to Shipbuilding Contract No. DSO-AKF/T151, dated May 03, 2007, sets forth that the parties agreed to make an agreement on optional works for YN9151 according to the Chapter 5 Optional works of Annex No. 4 of the Contract No. DSO-AKF/T151, dated May 03, 2007. The subject of the agreement is production and fitting of catwalk, vent mast and pipe supports. The price for the additional works is USD 212,291.00 (two hundred twelve thousand three hundred ninety one United States Dollars). Addendum No. 3, dated July 17, 2007, to the Shipbuilding Contract No. DSOAKF/T151, dated May 03, 2007, sets forth that the parties agreed to make an agreement on optional works for YN9151 according to the Chapter 5 Optional works of Annex No. 4 of the Contract No. DSO-AKF/T151, dated May 03, 2007. The subject of the agreement is side light supports, loose tanks, ventilation ducks, exhaust pipes, cable pipes. The price for the additional works is USD 236,910.00 (two hundred thirty six thousand nine hundred ten United States Dollars). Addendum No. 4 to the Contract No. DSO-AKF/T151, dated May 03, 2007, sets forth the List of Import Equipment Supplied as Buyers Property for Hull No. 9151. According to this List, Aker Yards Floro AS supplied a tunnel for Kamewa Ulstein

51

Tunnel Thruster type TT1850, the total amount of which is EUR 6,875.00 (six thousand eight hundred seventy five euros). The equipment is temporarily imported as the Buyers property, and the cost of the Buyers supply is not comprised in the contract price. Addendum No. 5 to Contract No. DSO-AKF/T151, dated May 03, 2007, sets forth the List of Import Equipment Supplied as Buyers Property for Hull No. 9151. According to this List, Aker Yards Floro AS supplied a propeller boss aft, the total amount of which is EUR 19,900.00 (nineteen thousand nine hundred euros), propeller boss forward, the total amount of which is EUR 9,475.00 (nine thousand four hundred seventy five euros), and access hatches 0-6480-A, steel 800*1040mm, the total amount of which is EUR 8,000.00 (eight thousand euros). The equipment is temporarily imported as Buyers property, and the cost of Buyers supply is not comprised in the Contract price. Addendum No. 6, dated November 20, 2007, to Shipbuilding Contract No. DSOAKF/T151, dated May 03, 2007, sets forth that the parties agreed that due to an increase of the scope of work according to Option 3 at vessel yard No. 151, the contract price will increase by the amount of USD 7,000.00 (seven thousand United States Dollars). Addendum No. 7 to Contract No. DSO-AKF/T151, dated May 03, 2007, sets forth the List of Import Equipment Supplied as Buyers Property for Hull No. 9151. According to this List, Aker Yards Floro AS supplied a rudder trunk with accessories, the total amount of which is EUR 119,640.00 (one hundred nineteen thousand six hundred forty euros). The equipment is temporarily imported as Buyers property, and the cost of Buyers supply is not comprised in the contract price. Addendum No. 8 to the Contract No. DSO-AKF/T151, dated May 03, 2007, sets forth the List of Import Equipment Supplied as Buyers Property for Hull No. 9151. According to this List, Aker Yards Floro AS supplied a sterntube with mounting parts, the total amount of which is EUR 46,814.00 (forty six thousand eight hundred fourteen euros). The equipment is temporarily imported as Buyers property, and the cost of Buyers supply is not comprised in the contract price. Shipbuilding Contract No. DSO-AKF/T152 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for Director to sign the contract. The subject of the contract is the construction of one short hull of T152 chemical tanker consisting of the foreship part of chemical tanker T152 and the aft part of chemical tanker T152, assembled together to a complete hull (the Hull) of Chemical Tanker T152 (the Tanker) and sale of the Hull to the Buyer, and purchasing and paying for the Hull by the Buyer in accordance with the terms and conditions of the Contract.

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The Hull shall be built and certified under the Buyer Yard Number 152 and the Seller Yard Number 9152. The Chemical Tanker T152 shall be classified by Det Norske Veritas. The contract price is USD 16,886,714.17 (sixteen million eight hundred eighty six thousand seven hundred fourteen United States Dollars and seventeen cents). The Contract price is the net sum receivable by the Seller in consideration of the performance of the Sellers scope of work under and subject to the terms of the contract. The contract price may be adjusted up or down according to modifications by amounts mutually agreed between the parties on the basis of separate Addenda. The Seller undertakes to deliver the Hull to the Buyer, duly built, partly outfitted and completed in accordance with the provisions of this Contract, safely afloat EXW at the Sellers quay ready for towing on or before August 31, 2008.. A Technical Acceptance Protocol must be signed by the Parties stating that the Hull is built in accordance with the terms and conditions the contract and is accepted technically by the Buyer as ready for transport/sailing. The Data (any and all design(s), drawings, plans, specifications, information and other data, any and all copyrights and/or other intellectual and/or industrial property relating thereto, and any and all physical documents containing the same in whole or in part, whether or not in modified or amended form provided by the Buyer) are and shall remain the exclusive property of the Buyer. The Hull and any and all parts thereof will be for the risk and account of the Seller until the Delivery Date. The Buyer should insure the Hull and the Buyers deliveries until the Delivery Date. The Buyer will bear the risks as well as insurance costs relating to its deliveries to be made pursuant to the contract until arrival of the same at the building location. The maximum liquidated damages under the contract may not exceed 4% (four percent) of the purchase price. The Buyer has the right to terminate the contract in case of delayed delivery of more than 90 (ninety) calendar days (including grace period) after the scheduled Delivery Date. The Buyer, without limitation of any other rights or remedies he may possess under the Contract, may terminate the Contract forthwith upon the occurrence or threatening, all in the sole discretion of the Buyer, of one or more of the following events by giving a written notice of termination to the Seller: 1. if the Seller becomes bankrupt or insolvent, or has received an order for its bankruptcy issued against it, or compounds with its creditors, or a resolution is passed or order it made for its winding up or a receiver is appointed over any part of its undertaking or assets; or if the Seller takes or suffers any other analogous action in consequence of debt and as a result is unable to continue performance of its obligation hereunder in due time; if the Seller assigns or transfers the Contract or any right or interest herein without a prior written approval of the Buyer, or has abandoned or repudiated the Contract;

2.

53

3. 4. 5. 6. 7.

if the Seller sells or transfers in any other manner, or purports to sell or transfer in any other manner all or a substantial part of its assets; if the Seller fails to perform, in a material manner (such to be determined by the Buyer in its sole discretion), any provision of the Contract; if the Seller, without the prior written consent of the Buyer, removes the Hull from the Yard; if the Delivery Date is exceeded by more than 90 (ninety) calendar days for whatever reason; or if a duly authorized body or the Buyers Representative(s) decides to terminate this Contract for whatever reason at its/his/her sole discretion, such decision being conclusively evidenced by its/his/her signing and sending of the termination notice to the Seller.

The contract is governed by and interpreted in accordance with Norwegian Law and arbitration takes place in the city of Bergen, Norway according to Norwegian Law On Arbitration, date May 14, 2004. Addendum No. 1, dated August 31, 2007, to Shipbuilding Contract No. DSOAKF/T152, dated August 22, 2007; sets forth that the parties have agreed to make an agreement on optional works for YN9151 according to the Chapter 5 Optional works of Annex 4 to the Contract No. DSO-AKF/T152, dated August 22, 2007, for structural and outfitting works according to a structural drawings list. The price for the additional works is USD 1,110,742.00 (one million one hundred ten thousand seven hundred forty two United States Dollars). Addendum No. 2, dated August 31, 2007, to Shipbuilding Contract No. DSOAKF/T152, dated August 22, 2007, sets forth that the parties agreed to make an agreement on optional works for YN9151 according to the Chapter 5 Optional works of Annex 4 to the Contract No. DSO-AKF/T152, dated August 22, 2007, for production and fitting of catwalk, vent mast, and pipe supports. The price for the additional works is USD 212,391.00 (two hundred twelve thousand three hundred ninety one United States Dollars). Addendum No. 3, dated August 31, 2007, to Shipbuilding Contract No. DSOAKF/T152, dated August 22, 2007, sets forth that the parties agreed to make an agreement on optional works for YN9151 according to the Chapter 5 Optional works of Annex 4 to Contract No. DSO-AKF/T152, dated August 22, 2007, for production, fitting, and securing of side light supports, loose tanks, radar mast, ventilation ducts, exhaust pipes, cable pipes. The price for the additional works is USD 236,910.00 (two hundred thirty six thousand nine hundred ten United States Dollars). Addendum No. 4, dated November 22, 2007, to Shipbuilding Contract No. DSOAKF/T152, dated August 22, 2007, sets forth that the parties agreed that due to an increase of the scope of works according to Contract No. DSO-AKF/T152, dated

54

August 22, 2007, the Contract price will increase by USD 7,000.00 (seven thousand seven hundred seventy two United States Dollars). Shipbuilding Contract No. DSO-AKF/T153 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for Director to sign the contract. The subject of the contract is the construction of one short hull of T153 chemical tanker consisting of the foreship part of chemical tanker T153 and the aft part of chemical tanker T153, assembled together to a complete hull (the Hull) of Chemical Tanker T153 (the Tanker) and sale of the Hull to the Buyer, and purchasing and paying for the Hull by the Buyer in accordance with the terms and conditions of the Contract. The Hull shall be built and certified under the Buyer Yard Number 153 and the Seller Yard Number 9153. The Chemical Tanker T153 shall be classified by Det Norske Veritas. The Contract price is USD 16,620,067.00 (sixteen million six hundred twenty thousand sixty seven United States Dollars). The Contract price is the net sum receivable by the Seller in consideration of the performance of the Sellers scope of work under and subject to the terms of the contract. The contract price may be adjusted up or down by an amount equal to 100% of the aggregate difference in the price for the steel for the Hull. The work to be performed by the Seller under the Contract can be modified or changed by request from the Buyer provided that the parties shall first agree to possible adjustment in the Purchase Price, the Delivery Date, and such other terms and conditions occasioned by or resulting from such modification or change (by written agreement). The Seller undertakes to deliver the Hull to the Buyer, duly built, partly outfitted and completed in accordance with the provisions of this Contract, safely afloat EXW at the Sellers quay ready for towing on or before January 31, 2009. A Technical Acceptance Protocol will be signed by the Parties hereto stating that the Hull is built in accordance with the terms and conditions hereof and is accepted technically by Buyer and is ready for transport/sailing. The Data (any and all design(s), drawings, plans, specifications, information and other data, any and all copyrights and/or other intellectual and/or industrial property relating thereto, and any and all physical documents containing the same in whole or in part, whether or not in modified or amended form provided by the Buyer) are and shall remain the exclusive property of the Buyer. The Hull and any and all parts thereof will be for the risk and account of the Seller until the Delivery Date. The Buyer should insure the Hull and the Buyers deliveries until the Delivery Date. The Buyer will bear risk as well as insurance costs relating to

55

its deliveries to be made pursuant to the contract until arrival of the same at the building location. The maximum liquidated damages under the contract may not exceed 4% (four percent) of the Purchase Price. The Buyer has the right to terminate this Contract in case of delayed delivery more than 90 (ninety) calendar days (including grace period) after the scheduled Delivery Date. The Buyer, without limitation of any other rights or remedies he may possess under the Contract, may terminate the Contract forthwith upon the occurrence or threatening, all in the sole discretion of the Buyer, of one or more of the following events by giving a written notice of termination to the Seller: 1. if the Seller becomes bankrupt or insolvent, or has received an order for its bankruptcy issued against it, or compounds with its creditors, or a resolution is passed or order it made for its winding up or a receiver is appointed over any part of its undertaking or assets; or if the Seller takes or suffers any other analogous action in consequence of debt and as a result is unable to continue performance of its obligation hereunder in due time; if the Seller assigns or transfers the Contract or any right or interest herein without a prior written approval of the Buyer, or has abandoned or repudiated the Contract; if the Seller sells or transfers in any other manner, or purports to sell or transfer in any other manner all or a substantial part of its assets; if the Seller fails to perform, in a material manner (such to be determined by the Buyer in its sole discretion), any provision of the Contract; if the Seller, without the prior written consent of the Buyer, removes the Hull from the Yard; if the Delivery Date is exceeded by more than 90 (ninety) calendar days for whatever reason; or if a duly authorized body or the Buyers Representative(s) decides to terminate this Contract for whatever reason at its/his/her sole discretion, such decision being conclusively evidenced by its/his/her signing and sending of the termination notice to the Seller.

2.

3. 4. 5. 6. 7.

The Contract is governed by and interpreted in accordance with Norwegian Law and arbitration takes place in the city of Bergen, Norway according to Norwegian Law On Arbitration, date May 14, 2004. Addendum No. 1, dated November 12, 2007, to Shipbuilding Contract No. DSOAKF/T153, dated November 20, 2007, sets forth that the parties agreed to make an agreement on optional works for YN9153 according to the Chapter 5 Optional works of Annex 4 to the Contract No. DSO-AKF/T153, dated November 12, 2007. Subject of Agreement is additional works on superstructure and casing structure. The

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price for the additional works is USD 1,110,742.00 (one million one hundred ten thousand seven hundred forty two United States Dollars). Addendum No. 2, dated November 12, 2007, to Shipbuilding Contract No. DSOAKF/T153, dated November 20, 2007, sets forth that the parties agreed to make an agreement on optional works for YN9153 according to the Chapter 5 Optional works of Annex 4 to the Contract No. DSO-AKF/T153, dated November 12, 2007for installation of a catwalk, vent mast and pipe supports. The price for the additional works is USD 212,391.00 (two hundred twelve thousand three hundred ninety one United States Dollars). Addendum No. 3, dated November 12, 2007, to the Shipbuilding Contract No. DSOAKF/T153, dated November 20, 2007, sets forth that the parties agreed to make an agreement on optional works for YN9153 according to the Chapter 5 Optional works of Annex 4 to Contract No. DSO-AKF/T153, dated November 12, 2007, for side light supports, loose tanks, radar mast, ventilation ducts, exhaust pipes, cable pipes. The price for the additional works is USD 236,910.00 (two hundred thirty six thousand nine hundred ten United States Dollars). Addendum No. 4, dated November 20, 2007, to the Shipbuilding Contract No. DSOAKF/T153, dated November 20, 2007, sets forth that the parties agreed that due to an increase of the scope of work according to Contract No. DSO-AKF/T153, dated November 12, 2007, the contract price will increase by the amount of USD 7,000.00 (seven thousand United States Dollars). Shipbuilding Contract No. DSO-AKF/T154 The Company is a party to the Shipbuilding Contract No. DSO-AKF/T154, dated February 25, 2008, entered into by and between the Company and Aker Yards Floro AS. We were not provided with a copy of the above-mentioned Contract; however, it was provided for review together with three addenda thereto in Binder 81 after access to the Data Room was closed. Shipbuilding Contract No. DSO-BRA/YN1094 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for Director to sign the contract. The subject of the contract is the construction of one hull of the tanker hull 15,000 dwt BRAMAX project at Sellers shipyard located in Mykolaiv, Ukraine and its sale and delivery to the Buyer, and purchasing and paying for the Hull by the Buyer in accordance with the terms and conditions of the contract. The contract price is EUR 8,021,163.50 (eight million twenty one thousand one hundred sixty three euros and fifty cents). The delivery of the Hull was to take place on the conditions FCA Sellers yard quay (Incoterms 2000) no later than May 25, 2007.. The acceptance of the Hull will be evidenced by a Protocol of Delivery and Acceptance signed by both the Buyer and the

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Seller, stating that the Hull is built in full conformity with the provisions of this contract and specifications and that it has been accepted. The date of signing the Protocol of Delivery and Acceptance is considered to be the date of delivery of the Hull. From this date the title and risks of the Hull within the Hull will pass from the Seller to the Buyer and the Buyer will bear full responsibility for the Hull.. The maximum penalty under the contract may not exceed 7% of the contract value for the works. The Buyer will be entitled to cancel the contract in case of a delay of 2 (two) months plus force majeure in the building process of the Hull compared to the delivery date agreed by the parties, but in any case if the delay in building process of the Hull exceeds 4 (four) months for any reason, including force majeure, except the Buyers fault. In case of cancellation of the contract by the Buyer, the Buyer retains the right to purchase the Hull in its current stage of construction at the date of cancellation. The contract may not be transferred by the Seller to any third party without the prior written consent of the Buyer. All disputes arising in connection with the contract shall be finally settled under the rules of arbitration and conciliation of Maritime Arbitration Association in Copenhagen, Denmark according to the Danish Law. This Contract does not contain a provision regarding governing law. Thus, according to the Law of Ukraine No. 2709-IV On International Private Law, dated June 23, 2005, in case a choice of governing law is absent from a contract, the law with the closest connection to the transaction in question will apply. We were only provided with Addendum No. 6 to Contract No. DSO-BRA/YN 1094, dated December 13, 2006; which states that the parties agreed to change the delivery date of Vessel YN 9129 from the Seller to the Buyer and deliver the above Vessel to on or before August 31, 2007. Please note that this copy of Addendum No. 6 was not signed by the parties. We were also provided with Termination Agreement, dated June 11, 2007, to Shipbuilding Contract No. DSO-BRA/YN1094, dated December 13, 2006. According to this Termination Agreement, the parties agreed to terminate Contract No. DSO-BRA/YN1094. The Seller was obliged to refund to the Buyer the amount of EUR 1,203,174.54 (one million two hundred three thousand one hundred seventy four euros and fifty four cents) previously transferred by the Buyer in prepayment of the Contract price. The Seller was further obliged to (i) purchase 11 (eleven) steel pallets according to the Contract No. DSO 129 dd 06.12.06, (ii) purchase steel for the main engine MAN according to the Contract No. DSO 129 dd 06.12.06, (iii) purchase steel metalware, namely foreship part of the Tankers hull delivered by the Buyer and received by the Seller on March 3, 2007, according to the Contract No. DSO 129 dd 06.12.06, and (iv) make available and return to the Buyer the

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Deliverables at the Sellers shipyard located at 1, Zavodska Square, Mykolaiv, 54050, Ukraine. We were not provided with any documents, confirming that the above described obligations were fulfilled by the Seller in satisfaction of the Buyer. Shipbuilding Contract No. DSO-BRA/YN1095 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for Director to sign the contract. The subject of the contract is the construction of one hull of the tanker hull 15,000 dwt BRAMAX project at Sellers shipyard located in Mykolaiv, Ukraine and its sale and delivery to the Buyer, and purchasing and paying for the Hull by the Buyer in accordance with the terms and conditions of the Contract. The Contract price is EUR 8,021,163.50 (eight million twenty one thousand one hundred sixty three euros and fifty cents). The delivery of the Hull was to take place on the conditions FCA Sellers yard quay (Incoterms 2000) no later than February 10, 2008 with the acceptance of the Hull to be evidenced by a Protocol of Delivery and Acceptance signed by both the Buyer and the Seller stating that the Hull is built in full conformity with the provisions of the contract and specifications and that it has been accepted. We were also provided with Termination Agreement, dated September 4, 2007, to Shipbuilding Contract No. DSO-BRA/YN1095, dated February 20, 2007. According to this Termination Agreement, the parties agreed to terminate Contract No. DSOBRA/YN1095. The Seller was obliged to refund to the Buyer the amount of EUR 1,203,174.54 (one million two hundred three thousand one hundred seventy four euros and fifty four cents) previously transferred by the Buyer in prepayment of the Contract price. We were not provided with any documents, confirming that the above described obligations were fulfilled by the Seller in satisfaction of the Buyer. Shipbuilding Contract No. DSO-BREV/YN1054 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law with the exception of the Ukrainian Language Rule. In addition, we were not provided with confirmation of corporate approval for Director to sign the contract. The subject of the contract is the construction of one vessel having the following building serial number and built according to the following description (the Vessel): The Purchasers yard building serial No. BC 54/AB94; The Builders yard building No. 7129;

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Type: Tanker for Oil Products and Petroleum Products, type IMO 2.

The contract price is EUR 12,627,399.00 (twelve million six hundred twenty seven thousand three hundred ninety nine euros) and can be changed according to a written agreement between the parties. The Vessel shall be delivered EX WORKS alongside Builders yard, Damen Shipyards Okean, Ukraine on March 15, 2008. Simultaneously with signing of the Protocol of Delivery and Acceptance of the Vessel, the Builder shall deliver to the Purchaser or its Representative all necessary certificates and documents. Neither party hereto has the right to assign this Contract except with the written consent of the other party. The Purchaser may, without the consent of the Builder, assign the contract to any existing or new company under their control; however, the Purchaser remains in such case liable for their obligations under the Contract. Until the Vessel has been delivered, and whether or not ownership thereof passes to the Purchaser pursuant to the contract, the Builder carries the risk of accidental destruction of the Vessel, materials, parts, machinery, boilers and equipment. The Purchaser is obliged to arrange and pay premium for building insurance for the vessel and the procurements therefore in the form of materials and equipment, including the Builders supplies limited to full reconstruction cost at any stage of building progress. This building insurance for the Vessel must be maintained until the Vessel is delivered to the Purchaser. The Purchaser, without limitation of any other rights or remedies he may possess under the Contract, may terminate the Contract forthwith upon the occurrence or threatening, all in the sole discretion of the Purchaser, of one or more of the following events by giving a written notice of termination to the Builder: 1. if the Builder becomes bankrupt or insolvent, or has received an order for its bankruptcy issued against it, or compounds with its creditors, or a resolution is passed or order it made for its winding up or a receiver is appointed over any part of its undertaking or assets; or if the Builder takes or suffers any other analogous action in consequence of debt and as a result is unable to continue performance of its obligation hereunder in due time; if the Builder assigns or transfers the Contract or any right or interest herein without a prior written approval of the Purchaser, or has abandoned or repudiated the Contract; if the Builder sells or transfers in any other manner, or purports to sell or transfer in any other manner all or a substantial part of its assets; if the Builder fails to perform, in a material manner (such to be determined by the Purchaser in its sole discretion), any provision of the Contract; if the Builder, without the prior written consent of the Purchaser, removes the Vessel from the Yard; 60

2.

3. 4. 5.

6. 7.

if the Delivery Date is exceeded by more than 90 (ninety) calendar days for whatever reason; or if a duly authorized body or the Purchasers Representative(s) decides to terminate this Contract for whatever reason at its/his/her sole discretion, such decision being conclusively evidenced by its/his/her signing and sending of the termination notice to the Builder.

In case of termination the Builder hereby irrevocably: (i) (ii) waives any right of retention, mortgaging or encumbering the material and equipment delivered by the Purchaser, and declares his consent in the removal of the material and equipment delivered by the Purchaser from the yard by the Purchaser.

Any dispute between the parties concerning this building Contract shall be settled with final and binding effect for both parties by arbitration in Norway. All disputes under this Contract will be settled in accordance with Norwegian law. We were provided with several addenda to the contract (Nos. 1-5, 7-8, 10, 12-14, 1624, 26-27, 29), which set forth the lists of imported equipment supplied as the Buyers property for the construction of the hull No. 7129 under the Contract. The equipment is temporarily imported as the Buyers property, which was to be exported from Ukraine as part of the vessel. These costs are not reflected in the contract price. Addendum No. 9 to Contract No. DSOBREV/YN 1054, dated April 24, 2007, sets forth that due to an increase of the scope of works under the contract, the total price of the contract is to be increased by EUR 170,000.00 (one hundred seventy thousand euros). Addendum No. 10 to Contract No. DSOBREV/YN 1054, dated April 24, 2007, sets forth that due to an increase of the scope of works under the contract, the total price of the contract is to be increased by EUR 53,843.00 (fifty three thousand eight hundred forty three euros). Addendum No. 11 to Contract No. DSOBREV/YN 1054, dated April 24, 2007, sets forth that the parties have agreed to the wording of Article 1 of paragraph 4 of the Contract with respect to effectuation of payment under the Contract in eight installments. Addendum No. 15 to Contract No. DSOBREV/YN 1054, dated April 24, 2007, sets forth that the parties agreed that the sum for insurance in the amount of EUR 88,479.76 (eighty eight thousand four hundred seventy nine euros and seventy six cents) will be paid by the Purchaser within 14 (fourteen) banking days from the date of the signing this Addendum. Addendum No. 25 to Contract No. DSOBREV/YN 1054, dated April 24, 2007, sets forth that the price of the Vessel, delivered on EXWORKS Builders yard quay

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(Incoterms 2000) will be EUR 15,100,000.00 (fifteen million one hundred thousand euros), and the parties agreed to the new wording of Item 1 of paragraph 4 of the contract with respect to the effectuation of payment in seven installments. Please note that this Addendum was not signed by the parties and did not have the date. Shipbuilding Contract No. DSO-BREV/YN1055 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for Director to sign the contract. The subject of the contract is the construction of one vessel having the following building serial number and built according to the following description (the Vessel): The Purchasers yard building serial No. BC 5/AB95; The Builders yard building No. 7135; Type: Tanker for Oil Products and Petroleum Products, type IMO 2.

The contract price is EUR 12,627,399.00 (twelve million six hundred twenty seven thousand three hundred ninety nine euros). The Contract price can be changed according to the written agreement between the parties. The Vessel shall be delivered EX WORKS alongside Builders yard, Damen Shipyards Okean, Ukraine on May 31, 2008. Simultaneously with signing of the Protocol of Delivery and Acceptance of the Vessel, the Builder shall deliver to the Purchaser or its Representative all necessary certificates and documents. Neither party to the contract has the right to assign the contract except with the written consent of the other party. The Purchaser may without the consent of the Builder assign this contract to any existing or new company under their control, but the Purchaser remains in such case liable for its obligations under the contract. Until the Vessel has been delivered, and whether or not ownership thereof passes to the Purchaser pursuant to the Clause re: ownership, the Builder carries the risk of the accidental destruction of the Vessel, materials, parts, machinery, boilers and equipment. The Builder will arrange and pay premium for building insurance for the vessel and the procurements therefore in the form of materials and equipment, including the Purchasers supplies limited to full reconstruction cost at any stage of building progress. This building insurance for the Vessel shall be maintained until the Vessel is delivered to the Purchaser. The Purchaser, without limitation of any other rights or remedies he may possess under the contract, may terminate the contract forthwith upon the occurrence or threatening, all in the sole discretion of the Purchaser, of one or more of the following events by giving a written notice of termination to the Builder: 1. if the Builder becomes bankrupt or insolvent, or has received an order for its bankruptcy issued against it, or compounds with its creditors, or a resolution is 62

passed or order it made for its winding up or a receiver is appointed over any part of its undertaking or assets; or if the Builder takes or suffers any other analogous action in consequence of debt and as a result is unable to continue performance of its obligation hereunder in due time; 2. if the Builder assigns or transfers the contract or any right or interest herein without a prior written approval of the Purchaser, or has abandoned or repudiated the contract; if the Builder sells or transfers in any other manner, or purports to sell or transfer in any other manner all or a substantial part of its assets; if the Builder fails to perform, in a material manner (such to be determined by the Purchaser in its sole discretion), any provision of the Contract; if the Builder, without the prior written consent of the Purchaser, removes the Vessel from the Yard; if the Delivery Date is exceeded by more than 90 (ninety) calendar days for whatever reason; or if a duly authorized body or the Purchasers Representative(s) decides to terminate this contract for whatever reason at its/his/her sole discretion, such decision being conclusively evidenced by its/his/her signing and sending of the termination notice to the Builder.

3. 4. 5. 6. 7.

In case of termination the Builder hereby irrevocably: (i) (ii) waives any right of retention, mortgaging or encumbering the material and equipment delivered by the Purchaser, and declares his consent in the removal of the material and equipment delivered by the Purchaser from the yard by the Purchaser.

Any dispute between the parties concerning this building Contract shall be settled with final and binding effect for both parties by arbitration in Norway. All disputes under this Contract will be settled in accordance with Norwegian law. We were provided with several addenda to the contract (Nos. 1-16, 21-25, 28-30, 37), which set forth the lists of imported equipment supplied as the Buyers property for the construction of the hull No. 9135 under the Contract. The equipment is temporarily imported as the Buyers property, which is to be exported from Ukraine as part of the vessel. These costs are not reflected in the contract price. Addendum No. 17 to Contract No. DSOBREV/YN 1055, dated September 4, 2007, sets forth that due to an increase of the scope of works under the contract, the total price of the contract is to be increased by EUR 170,000.00 (one hundred seventy thousand euros).

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Addendum No. 18 to Contract No. DSOBREV/YN 1055, dated September 4, 2007, sets forth that according to item 3 of Paragraph 7 of the contract, the Builder shall insure the Vessel on the terms that are normally employed in insuring ships under construction at Ukrainian yards. The parties agreed that the insurance sum will equal EUR 88,479.76 (eighty eight thousand four hundred seventy nine euros and seventy six cents) to be paid by the Purchaser within 14 banking days from the date of signing the Addendum. Addendum No. 19 to Contract No. DSOBREV/YN 1055, dated September 4, 2007, sets forth that due to an increase of the scope of works under the contract, the total price of the contract is to be increased by EUR 53,843.00 (fifty three thousand eight hundred forty three euros). Addendum No. 20 to Contract No. DSOBREV/YN 1055, dated September 4, 2007, sets forth that the price of the Vessel, delivered on EXWORKS Builders yard quay (Incoterms 2000) will be EUR 14,000,000.00 (fourteen million euros), and the parties have agreed to the wording of Item 1 of paragraph 4 of the Contract with respect to effectuation of payment under the Contract in five installments. Please note that this Addendum was not signed by the parties; however, it is dated December 14, 2007. We were not provided with Addenda Nos. 26, 27, 31-36 to Contract No. DSO BREV/YN 1055; however, the said addenda were provided for review in Binder No. 80 after access to the Data Room was closed. Shipbuilding Contract No. DSO-AUKRA-9128 In general, this contract complies with the requirements set for foreign economic contracts by Ukrainian law. However, we were not provided with confirmation of corporate approval for Director to sign the contract. The subject of the contract is the construction of one hull for a Platform Supply Vessel type UT 755 LN, Buyers Yard building number No. AYA 128 (the Hull) in conformity with the conditions of the contract. The Hull will have the Sellers Yard building number: YN 9128. The Hull shall be built under the survey of DNV. The contract price is EUR 2,990,000.00 (two million ninety nine thousand euros), which may be adjusted according to the actual items delivered by the Buyer and the Buyers subcontractor Aker Braila. The Hull was to be delivered on July 30, 2007, EXW Mykolaiv afloat alongside the Sellers quay, floating and ready for towing. After technical acceptance of the Hull, the Protocol of Delivery and Acceptance will be signed by both parties, stating that the Hull is built according to the Contract drawings and is finally accepted. From the date of signing of the above-mentioned Protocol, the Buyer will bear full responsibility for the Hull. This Contract is not transferable by any of the Parties without the prior written consent of the other party. The Seller reserves the right to subcontract fabrication of part of the units outside his premises. Such subcontracting must be accepted by the Buyer in advance.

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The Buyer will be entitled to cancel this Contract in part or in whole, should the delivery of the Hull be delayed by more than 6 (six) months from the agreed upon date of delivery, except at the Buyers fault. The Party, forwarding the reason for termination of this Contract, will notify other Party no later than 30 (thirty) days before the date when such termination becomes effective. The contract enters into force on the date of signing by the Seller and the Customer and receipt of down payment under Article 3.1 by Seller and is valid till June 30, 2008. Arbitration shall take place in the city of Oslo, Norway according to the rules of Arbitration of the Norwegian standing Arbitration Court of the International Trade and Industry Chamber. We were not provided with Addenda Nos. 1-8, 11, 13-17, 20-25 to Contract No. DSOAUKRA-9128; however, the said addenda were provided for review in Binder No. 80 after access to the Data Room was closed. Addendum No. 9 to Contract No. DSOAUKRA-9128, dated December 21, 2006, which sets forth that the parties agreed to change the delivery date of the Vessel from the Seller to the Buyer to on or before October 30, 2007. This Addendum is not signed and has no date. Addendum No. 10 to Contract No. DSOAUKRA-9128, dated December 21, 2006, sets forth that the parties agreed to increase the contract price by the amount of EUR 103,283.00 (one hundred three thousand two hundred eighty three euros). Addendum No. 12 to Contract No. DSOAUKRA-9128, dated December 21, 2006, sets forth that the parties agreed to change the delivery date of the Vessel from the Seller to the Buyer to on or before December 31, 2007. This Addendum was signed later on September 13, 2007. Addendum No. 18 to Contract No. DSOAUKRA-9128, dated December 21, 2006, sets forth that the parties agreed to change the delivery date of the Vessel from the Seller to the Buyer to on or before January 15, 2008. This Addendum was signed on December 10, 2007. Addendum No. 19 to Contract No. DSOAUKRA-9128, dated December 21, 2006, sets forth that the parties agreed to change the delivery date of the Vessel from the Seller to the Buyer to on or before February 29, 2007. This Addendum was signed on January 9, 2008. We did not review any documents confirming the acceptance and delivery of the Vessel under Contract No. DSO-AURKA-9128. Contract No. MTW/1700-133, dated March 19, 2007 The Contract was entered into by and between the Company, as the Seller, and Aker MTW Werft GmbH, as the Buyer. According to the Contract, the Seller undertakes to

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deliver to the Buyer one foreship of CS 1700 type Container Ship with outfitting and components fitted in the scope of the complete vessel, as provided by the contract. The total Contract Price is set at EUR 6,554,526 (six million five hundred fifty four thousand five hundred twenty six euros) and is to be paid gradually in 6 installments as provided by the contract. The Seller undertakes to prepare the "CS 1700 Container Ship Forepart" for sea towing EXW Mykolayiv on January 31, 2008. The delivery date can be adjusted by the parties in writing upon mutual consent. The Seller must provide for insurance for the period of building. In general, the provisions of the Contact comply with the requirements of applicable law. It should be noted, however, that we were not provided for review any corporate approval by Supervisory Council of the Company for the President to sign on behalf of the Company a contract whose value exceeds EURO 1,000,000 (one million euros). Such approval is required by the Charter. We recommend that the Company keep a record of such corporate approvals on file. Otherwise, there is a risk of challenging validity of a Contract in question. According to Addendum No. 1 of June 1, 2007 to the contract, the parties agreed to increase the Contract Price by EUR 216,771 (two hundred sixteen thousand seven hundred seventy one euros) which amount is payable to the Seller within 14 banking days following receipt of the invoice. According to Addendum No. 5 of July 23, 2007 to the contract, the parties agreed to change the amount of EUR 600,000 (six hundred thousand euros), stated in 3.1 (iv) of Article 3 of the Contract, to EUR 314,627.50 (three hundred fourteen thousand six hundred twenty seven euros and fifty cents). On behalf of the Company Addendum is signed by Interim President, A. Shamray. Our concern with respect to this Addendum is that we were not provided with any document evidencing the fact that the authority to sign this Addendum on behalf of the Company was actually granted to Mr. Shamray. The Company must keep a record of such document on file; otherwise there is a risk of challenging the validity of the Addendum in question. According to Addendum No. 10 of October 25, 2007 to the contract, the parties agreed to increase the total Contract Price by EUR 8,606 (eight thousand six hundred six euros). The said amount is to be paid to the Seller within 14 banking days following the date of signing the Addendum in question. On behalf of the Company, the Addendum is signed by Interim President, Mr. A. Shamray. Our concern with respect to this Addendum is that we were not provided with any document evidencing the fact that the authority to sign this Addendum on behalf of the Company was actually granted to Mr. Shamray. The Company must keep a record of such document on file otherwise there is a risk of challenging the validity of the Addendum in question.

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B.

Delivery Contracts Contract No. DSO-DS-002

In general, the contract complies with the requirements set for foreign economic contracts by Ukrainian law with the exception of the Ukrainian Language Rule. In addition, we were not provided with confirmation of corporate approval for Director to sign Contract. The subject of the contract is the purchase of one set of welding materials (the Goods) on the terms DDU, Nikolaev, Ukraine for the construction of new buildings. Yard Numbers are according to Enclosures to this Contract in accordance with Incoterms 2000, type and composition of the Goods being as per Enclosures which are considered to be the integral parts of the Contract. The price of the Goods will be indicated in the Contract in each Enclosure to the Contract including delivery cost DDU Nikolaev. The price is firm for the duration of the Contract and is not subjected to any alternation and includes transportation, export packing, marking and insurance. The Goods specified in each Enclosure to this Contract are to be delivered to the Buyers address within 2 (two) weeks after receipt of the prepayment mentioned in Article 4 of the Contract. Payment for the Goods will be effected as follows: 10% payment in advance; 90% payment within 14 days after date of invoice in accordance with Enclosures to this Contract.

The Goods are guaranteed free for any defects caused by bad workmanship or use of defective material 12 months after delivery to the Shipyard, on the condition that storage and exploitation terms will be observed. Any dispute arising out of or inconnection with this contract shall be subject to submission and the definitive resolution in International Commercial Arbitration court at Chamber of Commerce and Industry of Ukraine, Kiev. This Contract comes into force from the moment of its signing by both parties. It was signed by Mr. Romanchuk (DSO) and Mr. Werner Schmitt (Drahtzug Stein). We were provided with Enclosures 1 -53 to the Contract No. DSO-DS-002, which are the Specification on delivery of welding consumables. Enclosure No. 1 to the Contract, dated December 12, 2005, contains the description of goods, their quantity in kilos, and their price in EUR. The price of the set of Goods according to Enclosure No. 1 is EUR 63,600.00 (sixty three thousand six hundred euros).

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The last Enclosure No. 53, which was provided for our review, dated November 16, 2007, contains the description of goods, their quantity in kilos, and their price in EUR. The price of set of Goods according to Enclosure No. 53 is EUR 63,600.00 (sixty three thousand six hundred euros). C. Miscellaneous Contracts (Over EUR 50,000) Contract No. 48 The Contract was entered into by and between the Company, as the Buyer, and Techproject 21, as the Supplier, on September 4, 2007. Under the Contract the Supplier undertakes to perform and the Buyer undertakes to accept and pay for the manufacturing and delivery of spindle female nut according to specification. The total Contract Price is set at UAH 734,400 (seven hundred thirty four thousand four hundred Ukrainian Hryvnias). Payment for the goods shall be effected as follows: (i) (ii) 30% advance payment of the Contract Price is to be paid upon conclusion of the Contract; and the remaining amount of the Contract Price it to be paid within 30 days following delivery of the goods to warehouse of the Buyer.

According to the Contract, the goods must be delivered within 90 days following the advance payment by the Buyer. Our review of the Contract revealed that the contact is made in both the Russian and English languages. There is no need for a bilingual version of the Contract, as both parties thereto appear to be Ukrainian entities. Please note, however, that the risk of challenging validity of the contract on this basis is quite insubstantial. Purchase Agreement No. 344 This agreement was entered into by and between the Company, as the Buyer, and Avtopromservis Zapchastyna Private Enterprise, as the Seller, on December 10, 2007. Under the Agreement, the Seller undertakes to sell and the Buyer undertakes to accept and pay for the goods, i.e., MTZ 80 tractor and a bulldozer blade. The total price is set at UAH 398,520 (three hundred ninety eight thousand five hundred twenty Ukrainian Hryvnias). The payment for the goods shall be effected as follows: 100% of the Price within 10 (ten) working days following the signing of the Agreement. The goods must be delivered within 10 (ten) working days following the payment of the price by the Buyer. Our review of the Agreement did not reveal any legal flaws or material inconsistencies. The provisions of the Agreement appear to comply with the requirements of applicable law.

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Agreement No. -50/9129 This agreement was entered into by and between the Company, as the Customer, and Alewijnse Ukraine Ltd., as the Seller, on July 6, 2007. Under the agreement the Seller undertakes to carry out electric installation of the vessel No. 9129 and the Customer undertakes to accept and pay for the said work. The total price under the agreement is set at UAH 1,405,192.80 (one million four hundred five thousand one hundred ninety two Ukrainian Hryvnias or an equivalent of EUR 204,000). Payment for the goods shall be effected in 5 (five) equal installments of the UAH equivalent of EUR 40,800 (forty thousand eight hundred euros) of the total Price. The payment of the 5th installment shall be made upon completion of 100% of the installment work, connections, vessel commissioning and sea trial. The final price depends on the exchange rate of the NBU. The work under the agreement must be carried out within 20 (twenty) weeks following the commencement date. Our review of the agreement revealed that the Agreement is made in both Ukrainian and English languages. There is no need for a bi-lingual version of the Agreement, as both parties appear to be Ukrainian entities. Please note, however, that the risk of challenging the validity of the Agreement on these grounds is quite insubstantial. The provisions of the Agreement appear to comply with the requirements of applicable law. Agreement No. -51/9130 The Agreement was entered into by and between the Company, as the Customer, and Alewijnse Ukraine Ltd., as the Seller, on July 20, 2007. Under the agreement the Seller undertakes to carry out electric installation of the vessel No. 9130 and the Customer undertakes to accept and pay for the said work. The total price under the agreement is set at UAH 502,495.20 (five hundred two thousand four hundred ninety five and twenty kopecks or an equivalent of EUR 72,000). Payment for the work shall be effected in 5 (five) equal installments of the UAH equivalent of EURO 14,400 (fourteen thousand four hundred euros) of the price. The payment of the 5th installment shall be made upon completion of 100% of the installment work, connections, vessel commissioning and sea trial. The final price depends on the exchange rate of the NBU. The work under the Agreement must be carried out within 8 (eight) weeks following the commencement date. Our review of the Agreement revealed that the agreement is made in both Ukrainian and English languages. There is no need for a bi-lingual version of the Agreement, as both parties appear to be Ukrainian entities. Please note however, that the risk of challenging validity of the Agreement on these grounds is quite insubstantial.

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The provisions of the Agreement appear to comply with the requirement of applicable law. Agreement No. -52/9131 The Agreement was entered into by and between the Company, as the Customer, and Alewijnse Ukraine Ltd., as the Seller, on July 20, 2007. Under the agreement the Seller undertakes to carry out electric installation of the vessel No. 9131 and the Customer undertakes to accept and pay for the said work. The total price is set at UAH 502,495.20 (five hundred two thousand five hundred ninety five Ukrainian Hryvnias and twenty kopecks or an equivalent of EUR 72,000). Payment for the goods shall be effected in 5 (five) equal installments of the UAH equivalent of EUR 14,400 (fourteen thousand four hundred) of the Contract Price. The final payment of the 5th installment shall be made upon completion of 100% of the installment work, connections, vessel commissioning and sea trial. The final price depends on the exchange rate of the NBU. The work under the Agreement must be carried out within 8 (eight) weeks following the commencement date. Our review of the Agreement revealed that the Agreement is made in both Ukrainian and English languages. There is no need for a bi-lingual version of the Agreement, as both parties appear to be Ukrainian entities. Please note, however, that the risk of challenging validity of the Agreement on these grounds is quite insubstantial. The provisions of the Agreement appear to comply with the requirement of applicable law. Agreement No. -53/9132 The Agreement was entered into by and between the Company as the Customer, and Alewijnse Ukraine Ltd., as the Seller, on July 20, 2007. Under the agreement the Seller undertakes to carry out electric installation of the vessel No. 9132 and the Customer undertakes to accept and pay for the said work. The total price under the Agreement is set at UAH 502,495.20 (five hundred two thousand four hundred ninety five Ukrainian Hryvnias and twenty kopecks or an equivalent of EUR 72,000). Payment for the work shall be effected in 5 (five) equal installments of the UAH equivalent of EUR 14,400 (fourteen thousand four hundred euros) of the set price. The payment of the 5th installment shall be made upon completion of 100% of the installment work, connections, vessel commissioning and sea trial. The final Price depends on the exchange rate of the NBU. The work under the Agreement must be carried out within 8 (eight) weeks following the commencement date. Our review of the Agreement revealed that the Agreement is made in both Ukrainian and English languages. There is no need for a bi-lingual version of the Agreement, as

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both parties appear to be Ukrainian entities. Please note, however, that the risk of challenging validity of the Agreement on these grounds is quite insubstantial. The provisions of the Agreement appear to comply with the requirement of applicable law. Agreement No. -56/9135 The Agreement was entered into by and between the Company, as the Customer, and Alewijnse Ukraine Ltd., as the Seller, on November 7, 2007. Under the agreement the Seller undertakes to carry out electric installation of the vessel No. 9135 and the Customer undertakes to accept and pay for the said work. The price under the Agreement is set at UAH 1,498,631.94 (one million four hundred ninety eight thousand six hundred thirty one Ukrainian Hryvnias and ninety four kopecks or an equivalent of EUR 204,000). Payment for the goods shall be effected in 5 (five) equal installments of the UAH equivalent of EUR 40,800 (forty thousand eight hundred euros) of the set price. The payment of the 5th installment shall be made upon completion of 100% of the installment work, connections, vessel commissioning and sea trial. The final price depends on the exchange rate of the NBU. The work under the Agreement must be carried out within 20 (twenty) weeks following the commencement date. Our review of the Agreement revealed that the Agreement is made in both Ukrainian and English languages. There is no need for a bi-lingual version of the Agreement, as both parties appear to be Ukrainian entities. Please note, however, that the risk of challenging validity of the Agreement on these grounds is quite insubstantial. The provisions of the Agreement appear to comply with the requirement of applicable law. Agreement No. -57/9133 The Agreement was entered into by and between the Company, as the Customer, and Alewijnse Ukraine Ltd., as the Seller, on November 15, 2007. Under the agreement the Seller undertakes to carry out electric installation of the vessel No. 9133 and the Customer undertakes to accept and pay for the said work. The price under the Agreement is set at UAH 413,919.51 (four hundred thirteen thousand nine hundred nineteen Ukrainian Hryvnias and fifty one kopecks or an equivalent of EUR 55,758). Payment for the work shall be effected in 3 (three) installments of the UAH equivalent of EUR of the set Price. The payment of the 3rd installment shall be made upon completion of 100% of the installment work, connections, vessel commissioning and sea trial. The final price depends on the exchange rate of the NBU. The work under the Agreement must be carried out within 6 (six) weeks following the commencement date.

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Our review of the Agreement revealed that the agreement is made in both Ukrainian and English languages. There is no need for a bi-lingual version of the Agreement, as both parties appear to be Ukrainian entities. Please note, however, that the risk of challenging validity of the agreement on these grounds is quite insubstantial. The provisions of the Agreement appear to comply with the requirement of applicable law. Agreement No. -58/9134 The Agreement was entered into by and between the Company, as the Customer, and Alewijnse Ukraine Ltd., as the Seller, on November 15, 2007. Under the agreement the Seller undertakes to carry out electric installation of the vessel No. 9134 and the Customer undertakes to accept and pay for the said work. The price under the agreement is set at UAH 413,919.51 (four hundred thirteen thousand nine hundred nineteen Ukrainian Hryvnias and fifty one kopecks or an equivalent of EUR 55,758). Payment for the work shall be effected in 3 (three) installments of the UAH equivalent of EUR of the set price. The payment of the 3rd installment shall be made upon completion of 100% of the installment work, connections, vessel commissioning and sea trial. The final price depends on the exchange rate of the NBU. The work under the Agreement must be carried out within 6 (six) weeks following the commencement date. Our review of the Agreement revealed that the Agreement is made in both Ukrainian and English languages. There is no need for a bi-lingual version of the Agreement, as both parties appear to be Ukrainian entities. Please note, however, that the risk of challenging validity of the Agreement on these grounds is quite insubstantial. The provisions of the Agreement appear to comply with the requirement of applicable law. In general, the provisions of the described group of contracts are in compliance with the requirements of the effective legislation. We recommend, however, that the Company should refrain from making bi-lingual contracts with Ukrainian resident entities, as there is no necessity for such bi-lingual contracts between Ukrainian resident entities. V. A. Employment Matters General

We have been provided with a very limited number of documents and information regarding the matters in question. In general, it appears that the employment practices of the Company are in compliance with applicable requirements of Ukrainian labor related legislation. It appears that the Company has not been in arrears with salary payments to its employees during the last two years.

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It appears that the collective agreement between the Company, as the employer, and the Company's worker collective is concluded on an annual basis. We have been provided for review a poor English language translation of what appears to be a copy of the collective agreement for 2007-2009 (Blue Binder No. 11, document No. 11.5.2.3.2) (hereinafter referred to as the Collective Agreement). However, we have not been provided with any information evidencing registration of the original Collective Agreement with local authorities as required by applicable law. According to the information provided by the Company, the worker collective of the Company, including the trade union operating at the Company, closely cooperate with the Companys governing bodies, including its Directorate, and there have been no strikes or material employment/labor disputes in the last two years. B. Information on the Companys Employees

According to the information provided to us (Blue Binder No. 11, document No. 11.3.2.3.1), as of January 1, 2008, the Company employees (Employees) totaled 2,601 (two thousand six hundred one) individuals. We believe that the general ratio of employees (i.e., main workers, engineers and office personnel, and auxiliary workers) has not changed since the date of the SDP DDR. Based on the information available to us, as of January 1, 2008, the Companys management structure appears to be as shown in the Blue Binder No. 2, document No. 2.1.3.3.6 (please see details in the Corporate Section of this report). Regarding the Companys hiring procedure, we assume that the employment agreements with the Employees are normally concluded in so-called verbal form, 9 which is confirmed and evidenced by (i) an employment application submitted by a potential Employee, and (ii) respective order on employment issued by the Head (Chairperson) of the Executive Body. We also assume that the relevant entries are made into the Employees labor books. Such hiring procedure is common practice under the effective legislation of Ukraine and is widely used by companies in Ukraine. According to the most recent restated Charter (i.e., the Charter approved by the GMS of the Company pursuant to the minutes No. 6, dated October 16, 2006, as referenced in Binder No. 1, document 1.3.2.6.2) the hiring and/or dismissal of Employees (except persons sitting on the Directorate, the Supervisory Council and the Auditing Commission) are within the authority of the Directorate of the Company. However, according to the Charter, this authority may be delegated for individual consideration to the General Director or a Director. Delegation of this authority to the Director for Personnel and Administration is evidenced by Order No. 233/o, dated March 27, 2007, issued by the President of the Company (Binder No. 2, documents No. 2.6.2.6.2).

Article 24 of the Labor Code.

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C.

Employment Agreements (Contracts) with the Companys Officers

We have not been provided any documents evidencing conclusion of written employment agreements (contracts) between the Company and its officers, i.e., the persons sitting on the Directorate, the Supervisory Council and the Auditing Commission. We assume that the employment agreements with the Ukrainian citizens are concluded in the so-called verbal form, as stated above, and following the relevant decisions of the relevant governing body, as provided by the Companys Charter. However, the Company provided copies of employment agreements for Messrs. Romanchuk (General Director) and Shamray (Financial Director) after access to the Data Room was closed. Please note that the office duties of the General Director of the Company are stated in the Job Description of the General Director of Damen Shipyards Okean OJSC, approved by the Supervisory Council of Damen Shipyards Okean OJSC as of November 15, 2006 (Binder No. 2, documents 2.6.2.6.1). It is stated therein that the Job Description serves as the supplement to the employment agreement between the General Director and the Company, which describes the office duties of the General Director. The Job Description does not provide for any information regarding the General Directors terms of hiring, employment and/or dismissal, its compensation package, benefits, pension plan, etc. It should be noted that the Company must obtain as well as maintain up-to-date employment permits (Employment Permits) for its foreign employees and conclude written employment agreement (contracts) with them. 10 No material documents and information were provided for our review in respect of written employment contracts. However, the Company provided a standard employment contrct for its expat employees after the closing of the Data Room. Employment Permits. According to the provided copies of documents (Yellow Binder No. 80, item No. 1581), the Company holds the following Employment Permits, issued by the State Employment center of the Ministry of Labor and Social Policy of Ukraine: (1) Employment Permit No. 3336, dated December 27, 2007, to employ Peter Viergutz, a citizen of Germany, in the position of Production Director. The Permit is valid until December 26, 2008. Employment Permit No. 2974, dated December 27, 2006, to employ Roger McKay, a citizen of Great Britain, in the position of Procurement Director. The Permit is valid until December 26, 2008. Employment Permit No. 2936, dated October 27, 2006, to employ Torben Levinsen, a citizen of the Kingdom of Denmark, in the position of Procurement Director. The Permit is valid until October 26, 2008.

(2)

(3)

See Resolution No. 2028 of the Cabinet of Ministers of Ukraine On Approval of the Procedure of Issuance to Foreigners and Persons without Citizenship of Permits for Employment in Ukraine, dated November 1, 1999 (as amended).

10

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(4)

Employment Permit No. 3270, dated April 27, 2007, to employ Andres Pedersen, a citizen of Denmark, in the position of Human Resources and Administration Director. The Permit is valid until April 26, 2008. Employment Permit No. 2984, dated March 20, 2007, to employ Florin Mihaleyko, a citizen of Romania, in the position of Information Technology Consultant. The Permit is valid until March 19, 2008. Employment Permit No. 3059, dated April 14, 2007, to employ Gustav Nydal, a citizen of Norway, in the position of Sales and Contracts Manager. The Permit is valid until April 13, 2008. Employment Permit No. 3244, dated August 1, 2007, to employ Michael Gratz, a citizen of Germany, in the position of Investment Manger. The Permit is valid until July 31, 2008. Employment Permit No. 3299, dated November 30, 2006, to employ John Skov Hansen, a citizen of Denmark, in the position of Vice President. The Permit is valid until November 29, 2008. Employment Permit No. 2911, dated September 16, 2006, to employ Michael Hake, a citizen of Germany, in the position of Technical Director. The Permit is valid until September 15, 2008.

(5)

(6)

(7)

(8)

(9)

Our review of the copies of the Employment Permits issued to the Companys foreign Employees did not revealed any legal flaws or inconsistencies. The Employment Permits provided for review appear to be in compliance with the requirements of applicable law. D. Worker Collective and the Collective Agreement Worker Collective General Information. According to Article 13 of the Companys Charter, the worker collective comprises all citizens who participate by their labor in activities of the Company on the basis of an employment agreement (contract, arrangement) as well as other instruments, which govern labor/employment relations between the Employee and the Company. The Company shall independently develop and approve its schedule of personnel, determine salaries, methods and systems of remuneration as well as hiring skilled personnel in the order specified by applicable law of Ukraine. The Company shall have the right to hire foreign citizens (subjects) and to determine the terms and conditions of such hiring on a contractual basis. The labor (worker) collective has the following authority: (i) consideration and approval of a draft Collective Agreement;

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(ii)

consideration and resolution of issues relating to self-governance of the labor (worker) collective pursuant to the Charter and the Collective Agreement; determination and approval of the list of social benefits and the procedure for provision thereof to the Employees pursuant to the Collective Agreement; participation in the provision of material and moral incentives for productive work pursuant to the Collective Agreement; promotion of invention and rationalization activities pursuant to the Collective Agreement; submission of petitions for conferring state awards upon Employees.

(iii)

(iv) (v) (vi)

The highest governing body of the labor (worker) collective that exercises the powers of the labor (worker) collective shall be the meeting thereof. A trade-union body or the council of the labor (worker) collective shall be the representative body of the labor collective as determined by the respective resolution of the meeting of the labor (worker) collective for a certain term. The meeting of the labor (worker) collective shall determine the order of formation, decision-making procedure as well as other issues of activity of the council of the labor (worker) collective. In the event the meeting of the labor (worker) collective decides that the trade-union body shall be appointed as the representative body of the labor (worker) collective, the council of the labor (worker) shall not be elected during the trade-union bodys term in the office of the representative body of the labor (worker) collective. The provisions of Article 13 of the Companys Charter with respect to the worker collective remain identical to those described in the previous version of the Company's Charter, i.e., the one effective prior to October, 2006 and described in the the SDP DDR (Blue Binder No. 14, document 14.1.3.2). Collective Agreement. According to applicable law, 11 a legal entity concludes a corporate collective agreement with its employees. The corporate collective agreement may contain provisions relating to production, labor conditions, labor safety, working hours, labor remuneration, and other employee social and economic benefits, which are superior to those provided by Ukrainian employment/labor legislation. The collective agreement and any amendments thereto are subject to registration with local authorities. 12

Chapter II of the Labor Code, the Law of Ukraine "On Collective Agreements and Treaties," dated July 1, 1993 (as amended) and the Law of Ukraine "On Procedure for Resolution of Collective Labor Disputes," dated March 3, 1998. The Procedure for Registration of Industry and Regional Agreements and collective Agreements, approved by Resolution No. 225 of the CMU, dated April 5, 1994 (as amended).
12

11

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Registration authenticates the collective agreements counterparts and secures possibility to take the collective agreements terms and conditions into account during consideration of labor (employment) disputes, both individual and collective. Upon review of the copy of the unsigned and unregistered English language translation of the Collective Agreement for the years 2007-2009, it appears to have been made between the worker collective of the Company, as represented by the trade union committee, and the employer, as represented by the Directorate. We have not been provided with any indication that the Ukrainian version of the Collective Agreement for the years 2007-2009 was registered with the appropriate local authority. The Collective Agreement for the years 2007-2009 appears to include all mandatory provisions of applicable law compliant with its requirements, as stated above. Standard Employment Agreements. The Company provided for review a sample draft Standard Manager Contract of Employment (Blue Binder No 11, documents 11.14.2.3.2) (the Standard Employment Contract). Our review of the Standard Employment Contract revealed it contains the following sections and provisions: (i) (ii) (iii) (iv) (v) the preamble, containing a description of the parties; the general provisions section, which outlines the general idea and subject matter of the agreement; the rights and obligations section, which describes the general rights and duties of both employer and employee, as required by law; the working time and rest section, describing the office hours, length of annual and additional vacation time, and use thereof; the compensation section, which contains general provisions regarding the possibility of bonuses, compensation for traveling costs, business expenses, a mobile phone and its use, etc.; the confidentiality section, which describes the employees duties regarding the confidential information; the non-competition clause;

(vi) (vii)

(viii) the intellectual property clause; (ix) (x) (xi) (xii) the suspension of the employee clause; the termination of the contract clause, which, in general, complies with the requirements of the effective employment/labor legislation; the dispute resolution clause; the miscellaneous provisions clause and the signatures area.

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The draft Standard Employment Contract is provided for review in the English language. Please note that the English language may not be used as a language for such contract in Ukraine under Ukrainian law. A bi-lingual version of such instrument may be acceptable in case of hiring a foreign national. Nevertheless, in general, the provisions of the draft Standard Employment Contract are in compliance with the provisions of the employment/labor related legislation of Ukraine. E. Wages, Salaries, Incentive Plans

As evidenced by the documents provided for the past 2 years, Employees had been compensated in due time with no payroll arrears. Based on the Companys information (Blue Binder No. 11, document 11.16.2.3.1), in Table 9 below we provide information on the increase of total remuneration of the Employees for the last three years. Table 9. The Companys Employees Remuneration No. 1. 2. 3. Year 2005 2006 2007 Total by the yard 1,369 1,688 2,395 Direct workers 1,469 1,741 2,458

According to information provided by the Company (Blue Binder No. 11, document No. 11.15.2.3.1), the salary amounts in the table above are stated in Hryvnyas for normal work of 167 hours per month (i.e., an average monthly number of working hours). Each hour of overtime work and/or work on weekends is paid for with coefficient 1.8. The Company pays additional 20% for the work during evening hours and additional 30% for the work during night hours. Please note that the bonus system based on effectiveness, productivity and work results is currently under discussion. According to information provided by the Company (Blue Binder No. 11, document No. 11.18.2.6.1), the cars used by the Companys Directors and managers, apparently, according to the contractual terms and conditions, can be summarized as follows: Table 10. Use of Cars by Directors and Managers No. Brand of car License plate number BE0881BE Name of Director Position Regime of use Permanent

1. 2. 3.

Volkswagen Passat B6 Volkswagen Passat Mitsubishi Sport

Torben Levinsen 555 37 HK Romanchuk N. P. BE9189AE Roger McKay

President

General Permanent Director Procurement Permanent Director

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4. 5. 6. 7.

Mitsubishi Sport Ford Focus Ford Focus Ford Mondeo

BE1355BE BE2585AC BE4187AC BE1553AC

8. 9.

Ford Focus Ford Focus

BE2584AC BE4186AC

Technical Director Shamray A. N. Finance Director Evan Jahr IT-consulter Afanasenko A. Deputy of A. Production Director John Hansen VicePresident Michael Gratz Manager for Investment and Maintenance Gustav Nydal Manager for Sales and Contracts

Michael Hake

Permanent Permanent Permanent Permanent

As needed As needed

Please note that the above-mentioned information did not bear any date, Company stamp (seal) or signature. Also, according to the information provided by the Company (Blue Binder No. 2, document No. 2.3.2.6.1), the remuneration of the Companys members of the Directorate can be summarized as follows: Table No.11. Remuneration of the Companys Directors. Position President Vice President Procurement Director Technical Director Production Director Finance Director HR Director Name Torben Ardal Levinsen John Skov Hansen Roger McKay Michael Hake Peter Viergutz Aleksander Shamray Anders Michael Pedersen Remuneration UAH 20.000 per month 8.000 per month 10.000 per month 10.000 per month 10.000 per month 18.000 per month 10.000 per month

Please note that the above-mentioned information did not bear any date, Company stamp (seal) or signature. Also, the information did not include data regarding the General Directors remuneration. F. Confidentiality and Non-Competition Confidentiality We have not been provided with specific documents and information regarding whether the non-disclosure of commercial and other types of confidential information is ensured by internal regulations and documents, as well as non-disclosure agreements with partners, inspecting shareholders, and other visitors of the Company.

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Therefore, we cannot opine on the adequacy of the confidentiality and noncompetition rules established by the Company, if any. In particular, we cannot asses whether the employer instructions to executive staff, research and technical Employees, etc., warn the Employees on disciplinary, material, administrative, and criminal liability for any action or omission, which may lead to disclosure or loss of the Company's confidential information. However, it should be noted that the draft Standard Employment Contract provided for the confidentiality section describing the Employees obligation to observe the rules and procedures established by the Company to prevent disclosure of commercial secrets. Non-Competition No specific material documents, governing the matter of non-competition within the Company, were provided for our review. It should be noted, however, that the draft Standard Employment Contract provided for the non-competition section describing the Employees obligation to observe the rules and procedures established by the Company to ensure non-competition. G. Absentee Rates

According to the information provided by the Company (Blue Binder No. 11, document 11.21.2.3.1) the absence from work for the past 4 years can be summarized as follows: Table No.12. Data on Absence from Work for 2004-2007.
Type of Absence Due to illness Paid absence Unpaid absence Idle time Total 2004 Direct 8.67 1.64 1.72 0.13 12.17 Indirect 3.80 1.07 0.98 0.00 5.85 Total 6.31 1.36 1.36 0.07 9.11 2005 Direct 8.74 1.75 1.39 0.38 12.26 Indirect 3.11 1.49 0.42 0.00 5.02 Total 6.25 1.64 0.96 0.21 9.07 11.70 5.48 9.08 11.42 4.96 8.54 2006 Direct 8.23 1.65 1.82 Indirect 3.71 1.69 0.09 Total 6.32 1.66 1.09 2007 Directs 7.21 1.59 20.61 Indirect 3.79 0.64 0.53 Total 5.68 1.17 1.69

Please also note that unified stipulations, general undertakings and works practices (e.g., as to working time, holidays, supplemental pay, etc.,) are according to the requirements of the Labor Code. The principal ones are as follows: (i) (ii) (iii) (iv) (v) National holidays 10 calendar days; annual paid vacation a minimum of 24 calendar days; paid sick leave; compensation of travel expenses; additions to basic salary according to the Collective Agreement. 80

H.

Pension Scheme

We have not been provided with documents and information regarding the Companys specific pension scheme. It should be noted that according to applicable law, 13 the Ukrainian pension system consists of 3 tiers: (i) (ii) (iii) the mutual system of the mandatory state pension insurance; the accumulating system of the mandatory state pension insurance; the system of non-state (private) pension benefits.

This matter has been discussed in detail in Section XIII of the SDP DDR (Blue Binder No. 14, document 14.1.3.2). As required by law, the Company makes regular payments to the Pension Fund of Ukraine, thus being a part of the mutual system of the mandatory state pension insurance. The accumulating system of the mandatory state pension insurance does not seem to be properly functioning in Ukraine, and, apparently, the Company has no obligations in this regard. Further, it appears that he Company does not make any contributions under non-state (private) pension plans. I. Consultants and Free-Lance Workers

According to the List of Free-Lance Employees (Blue Binder No. 11, document No. 11.26.2.6) prior to January 31, 2008, the Company was using the services of 44 (forty four) free-lance employees. We were not provided any material documents evidencing the basis (i.e., any form of employment agreement) of procuring services of the said free-lance employees. With respect to consultants, it should be noted that the Company provided for review draft standard forms of a Contractor Agreement (Blue Binder No. 11, document 11.25.2.3.1) and a Service Agreement (Blue Binder No.11, document 11.25.2.3.2). The nature of the agreements is the same, i.e., provision of services. These agreements are not governed by the provisions of the employment/labor related legislation. The agreements are governed by the provisions of the Civil and Commercial Codes of Ukraine. In general, both drafts comply with the requirements of the effective legislation, and contain the basic requirements with respect to the parties, subject matter, rights and duties of the parties, payment, scope of liability and dispute resolution, duration and termination provisions, as well as the signing area.
Law of Ukraine No. 1058-IV "On Mandatory State Pension Insurance," dated July 9, 2003 (as amended).
13

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J.

Disputes

According to the information provided by the Company (Blue Binder No. 11, document No. 11.34.2.6.1), the most recent employment/labor related dispute concerned Ms. A. G. Dubkovskayas lawsuit against the Company regarding compensation for forced absence from work and her reinstatement at her position. The claim was satisfied and the Company paid to Ms. Dubkovskaya UAH 6,811 (six thousand eight hundred eleven Ukrainian Hryvnias) in compensation and reinstated her in the position of electrician. The case was closed as of February 7, 2007. Currently the Company is not involved in any labor/employment related disputes. VI. A. Intellectual Property Patents

No respective material documents and information were provided for our review. B. Trademarks

According to the information provided for review (Blue Binder No. 6, documents No. 6.5.3.1), the Company has only one registered trademark. According to the information on pages 173-174 of the document No. 14.1.3.2 (Blue Binder No. 14), the trademark is made in blue and white colors. The registration is valid until September 21, 2011, and can be extended for a successive 10-year term upon payment of a prolongation fee. Further, the trademark was registered on September 15, 2003, for Classes 12, 37, and 39 of the International Classification of Goods and Services for Purposes of Trademark Registration. 14 It should be noted that Ukrainian law 15 provides that the term of a trademark registration certificate should expire in 10 years from the date of filing of the respective registration application. The term can be extended for successive 10-year periods upon the trademark owners request, provided that the relevant prolongation fee has been paid. C. Know-How

No respective material information and documents were provided for review.

Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks, dated June 15, 1957, (as revised and amended). Article 5 of the Law of Ukraine No. 3689-XII "On Protection of Rights to Marks for Goods and Services," dated December 15, 1993 (as amended).
15

14

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D.

Licenses

As evidenced by the information provided by the Company (Blue Binder No. 6, document 6.10.3.1), the Company uses a number of software products. As no material evidence was provided to confirm that the Company uses these products according to effective license agreements, we cannot opine on this issue. According to additionally provided information (Yellow Binder No. 40, document 337), the Company is a party to a License Contract with AVEVA AB regarding the "Tribon" Software, dated April 25, 2007 (the License Contract). The software in question is a specialized shipbuilding suite encompassing all stages of vessel design. According to the License Contract, the Company is entitled as follows: (i) to receive a copy of the software for use on the designated system and at the specified location together with the necessary documentation to install and use the software; to load, install and use the software at the specified location by the number of concurrent specified users; to use the software as specified in the software license; and to receive such new updates of the software incorporating error correction and patches reported to AVEVA by the Company or other users and/or incorporating such upgrades as AVEVA may make from time to time.

(ii) (iii) (iv)

The initial amount of the licensing fee under the License Contract to be paid by the Company is set at EUR 569,110 (five hundred sixty nine thousand one hundred ten euros), and the annual fees are due and payable for each half of the year starting from the date of delivery for the duration of the License according to the payment and delivery schedule. It appears that software license per se, being an integral part of the License Contract, contains all terms and conditions which may be necessary or required for such licenses, including the terms of use, license fees and payment thereof, software enhancement and other services, rights and duties of the parties, warranty, confidential information, duration and termination, assignment, etc. The license commences as of the date set out in the License Contract and continues unless terminated as follows. The licensor, by notice in writing to the licensee, may terminate the license in any of the following events: (i) if the licensee is in breach of any term or condition or provision of the license or required by the applicable law to and fail to remedy such breach (if capable of remedy) within 30 days of having received written notice of such breach;

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(ii)

if the licensee, being a body corporate, shall present a petition on have a petition presented by a creditor for its winding up, or shall convene a meeting to pass a resolution for voluntary winding up, or shall enter into any liquidation (other than for the purposes of a bona fide reconstruction or amalgamation); shall call a meeting of its creditors, or shall have a receiver of all or any of its undertakings or assets appointed, or shall be deemed by the relevant statutory provisions under the applicable law to be unable to pay its debts.

The licensee may terminate the license by giving a 3 (three) months prior written notice to the licensor to take effect twelve months after the date of the software license or any time thereafter. Upon termination, the licensee shall comply with the undertakings specified in the software license and shall pay to the licensor all costs and expenses, including legal and other fees incurred and all arrears of fees, charges or other payments arising in respect of the software, the license or otherwise. Importantly, the licensee may not assign or otherwise transfer all or part of the software or of the license to third parties without prior written consent of the licensor. It should be noted that the validity, construction and performance of the license shall be governed by English law. Any dispute arising under the license shall be subject to the exclusive jurisdiction of the English Courts. Our review of the license did not reveal any legal non-compliances or inconsistencies. E. Vessel Designs and Construction Information, Documents and Other Data

We have not been provided with any documents regarding the Companys property rights to information, documents and other data, relating to the design and construction of the vessels. However, certain Shipbuilding Contracts provide that such rights are (i) either retained by the Company or (ii) remained exclusive property of a vessel purchaser as acknowledged by the Company. To summarize, according to the provided documents and information, the Companys practices related to the exercise of its intellectual property rights appear to be in compliance with applicable law. VII. A. Property and Assets General

As evidenced by the documents and information provided for review, the Company possesses the following property: (1) (2) real estate; certain other tangible assets;

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(3) (4)

certain goods in circulation and processing; certain intangible assets.

Please note that we have been provided with a very limited quantity of documents evidencing (i) the Companys right of ownership of its property and (ii) the acquisition of rights to property. B. Real Estate

The list of the Companys real estate items as of December 31, 2007 is provided in Blue Binder No. 5, document 5.1.3.2. We assume that these items are on the Companys books. Another list of the Companys equipment, technical devices, and other tangible asset as of December 31, 2007 is provided in Blue Binder No. 5, document 5.14.3.2. We also assume that the listed items are on the Companys books. The Land Plot. According to the State Act On the Ownership Rights to Land Plot No. No. 827950 issued to the Company on January 31, 2006 by the Mykolaiv City Council and Mykolaiv City Department of the State Committee of Ukraine for Land Resources (the State Act), the Company is the owner of the land plot with a total area of 1,087,818 square meters, which was obtained by the Company pursuant to the Land Plot Purchase Agreement No. 3856, dated July 4, 2005 (the Land Contract). The land plot is located at the following address: 1 Zavodska Ploscha, Mykolaiv, Ukraine. As the land plot in question falls into the category of industrial land, according to the Land Contract, the designation of the land plot in question is the administration of the production complex of the Companys shipyard located at the stated address. Please note that the land plot was initially mortgaged to B.V. Damen Finance (currently Okean B.V., as discussed below) as provided by Mortgage Agreement No. 5, dated April 18, 2006, for purposes of securing of the Companys obligations under certain Term Loan Facility Agreements. Land Lease. According to the information provided in the SDP DDR, the Mykolaiv City Council granted the Company a 25-year lease of the land plot located beneath 439,939 square meters of the Estuary for the purposes of the Companys production activity, as evidenced by Resolution of the Mykolaiv City Council No. 34/34, dated July 11, 2005. It appears that the Company may have taken steps to prepare the technical documentation for the respective lease agreement. As we were not provided any documents, which evidence the actual conclusion of the lease agreement, we are unable to provide any comments in this respect. Lease Agreements. The Company appears to be a party to number of lease agreements with respect to real estate in the capacity of a lessor. (1) According to the Lease Agreement No. 63, dated July 9, 2007 (Blue Binder No. 5, document no. 5.8.3.3), the Company leases to Teplotechnika limited liability company an area of 33.6 square meters in its Block of Works No. 1,

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and 29.28 square meters of adjacent territory. The term of the lease is set at 11 months with the monthly lease payment in the amount of UAH 408.5 (four hundred eight Ukrainian Hryvnias and fifty kopecks), VAT included. The Lease Agreement appears to be a standard form with all necessary statutory requirements with respect to such type of agreements. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and Organizations. In this connection, please also note that risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low. (2) According to Lease Agreement No. 65, dated May 1, 2007 (Blue Binder No. 5, ref. No. 5.8.3.4), the Company leases to ISD limited liability company an area of 135 square meters in its Wood Processing Facility, and 147 square meters of adjacent territory. The term of lease is set at 11 months with the monthly lease payment in the amount of UAH 868.56 (eight hundred sixty eight Ukrainian Hryvnias and fifty six kopecks), VAT included. The Lease Agreement appears to be a standard form with all necessary statutory requirements with respect to such type of agreements. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and Organizations. In this connection, please note that the risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low. (3) According to Lease Agreement No. 66, dated May 1, 2007 (Blue Binder No. 5, ref. No. 5.8.3.5), the Company leases to ISD limited liability company an area of 50 square meters in its BKC No. 2 building and 53.38 square meters of adjacent territory. The term of lease is set at 11 months with the monthly lease payment in the amount of UAH 321.42 (three hundred twenty one Ukrainian Hryvnias and forty two kopecks), VAT included. The Lease Agreement appears to be a standard form with all necessary statutory requirements with respect to such type of agreements. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and Organizations. In this connection, please note that the risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low. (4) According to Lease Agreement No. 67, dated July 9, 2007 (Blue Binder No. 5, ref. No. 5.8.3.6), the Company leases to Orion-Avto open joint-stock company an area of 65.2 square meters in its Profilactics Garage, facility No. 20 building, and 5,118 square meters of adjacent territory. The term of lease is set at 11 months with the monthly lease payment in the amount of UAH 1440 (one thousand four hundred forty Ukrainian Hryvnias), VAT included.

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The Lease Agreement appears to be a standard form with all necessary statutory requirements with respect to such type of agreements. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and Organizations. In this connection, please note that the risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low. (5) According to Lease Agreement No. 68, dated August1, 2007 (Blue Binder No. 5, ref. No. 5.8.3.7), the Company leases to Akademiya Svarki limited liability company an area of 26 square meters in its BKC No. 2 facility, and 22.66 square meters of adjacent territory. The term of lease is set at 11 months with the monthly lease payment in the amount of UAH 316.38 (three hundred sixteen Ukrainian Hryvnias and thirty eight kopecks), VAT included. The Lease Agreement appears to be a standard form with all necessary statutory requirements with respect to such type of agreements. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and Organizations. In this connection, please note that the risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low. (6) According to Lease Agreement No. 69, dated August 1, 2007 (Blue Binder No. 5, ref. No. 5.8.3.8), the Company leases to Yug Antikor limited liability company an area of 36 square meters in its Block of Assembling Facility, and 7 square meters of adjacent territory. The term of lease is set at 11 months with the monthly lease payment in the amount of UAH 649.36 (six hundred forty nine Ukrainian Hryvnias and thirty six kopecks), VAT included. The Lease Agreement appears to be a standard form with all necessary statutory requirements with respect to such type of agreements. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and Organizations. In this connection, please note that the risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low. (7) According to Lease Agreement No. 71, dated September 17, 2007 (Blue Binder No. 5, ref. No. 5.8.3.9), the Company leases to Yardins limited liability company an area of 144 square meters in its Mechanical Repairs Facility, and 137.7 square meters of adjacent territory. The term of lease is set at 2 years and 11 months with the monthly lease payment in the amount of UAH 199.44 (one hundred ninety nine Ukrainian Hryvnias and forty four kopecks), VAT included. The Lease Agreement appears to be a standard form with all necessary statutory requirements with respect to such type of agreements. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and

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Organizations. In this connection, please note that the risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low. (8) According to Lease Agreement No. 72, dated October 1, 2007 (Blue Binder No. 5, ref. No. 5.8.3.10), the Company leases to Alevainse-Ukraine limited liability company an area of 607 square meters in its BKC No. 1 Facility, and 529 square meters of adjacent territory. The term of lease is set at 11 months with the monthly lease payment in the amount of UAH 354 (three hundred fifty four Ukrainian Hryvnias), VAT included. The Lease Agreement appears to be a standard form with all necessary statutory requirements with respect to such type of agreements. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and Organizations. In this connection, please note that the risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low. (9) According to Lease Agreement No. 73, dated July 22, 2007 (Blue Binder No. 5, ref. No. 5.8.3.11), the Company leases to Raiffaisen Bank Aval open joint-stock company an area of 93.5 square meters in its Administrative Building, and 35.2 square meters of adjacent territory. The term of lease is set at 2 years and 11 months with the monthly lease payment in the amount of UAH 2,250.79 (two thousand two hundred fifty Ukrainian Hryvnias and seventy nine kopecks), VAT included. According to Lease Agreement No. 23/07/07, dated July 23, 2007 (Blue Binder No. 5, ref. No. 5.8.3.12), the Company leases to Pivdenny Terminal limited liability company an area of 72 square meters in its Administrative Building, and 27.11 square meters of adjacent territory. The term of lease is set at 2 years and 11 months with the monthly lease payment in the amount of UAH 417.40 (four hundred seventeen Ukrainian Hryvnias and forty kopecks), VAT included. According to Lease Agreement No. 74, dated October 2, 2007 (Blue Binder No. 5, ref. No. 5.8.3.13), the Company leases to Kompaniya Progress-Story limited liability company fencing equipment, two amenities units, and a storage facility for purposes of administration of construction work. The term of lease is set at 11 months with the monthly lease payment in the amount of UAH 250 (two hundred fifty Ukrainian Hryvnias), VAT included. Please note that these are movable assets. According to Lease Agreement No. 76, dated October 1, 2007 (Blue Binder No. 5, ref. No. 5.8.3.14), the Company leases to sole proprietor Vysotskaya an area of 286 square meters in its Administrative Building, and 258 square meters of adjacent territory. The term of lease is set at 11 months with the monthly lease payment in the amount of UAH 1,695.46 (one thousand six hundred ninety five Ukrainian Hryvnias and forty six kopecks), VAT included.

(10)

(11)

(12)

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(13)

According to Lease Agreement No. 77, dated November 1, 2007 (BB NO. 5, doc. No. 5.8.3.15), the Company leases to "Sozidatel" limited liability company a site of a total area of 1,000 square meters for purposes of processing scrap metal. The term of lease is set at 11 months, with the monthly lease payment in the amount of UAH 793.04, VAT included. According to Lease Agreement No. 78, dated November 1, 2007 (Blue Binder No. 5, ref. No. 5.8.3.19), the Company leases to Yug Ankikor limited liability company an area of 60 square meters in the Assembling Facility, and 11.2 square meters of adjacent territory. The term of lease is set at 12 months with the monthly lease payment in the amount of UAH 722.53 (seven hundred twenty two Ukrainian Hryvnias and fifty three kopecks), VAT included. According to Lease Agreement No. 79, dated December 1, 2007 (Blue Binder No. 5, ref. No. 5.8.3.20), the Company leases to Det Norske Veritas Ukraina limited liability company an area of 70 square meters in the BKC No. 1 Building, and 61 square meters of adjacent territory. The term of lease is set at 2 years and 11 months with the monthly lease payment in the amount of UAH 851.77 (eight hundred seventy seven Ukrainian Hryvnias and seventy seven kopecks), VAT included. Please note that our review of the Lease Agreement revealed a minor flaw, i.e., a reference to a non-existent Law of Ukraine On Lease of Assets of Enterprises and Organizations. In this connection, please note that the risk of challenging the validity of the Lease Agreement on the grounds of the said flaw appears to be extremely low.

(14)

(15)

(16)

According to Lease Agreement No. 5 A, dated September 12, 2007 (Blue Binder No. 5, ref. No. 5.8.3.21), the Company leases to Yug Antikor limited liability company the premises of the Oxygen Station. The term of lease is set at 2 years and 11 months with the monthly lease payment in the amount of UAH 1,532.89 (one thousand five hundred thirty two Ukrainian Hryvnias and eighty nine kopecks), VAT included.

The Company also appears to be a party to a number of lease agreements with respect to real estate in the capacity of a lessee. (1) According to the Land Lease Agreement, dated September 25, 2007 (Blue Binder No. 5, ref. No. 5.7.3.5), the Company leases a land plot from the Ochakiv District State Administration in the Mykolaiv Region. Pursuant to Executive Order No. 384 of the Ochakiv District State Administration in Mykolaiv Region, dated August 1, 2007, the Company accepts for paid use a recreational purpose land plot for allocation and administration of the "Golden Beach" recreation facility. The total area of the land plot in question is 0.2956 hectares. The normative monetary appraisal value of the land plot, including indexation, was UAH 12,945.81 (twelve thousand nine hundred forty five Ukrainian Hryvnias and

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eighty one kopecks) as of January 1, 2006. The land plot is transferred without any flaws, which may prevent its effective use. The term of the lease is set at 5 years. Upon expiry of the term, the lessee is entitled to an option to renew it for a new term upon 30 days prior to expiry notice to the lessor. The annual lease payment for the land plot is set at 10 percent of the normative monetary appraisal value, including the indexation coefficient, which is UAH 1,294.58 (one thousand two hundred ninety four Ukrainian Hryvnias and fifty eight kopecks) as of the date of conclusion of the agreement. The lease payment must be made on a monthly basis. The lessee bears the risk of accidental loss or damage of the land plot. The lessee is required to insure the land plot for the duration of the lease. The agreement is subject to state registration, which was apparently carried out. Our review of the agreement revealed that it contains all provisions required by applicable law. Our review has also revealed the following legal flaw: according to the preamble to the agreement, the Company, as represented by its president, is said to be acting pursuant to the certificate of state registration. Under the applicable law, companies act pursuant to their charters rather than certificates of state registration. Although the risk of challenging validity of the agreement on the basis of this flaw is low, we recommend that the Company take steps in order to cure this flaw. (2) According to the Agreement for the Lease of Residential Premises No. 6120/281 (Blue Binder No. 5, ref. No. 5.7.3.4), the Company recently leased from Flagman N limited liability company, a sub-lessor under the Agreement, residential premises at 61 Shevchenko Street, Apt. 8, Mykolaiv, for purposes of a temporary residence. The lease is concluded for 2 months, from December 6, 2007 to February 6, 2008. The Company undertakes to pay UAH 6,181.20 (six thousand one hundred eighty one Ukrainian Hryvnias and twenty kopecks) per month for the leased premises. The Company agrees to pay the total amount of UAH 12,326.00 (twelve thousand three hundred twenty six Ukrainian Hryvnias) for the lease of the premises within 10 days following the conclusion of the Agreement. As the Agreement does not contain extension provisions, we assume that it has expired. Our review of the Agreement revealed that in general it complies with the requirements of applicable law.

It should be note that we were not provided with title documents evidencing the Companys ownership rights to its real property save for the title document to the land plot. We assume, however, that the Companys rights to its real and other property are properly accounted for on the Companys balance sheet. According to the agreements (contracts) provided for review, the Company appears to be in compliance with the requirements of the law.

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VIII. Environmental Matters A. General

According to the limited information provided by the Company, the activity of the Company observes the safety standards and rules according to Ukrainian law. The Company further provided information that it has two hazardous sites on the territory of the Company. The most hazardous site is the Oxygen (Cryogenic) Station and Oxygen Pipeline, which deals with 50 tons of oxygen that can be harmful to human health. The Company stated that this object is a second level hazard under Ukrainian law and that all of the preventive measures have been taken, including an Emergency Response Plan and worker instructions in case of accidents. The Company provided a copy of the Certificate of State Registration of an Extrahazardous Object issued by the territorial department of the State Committee on Supervision of Labor Safety (Derzhnaglyadokhoronpratsi) in the Mykolaiv Region. The object is entered into the register of extra-hazardous objects under No. 23 on November 5, 2003. Pursuant to the information provided by the Company, the Hot Galvanize Department is also considered a hazardous object due to the fact that it holds tanks with hydrochloric acid and sodium hydroxide. The Company stated that its management has developed and approved safety instructions for workers dealing with equipment regarding safety rules. The department also has an Emergency Response Plan and visual aids and all of the Companys employees are provided with the required HSE. We assume that this refers to the required safety equipment. Please note that we were not provided with a copy of the Emergency Response Plan or the visual aids and we are unable to comment on the compliance of these safety measures with Ukrainian legislation. The Company provided for our review a copy of Permit No. 09/232 of July 19, 2007 issued by the State Environmental Protection Authority in the Mykolaiv Region. Permit No. 09/232 allows the Company to store and use sodium hydroxide in the amount of 2 tons per year. The permission is issued for the period from July 20, 2007 until March 16, 2008. In case of the reoganization or change of name of the Company, the Company will need to apply to re-execute the Permit pursuant to the established procedure. The Company also provided for our review a copy of Permit No. 09/233 of July 7, 2007 issued by the State Environmental Protection Authority in the Mykolaiv Region. Permit No. 09/233 allows the Company to store and use hydrochloric acid in the amount of 60 tons per year. The permission is issued for the period from July 20, 2007 until March 21, 2009. In case of the reoganization or change of name of the Company, the Company will need to apply to re-execute the Permit pursuant to the established procedure.

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According to the statement of the Company, there is a potential hazard of oil escape in the yards water area. For this case, the Company has a Plan of Liquidation and oil gathering. We were not provided with a copy of this Plan or a description of its contents and accessibility by employees and, therefore, we are unable to comment on the compliance of these safety measures with Ukrainian law. According to the SDP DDR (Binder 14A reference number 14.1.3.2), the Company is subject to regular inspections by the local environmental authorities, which have revealed certain cases of the Companys non-compliance with some applicable norms and standards. We were not provided with an update of whether the Company has brought such non-compliances into compliance with the currently effective Ukrainian legislation. We were provided with a copy of the reports prepared by Tebodin in March-April 2005, which include: (i) Report on the Assessment of Environmental Conditions of the Acquired Property (Industrial Site and Water Area of the Bug Estuary) at the OJSC Damen Shipyards Okean, Volume 1; Execution of Soil Survey and Sampling of the Site of the OJSC Damen Shipyards Okean and Belonging to It Part of the Basin of the Bug Estuary, Volume 2; Laboratory Research of Samples of Soil, Bottom Sediments, Surface and Ground Waters of the Site Territory and Part of the Water Area of the Bug Estuary Belonging to the OJSC Damen Shipyards Okean, Volume 3; Assessment of Asbestos Content in Building and Complexes of the OJSC Damen Shipyards Okean, Volume 4.

(ii)

(iii)

(iv)

B.

Galvanic Shop

We were provided with a copy of the letter of the General Director of the Company, Mr. Romanchuk, to the Head of the State Department of Environmental Protection in the Mykolaiv Region, Mr. Y. A. Sedletskiy, dated May 22, 2007. By this letter Mr. Romanchuk requested that the State Department of Environmental Protection provide a conclusion that the galvanic shop premises do not represent a danger to the environment and the health of the Companys employees. This request was submitted in connection with the liquidation of the galvanic production on the premises in question and the preservation of the premises until the resolution of the issue of its further use by the Company for placing a vessel pipline system made of steel pipes. The Company also provided us with a copy of the state ecological expertise conclusion No. 05/231 of the State Department of Environmental Protection in the Mykolaiv Region, entitled Valuation of the Ecological Situation in the Area of the Former Galvanic Site (Workshop No. 4) of the OJSC Damen Shipyards Okean (hereinafter referred to as the Ecological Conclusion), pursuant to additional agreement No. 1 dated April 23, 2007 to the Contractor Agreement No. 12/01 of

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January 12, 2007. Please note that we were not provided with copies of Contractor Agreement No. 12/01 or the additional agreement thereto. According to the Ecological Conclusion of June 6, 2007, certain works were performed on the former galvanic shop to remove possible contamination of the environment, including the deconstruction of the basement structure, the removal of the top two meters of soil around the perimeter of the galvanic shop and the replacement of the top layer of soil by sand. In general, the Ecological Conclusion states that as of its date the level of pollution in the air and soil in the area of the galvanic shop does not exceed the permissible level of concentration. Moreover, the Ecological Conclusion states that the surface water tested around the area of the galvanic shop from the Bug Estuary in comparison with the surface water in the Mykolaiv Region from 2004 until 2007 contains the concentration of metals characteristic for the Bug Estuary. The State Department of Environmental Protection in the Mykolaiv Region concluded that the remaining influence on the environment is within the limits regulated by the requirements of the effective environmental legislation of Ukraine, and the land plot and the structure are suitable for further production exploitation. C. Sludge Pool

The Company provided for our review a copy of Conclusion No. 05/383 of the State Department of Environmental Protection of September 20, 2007 regarding the project for recultivating the polluted lands of the sludge pools Nos. 1 and 2 for galvanic production at the Company (hereinafter referred to as Conclusion No. 05/383. The project calls for the recultivation of the said sludge pools for their further use for manufacturing and civil construction. The sludge pools were used for the gathering and temporary storage of liquid industrial waste from various types of production. The sludge pools measure at 1512 square meters and 2520 square meters respectively and they are located within a 250 x 51 meter area. The recultivation project calls for the covering of the bottom of the sludge pools with a clay shield of 0.5 meters, the pouring and packing of various types of soils, and the planting of perennial grass around the entire area. Conclusion No. 05/383 pointed out the existence of negative environmental influences upon carrying out the recultivation project, including influence on the atmosphere, the soil, underground waters, plants and the social environment. In conclusion, the State Department of Environmental Protection stated that the recultivation project would have a positive influence on the environment by liquidating a potentially dangerous object. The State Department of Environmental Protection recommended moving forward with the project and after the completion of the project it will be possible to return the sludge pool area for production or civil use. The Company also provided for our review of copy of Conclusion No. 05/434 of the State Department of Environmental Protection of November 1, 2007. This conclusion sets forth the report on the results of the recultivation project and the evaluation of the status of the sludge pools.

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The recultivation project was performed by the private company Ingeoekobud at the request of Ukrvodgeo in September of 2007. According to Conclusion No. 05/434, the recultivation project was completed, the soil has been packed down, and the area is in favorable condition. As of the date of Conclusion No. 05/434, there were no environmental or technological negative impacts on the area. In conclusion, the State Department of Environmental Protection stated that the resulting impact on the environment is within the limits of the requirements of the environmental legislation of Ukraine, and the ecological situation on the built-up area is favorable and suitable for further industrial exploitation. Please note that we were not provided with (i) any valid permits with respect to air pollutant emissions, (ii) permits for handling poisonous substances, if applicable, and (iii) other environmental permits. Therefore, we are not in a position to comment on the Companys full compliance with Ukrainian law in these areas. The Company also failed to provide any information with respect to pending applications for environmental permits and licenses. Finally, we were not provided with any documents evidencing the Companys legal obligation to create a safety zone with regard to facilities which emanate hazardous substances, smells, increased levels of noise, vibration, etc. in order to separate such facilities from residential areas as required by Article 114 of the Land Code and other supporting legislation regarding urban sanitary rules. Given the above, we are unable to express a complete opinion with respect to the Companys compliance with Ukrainian environmental laws and regulations. We recommend a review of the above-mentioned matters along with the supporting documents in order to provide a vital assessment of the Companys current compliance with the environmental laws of Ukraine. We were also provided with a preliminary report of the company Norconsult, dated February 15, 2006 with respect to asbestos contamination on the territory of the Companys shipyard (hereinafter referred to as the Norconsult Report). The Norconsult Report was based upon the findings of the above-mentioned Tebodin Report and recommends the removal of asbestos from the Companys facilities. According to the statement of Mr. John Winsnes at our interview on January 28, 2008, the asbestos removal was undertaken and completed. However, we were not provided with any information regarding the final status of the asbestos removal procedure. The Company provided a copy of the Environmental Evaluation at Damen Shipyard Okean performed by the Norwegian Institute for Water Research, dated February 15, 2006 (hereinafter referred to as the NIWR Report). This report was also based on the initial Tebodin Reports and reported contaminant concentration in the surface soil, ground water, sediments, and surface water in the Bug Estuary. The NIWR Report recommended the removal of contamination from the territory of the Companys shipyard. Specifically, the NIWR Report stated that the Company has a 10-year ecological passport/permission to use a sludge pool on the shipyards territory which was in use

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from 1990-1995 and 2000-2006. We were not provided with a copy of a renewed ecological passport/permission to continue to use the sludge pool. However, as stated above, we were provided with evidence that the sludge pools were sufficiently removed from the area in satisfaction of the local environmental authority. Finally, the NIWR Report recommended the sealing off of an old galvanic workshop area, which is large and heavily contaminated with metals. According to the report, the galvanic workshop is a threat to human health, not only because of the high contamination levels, but also the building itself is in decay. As mentioned above, the Company provided documents evidencing the sealing off of the galvanic workshop area and its current ecological status. IX. Financial Matters: Credit Facility Agreements

Please note that the Company provided for review various registration certificates issued by the National Bank of Ukraine with respect to the agreements below only after the closing of the Data Room (Binder 81, ref. Nos. 1611 1623). Based on the final List of Additional Documents of February 27, 2008, we are unable to ascertain which registration certificates relate to which agreements, including the registration of amendments to such agreements. We believe that a review of these registration certificates is vital in ascertaining whether the agreements are currently in compliance with Ukrainian legislation and, if not, whether any steps should be taken to bring them into compliance. A. Credit Agreements between Damen Shipyards Okean OJSC (Borrower) and Okean B.V. (Lender)

In each case below, Okean B.V. became the Lender on the basis of Additional Agreements to each Credit Contract on the basis of an assignment of rights and obligations. The original Lender was B.V. Damen Finance. Term Facility Loan Agreement No. 1 (TFLA 1): Date of Signing 15.03.2004 Date of Repayment 18.04.2008 Interest Rate EURIBOR+3% Contract Amount 7,609,248.00 Credit of Currency EUR According to the accounting of the Company, the debt on 01.12.2007 is EUR 7,609,248.00 (seven million six hundred nine thousand two hundred forty eight euros), while the debt of interest on 01.12.2007 is EUR 1,692,819.05 (one million six hundred ninety two thousand eight hundred nineteen euros and five cents). According to the accounting of Okean B.V. (provided by the Company), the debt on 01.12.2007 is EUR 7,609,248.00 (seven million six hundred nine thousand two

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hundred forty eight euros), while the debt of interest on 01.12.2007 is 1,692,819.05 (one million six hundred ninety two thousand eight hundred nineteen euros and five cents). However, according to the information provided by the Copmpany, as of January 1, 2008 the debt is now EUR 4,509,248.00 (four million five hundred nine thousand two hundred forty eight euros). In this connection, we have not been provided with any document evidencing payment made on the principal debt between 01.12.2007 and 01.01.2008. On August 18, 2004, TFLA 1 was amended by Additional Agreement No. 1, which resulted in the replacement of B.V. Holding, the original lender, with Damen Finance, the New Lender. Thereunder, BV Holding had assigned and transferred all of its rights and responsibilities under TFLA 1 to Damen Finance, and this assignment had been accepted by Damen Finance and the Company. Additional Agreement No. 2 to TFLA 1, dated April 1, 2005, prolonged the date of repayment of the loan facility from April 18, 2005 to April 18, 2008. On July 20, 2006 TFLA 1 was amended by Additional Agreement No. 3, which resulted in the replacement of Damen Finance with Okean B.V. (the Lender). Thereunder, Damen Finance had assigned and transferred all of its rights and responsibilities under TFLA 1 to Okean B.V., and this assignment had been accepted by Okean B.V. and the Company. On December 3, 2007, the Lender and the Borrower signed Additional Agreement No. 4 to TFLA 1 on the termination of loan liabilities and unpaid interest under TFLA 1. As a consequence, the Borrowers liability in the amount of EUR 3,100,000.00 (three million one hundred thousand euros) was terminated; however, the unpaid interest due on the basic loan liability in the amount of EUR 613,788 (six hundred thirteen thousand seven hundred eighty eight euros) remains due. The parties also agreed to terminate the Borrowers liability for unpaid interest under TFLA 1 which accrued from March 15, 2004 until September 30, 2007 in the amount of EUR 689,652.78 (six hundred eighty nine thousand six hundred fifty two euros and seventy eight cents). Term Facility Loan Agreement No. 2 (TFLA 2) Date of Signing 15.03.2004 Date of Repayment 29.08.2009 Interest Rate EURIBOR+4% Contract Amount 5,059,411.00 Credit of Currency EUR According to the accounting of the Company, the debt on 01.12.2007 is EUR 5,059,411.00 (five million fifty nine thousand four hundred eleven euros), while the

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debt of interest on 01.12.2007 is EUR 1,322,317.87 (one million three hundred twenty two thousand three hundred seventeen euros and eighty seven kopecks). According to the accounting of Okean B.V. (provided by the Company), the debt on 01.12.2007 is 0.00, while the debt of interest on 01.12.2007 is 0.00. On August 18, 2004 TFLA 2 was amended by Additional Agreement No. 1, which resulted in the replacement of B.V. Holding, the original lender, with Damen Finance, the New Lender. Thereunder, BV Holding had assigned and transferred all of its rights and responsibilities under TFLA 2 to Damen Finance, and this assignment had been accepted by Damen Finance and the Company. On July 20, 2006 TFLA 2 was amended by Additional Agreement No. 2, which resulted in the replacement of Damen Finance with Okean B.V. (the Lender). Thereunder, Damen Finance had assigned and transferred all of its rights and responsibilities under TFLA 1 to Okean B.V., and this assignment had been accepted by Okean B.V. and the Company. On November 1, 2007, the Lender and the Borrower signed Additional Agreement No. 3 to TFLA 2 on the termination of loan liabilities and unpaid interest under TFLA 2. As a consequence, the Borrowers liability in the amount of EUR 5,059,411.00 (five million fifty nine thousand four hundred eleven euros) was terminated. The parties also agreed to terminate the Borrowers liability for unpaid interest under TFLA 2 which were accrued from March 15, 2004 until September 30, 2007 in the amount of EUR 1,322,317.87 (one million three hundred twenty two thousand three hundred seventeen euros and eighty seven cents). Term Facility Loan Agreement No. 3 (TFLA 3) Date of Signing 15.03.2004 Date of Repayment 15.03.2009 Interest Rate EURIBOR+4% Contract Amount 11,400,000.00 Credit of Currency EUR According to the accounting of the Company, the debt on 01.12.2007 is EUR 11,400,000.00 (eleven million four hundred thousand euros), while the debt of interest on 01.12.2007 is EUR 1,155,084.11 (one million one hundred fifty five thousand eighty four euros and eleven kopecks). According to the accounting of Okean B.V. (provided by the Company), the debt on 01.12.2007 is EUR 11,400,000.00 (eleven million four hundred thousand euros), while the debt of interest on 01.12.2007 is EUR 1,55,084.11 (one million one hundred fifty five thousand eighty four euros and eleven kopecks).

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On August 18, 2004 TFLA 3 was amended by Additional Agreement No. 1, which resulted in the replacement of B.V. Holding, the original lender, with Damen Finance, the New Lender. Thereunder, BV Holding had assigned and transferred all of its rights and responsibilities under TFLA 3 to Damen Finance, and this assignment had been accepted by Damen Finance and the Company. On July 20, 2006 TFLA 3 was amended by Additional Agreement No. 2, which resulted in the replacement of Damen Finance with Okean B.V. (the Lender). Thereunder, Damen Finance had assigned and transferred all of its rights and responsibilities under TFLA 3 to Okean B.V., and this assignment had been accepted by Okean B.V. and the Company. On August 3, 2006 TFLA 3 was amended by Additional Agreement No. 3, which increased the amount of the facility to from EUR 5,000,000 (five million euros) to EUR 8,500,000.00 (eight million five hundred thousand euros). On October 25, 2006 TFLA 3 was once again amended by Additional Agreement No. 4, which increased the amount of the facility to EUR 11,400,000.00 (eleven million four hundred thousand euros) and prolonged the maturity date to March 15, 2009.

Term Facility Loan Agreement No. 4 (TFLA 4) Date of Signing 08.08.2005 Date of Repayment 08.08.2008 Interest Rate USDLIBOR+4% Contract Amount 14,530,000 Credit of Currency USD According to the accounting of the Company, the debt on 01.12.2007 is EUR 14,529,784.44 (fourteen million five hundred twenty nine thousand seven hundred eighty four Ukrainian Hryvnias and forty four kopecks), while the debt of interest on 01.12.2007 is EUR 1,622,540.07 (one million six hundred twenty two thousand five hundred forty Ukrainian Hryvnias and seven kopecks). According to the accounting of Okean B.V. (provided by the Company), the debt on 01.12.2007 is 14,529,784.44 (fourteen million five hundred twenty nine thousand seven hundred eighty four Ukrainian Hryvnias and forty four kopecks), while the debt of interest on 01.12.2007 is EUR 1,622,540.07 (one million six hundred twenty two thousand five hundred forty Ukrainian Hryvnias and seven kopecks). On July 20, 2006 TFLA 4 was amended by Additional Agreement No. 1, which resulted in the replacement of Damen Finance with Okean B.V. (the Lender). Thereunder, Damen Finance had assigned and transferred all of its rights and responsibilities under TFLA 4 to Okean B.V., and this assignment had been accepted by Okean B.V. and the Company. Moreover, the amount of the loan facility was increased from USD 5,796,821.00 (five million seven hundred ninety six thousand

98

eight hundred twenty one United Stated Dollars) to USD 14,530,000 (fourteen million five hundred thirty thousand United States Dollars). Additional Agreement No. 1 to TFLA 4 also introduced the following amendments to TFLA 4: Section 2.2 The Borrower shall apply all amounts, borrowed under the Facility after the date of Additional Agreement No. 1 to the Agreement, exclusively towards repayment of loans provided to the Borrower under Agreement on Providing Financial Services No. 01/39, dated May 4, 2001, by and between the Borrower and JSB ING Bank Ukraine as amended, and Loan Agreement No. 010/08-11/204CR, dated November 24, 2005, by and between the Borrower and Aval Joint Stock Post Pension Bank, and all other amounts payable under these agreements, including conversion of amounts in US Dollars borrowed under the Facility into relevant currency of such a loan and/or amount to be repaid. A second paragraph was added to Section 3.3 as follows: At the written demand of the Lender, if so permitted by applicable Ukrainian law then in force, the Borrowers obligation to repay any Loan or a part thereof, and/or interests accrued thereon and any other amount owing hereunder, shall be extinguished by a setoff of mutual claims according to Article 601 of the Civil Code of Ukraine against the Lenders obligation to pay value of the shares of additional issuance of the Borrower subscribed by the Lender, if any. On November 13, 2006, the parties concluded Additional Agreement No. 2 to TFLA 4, which provided that the Borrower may re-borrow any part of the Facility which is repaid. The purpose of the Facility was also amended to financing the Borrowers capital expenditures and for general corporate purposes of the Borrower. With respect to TFLAs 1-4, we did not examine the Ukrainian versions thereof; however, we assume they exist as the agreements state that they were concluded in both Ukrainian and English. Term Loan Facility Agreement No. 5 (TLFA 5) Date of Signing 14.06.2007 Date of Repayment 14.06.2012 Interest Rate Three percent (3%) per annum above 3 Month EURIBOR+3% Contract Amount 25,000,000.00 Credit of Currency EUR According to the accounting of the Company, the debt on 01.12.2007 is EUR 18,985,050.00 (eighteen million nine hundred eighty five thousand fifty euros), while the debt of interest on 01.12.2007 is EUR 126,462.07 (one hundred twenty six thousand four hundred sixty two euros and seven cents).

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According to the accounting of Okean B.V. (provided by the Company), the debt on 01.12.2007 is EUR 18,985,050.00 (eighteen million nine hundred eighty five thousand fifty euros), while the debt of interest on 01.12.2007 is 126,462.07 (one hundred twenty six thousand four hundred sixty two euros and seven cents). B. Connected Agreements Agreement on Pledge of Property Rights to Bank Accounts An Agreement on the Pledge of Property Rights to Bank Accounts was concluded by and between the Company, as the Pledgor, and B.V. Damen Finance, as the Pledgee, on November 25, 2004 in the city of Mykolaiv (hereinafter the Bank Account Pledge Agreement or BAPA). BAPA was concluded for purposes of securing the obligations of the Pledgor arising from Term Loan Facility Agreements Nos. 1, 2 and 3 of March 15, 2004 (including Supplementary Agreements 16 thereto up to Supplementary Agreement No. 6, dated March 21, 2007). On September 19, 2005, Supplementary Agreement No. 3 to BAPA was amended to include the securing of obligations under Term Loan Facility Agreement No. 4, dated August 8, 2005. On July 31, 2006, Supplementary Agreement No. 4 to BAPA was concluded by and between DSO, as the Pledgor, B.V. Damen Finance, as the Original Pledgee, and Okean B.V., as the New Pledgee. Pursuant to Supplementary Agreement No. 4 to BAPA, the Original Pledgee assigned all of its rights and obligations to the New Pledgee under BAPA due to the assignment of the Original Pledgees rights and obligations to the New Pledgee under Term Loan Facility Agreements Nos. 1-4 with all subsequent amendments and additions. The pledge is a first ranking pledge (the Pledge) over the Pledgors right to receive funds together with all interest thereon available at or accruing to the Pledged Accounts up to an aggregate maximum amount of EUR 24,068,659 (twenty four million sixty eight thousand six hundred fifty nine euros) and USD 14,530,000 (fourteen million sixty eight thousand six hundred fifty nine United States Dollars). The maximum amount of the secured obligations under BAPA is the aggregate of EUR 30,292,275.64 (thirty million two hundred ninety two thousand two hundred seventy five euros and sixty four cents) and USD 17,336,432.08 (seventeen million three hundred thirty six thousand four hundred thirty two United States Dollars and eight cents). The list of Pledged Accounts was listed in the SDP DDR, and the only change to this list up to March 21, 2007 that we reviewed was the closing of the following account as evidenced in Supplementary Agreement No. 5 to BAPA:
No. Bank Name Bank Address Bank Facsimile Account Number Account Type Currency

Supplementary Agreement No. 1, dated June 5, 2005; Supplementary Agreement No. 2, dated June 19, 2005; Supplementary Agreement No. 3, dated September 19, 2005; Supplementary Agreement No. 4, dated July 31, 2006; Supplementary Agreement No. 5, dated June 25, 2006; Supplementary Agreement No. 6, dated March 21, 2007.

16

100

1.

JSPPB AVAL

19/19 Artyleriyska St., Mykolaiv, 54030

+380 512 35 96 65

20620383

Investment

UAH

Funds Debiting Agreements Funds Debiting Agreement No. 1 was concluded by and between the Company, as the Pledgor, B.V. Damen Finance, as the Pledgee, and JSB ING Bank Ukraine, as the Bank, on November 26, 2004 for purposes of securing the obligations of the Pledgor arising from Term Loan Facility Agreements Nos. 1, 2 and 3, dated March 15, 2004, and Additional Agreements No. 1 thereto, dated August 18, 2004 (hereinafter FDA 1). This agreement sets forth the enforcement mechanism with respect to title to the Pledged Accounts the Pledgor holds at the Bank (9 accounts in UAH, USD and EUR) under BAPA, and provides for contractual transfer of funds in favor of the Pledgee by the Bank upon an Event of Default under the BAPA. FDA 1 is effective from the date of its execution until the earliest of (i) the date on which the Pledgee notifies the Pledgor and the Bank of the full satisfaction of the claims under FDA 1 or (ii) the termination date of BAPA. On July 29, 2005, the parties executed Supplementary Agreement No. 1 to FDA 1, which amended the purpose of FDA 1 to include Additional Agreement No. 2, dated April 1, 2005, to Term Loan Facility Agreements Nos. 1, 2 and 3. Subsequently, on September 20, 2005, FDA 1 was further amended by Supplementary Agreement No. 2 thereto, adding the securing of obligations under Term Loan Facility No. 4, dated August 8, 2005, with any subsequent amendments, additions, and annexes to Term Loan Facility Agreements Nos. 1-4 concluded by the Pledgor. On October 11, 2006, FDA 1 was terminated pursuant to Termination Agreement to Funds Debiting Agreement No. 1 with any subsequent amendments, additions, and annexes thereto, dated November 26, 2004 by and among the Company, as Pledgor, B.V. Damen Finance, as Original Pledgee, Okean B.V., as New Pledgee, and JSB ING Bank Ukraine, as the Bank (hereinafter referred to as the Termination Agreement). The Termination Agreement was apparently executed in connection with the assignment of rights and obligations by B.V. Damen Finance to Okean B.V. under the Term Loan Facility Agreements Nos. 1-4. The parties agreed that they do not have any claims to each other related to FDA 1 and its performance. Subsequently, Funds Debiting Agreement No. 2, dated October 11, 2006, was entered into by and between the Company, as the Pledgor, Okean B.V., as the Pledgee, and JSB ING Bank Ukraine, as the Bank (hereinafter referred to as FDA 2). FDA 2 basically restated and updated the terms and conditions of FDA 1 with respect to the securing of the obligations of the Pledgor arising from Term Loan Facility Agreements Nos. 1-4 with any subsequent amendments, additions and annexes thereto concluded by the Pledgor. On February 23, 2007, the parties concluded Supplementary Agreement No. 2 to FDA 2 with minor amendments regarding currency conversion and the recognition of Mr. John Winsnes, a Norwegian national, as the Pledgees attorney-in-fact to perform on behalf of the Pledgee all powers under BAPA and FDA 2.

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Finally, on October 12, 2006, Funds Debiting Agreement No. 3 was entered into by and between the Company, as the Pledgor, Okean B.V., as the Pledgee and Raiffeisen Bank Aval OJSC, as the Bank (hereinafter referred to as FDA 3). FDA 3 contains the same terms and conditions for securing the Pledgors obligations under Term Loan Facility Agreements Nos. 1-4 with any subsequent amendments, additions and annexes thereto concluded by the Pledgor. FDA 3 covers the Pledged Accounts of the Pledgor located at the Bank (24 bank accounts in UAH, USD and EUR). Property Rights Pledge Agreement The Property Rights Pledge Agreement was concluded on November 10, 2005, by and between the Company, as the Pledgor, and B.V. Damen Finance, as the Pledgee (hereinafter referred to as the PRPA). PRPA secures the Companys performance under the Term Loan Facility Agreements Nos. 1-4 and, specifically, the repayment of the principal of the actually drawn up loans in the aggregate amount not exceeding EUR 24,068,659 (twenty four million sixty eight thousand six hundred fifty nine euros) and USD 14,530,000 (fourteen million five hundred thirty thousand United States Dollars), payment of interest accrued thereon, possible penalties, and other expenses on the terms and conditions set forth in TLFA Nos. 1-4. In an event of default specified in the PRPA and/or TLFA Nos. 1-4 Damen Finance shall be entitled to recover against the Companys creditor rights to collect on the commercial obligations under effective contracts of the Company listed in Annex 1 to PRPA, save the Shipbuilding Contracts, prior to other creditors of the Company. Six Supplementary Agreements were executed in relation to PRPA, which can be divided into two categories. 1. Supplementary Agreements Nos. 1 (March 21, 2006) 3 (September 25, 2006), 4 (October 15, 2006), 5 (March 21, 2007), and 6 (June 27, 2006) set forth the acquired rights of the Company which should be included into the pledged rights under the PRPA and the terminated rights which should be excluded from the pledged rights under the PRPA. Each of these Supplementary Agreements provides a list of such acquired and terminated rights. Supplementary Agreement No. 2, dated July 31, 2006, was executed by and between the Company, as the Pledgor, B.V. Damen Finance, as the Original Pledgee, and Okean B.V., as the New Pledgee. This Agreement basically provides that the Original Pledgee assigned all of its rights and obligations under PRPA to the New Pledgee due to the assignment of rights and the transfer of obligations from the Original Pledgee to the New Pledgee under the Term Facility Loan Agreements Nos. 1-4 with any subsequent amendments, additions and annexes thereto concluded by the Pledgor.

2.

Apparently, according to documents reviewed, the Companys creditor rights to collection the commercial obligations under the Companys major contracts, save the Shipbuilding Contracts, as of November 10, 2005, are pledged under PRPA.

102

Moveable Property Pledge Agreement It should be noted that the copy of this agreement (and its annexes) provided for our review was not signed or sealed by the parties. We assume that an original, signed and sealed agreement exists. Moveable Property Pledge Agreement was concluded on April 29, 2004 by and between the Company and BV Holding (hereinafter referred to as the MPPA). On October 14, 2004, MPPA was amended by Supplementary Agreement No. 2, under which BV Holding had assigned and transferred to Damen Finance all its rights and responsibilities under MPPA, Damen Finance had accepted such assignment and transfer of rights and responsibilities, and the Company confirmed its awareness of, and complete consent to, such assignment and transfer of rights and responsibilities. Thus, the parties to MPPA became the Company, as the Pledgor, and Damen Finance, as the Pledgee. MPPA secures the Companys performance under the TLFAs Nos. 1-4, i.e., repayment of the principal of the actually drawn up loans in the aggregate amount not exceeding EUR 24,068,659 (twenty four million sixty eight thousand six hundred fifty nine euros) and USD 14,530,000 (fourteen million five hundred thirty thousand United States Dollars), payment of interest accrued thereon, possible penalties, and other expenses on the terms and conditions set forth in the Term Loan Facility Agreements. The maximal amount of the secured obligations is the aggregate of EUR 30,292,275.64 (thirty million two hundred ninety two thousand two hundred seventy five euros and sixty four kopecks) and USD 17,336,432.08 (seventeen million three hundred thirty six thousand four hundred thirty two United States Dollars and eight cents). In an event of default specified in MPPA and/or the Term Loan Facility Agreements, Okean B.V. shall be entitled to recover against the aggregate of the Companys movable property listed in Annex 1 to MPPA prior to other creditors of the Company. MPPA is amended after the end of each calendar quarter to include into the pledged property new movables acquired by the Company during the quarter and to remove from the pledge property the items written off from the Companys balance sheet. On July 31, 2006, the parties signed Supplementary Agreement No. 11 to the MPPA, under which Damen Finance (the Original Pledgee) assigns all of its rights and obligations under MPPA to Okean B.V. (the New Pledgee) in connection with the signing of the Term Loan Facility Agreements Nos. 1-4 with subsequent amendments and additions. The last Supplementary Agreement provided for our review was Supplementary Agreement No. 18, dated July 9, 2007. The Supplementary Agreement to the MPPA for the last quarter of 2007 was not provided for our review. Please note that most of the copies of the MPPA and the Supplementary Agreements thereto up to 2006 provided for our review do not have signatures and seals affixed thereto. We therefore have assumed the authenticity of the originals.

103

Intangible Assets Pledge Agreement The copy of this agreement (and its annexes) provided for our review was not signed or sealed by the parties. We assume that an original, signed and sealed agreement exists. The Intangible Assets Pledge Agreement was concluded on November 25, 2004 by and between DSO, as the Pledgor, and Damen Finance, as the Pledgee (hereinafter referred to as the IAPA). IAPA secures the Companys performance under the Term Loan Facility Agreements Nos. 1-4, i.e., repayment of the principal of the actually drawn up loans in the aggregate amount not exceeding EUR 24,068,659 (twenty four million sixty eight thousand six hundred fifty nine euros) and USD 14,530,000 (fourteen million five hundred thirty thousand United States Dollars), payment of interest accrued thereon, possible penalties, and other expenses on the terms and conditions set forth in the Term Loan Facility Agreements Nos. 1-4. The maximal amount of the secured obligations shall be in the aggregate EUR 30,292,275.64 (thirty million two hundred ninety two thousand two hundred sevety five euros and sixty four cents) and USD 17,336,432.08 (seventeen million three hundred thirty six thousand four hundred thirty two United States Dollars and eight cents). In an event of default specified in the IAPA and/or the Term Loan Facility Agreements Nos. 1-4, Okean B.V. shall be entitled to recover against the aggregate of the Companys rights to the intellectual property objects listed in Annex 1 to IAPA prior to other creditors of the Company. IAPA is amended after the end of each calendar quarter to include into the pledged property new intangibles acquired by the Company during the quarter and to remove from the pledged property the items written off from the Companys balance sheet. On July 31, 2006, the parties signed Supplementary Agreement No. 9 to the IAPA, under which Damen Finance (the Original Pledgee) assigned all of its rights and obligations under IAPA to Okean B.V. (the New Pledgee) in connection with the signing of the Term Loan Facility Agreements Nos. 1-4 with subsequent amendments and additions. The last Supplementary Agreement provided for our review was Supplementary Agreement No. 13, dated June 27, 2007. The Supplementary Agreement to the IAPA for the last quarter of 2007 was not provided for our review. Please also note that most of the copies of the IAPA and the Supplementary Agreements thereto up to 2006 provided for our review do not have signatures and seals affixed thereto. We have therefore assumed the authenticity of the originals. Goods In Circulation and Processing Pledge Agreement (GCPPA)

104

The copy of the agreement (and its annexes) provided for our review was not signed or sealed by the parties. We have therefore assumed that an original, signed and sealed agreement exists. GCPPA was concluded on September 19, 2005 by and between the Company, as the Pledgor, and Damen Finance, as the Pledgee. GCPPA secures the Companys performance under the Term Loan Facility Agreements Nos. 1-4, i.e., repayment of the principal of the actually drawn up loans in the aggregate amount not exceeding EUR 24,068,659 (twenty four million sixty eight thousand six hundred fifty nine euros) and USD 14,530,000 (fourteen million five hundred thirty thousand United States Dollars), payment of interest accrued thereon, possible penalties, and other expenses on the terms and conditions set forth in the Term Loan Facility Agreements Nos. 1-4. The maximal amount of the secured obligations shall be in the aggregate EUR 30,292,275.64 (thirty million two hundred ninety two thousand two hundred seventy five euros and sixty four cents) and USD 17,336,432.08 (seventeen million three hundred thirty six thousand four hundred thirty two United States Dollars and eight cents). Part of the pledged property transferred by the Pledgor is subject to replacement with all of the goods in circulation and processing which: (i) were acquired by the Pledgor after the date of GCPPA; (ii) are goods in circulation and processing according to Ukrainian law, however, are not property that cannot be pledged pursuant to Ukrainian law; and (iii) entered into the Pledgors books after the date of GCPPA. In the event of a default specified in the GCPPA and/or the Term Loan Facility Agreements Nos. 1-4, Okean B.V. shall be entitled to recover against the aggregate of the Companys goods in circulation and processing listed in Annex 1 to GCPPA prior to other creditors of the Company. On July 31, 2006, the parties signed Supplementary Agreement No. 2 to the GCPPA, under which Damen Finance (the Original Pledgee) assigned all of its rights and obligations under GCPPA to Okean B.V. (the New Pledgee) in connection with the signing of the Term Loan Facility Agreements Nos. 1-4 with subsequent amendments and additions. The last Supplementary Agreement provided for our review was Supplementary Agreement No. 6, dated June 27, 2007. The Supplementary Agreement to the GCPPA for the last quarter of 2007 was not provided for our review. Please also note that most of the copies of the IAPA and the Supplementary Agreements thereto up to 2006 provided for our review do not have signatures and seals affixed thereto. We have therefore assumed the authenticity of the originals. Mortgage Agreements

105

The Company provided the following summarized information on mortgage agreements concluded by the Company to secure the Companys performance under the Term Loan Facility Agreements Nos. 1-4.
No. 1. Title MA 1 Signing Date July 5, 2005 Termination Date Date of discharge of all payment obligations under TLFAs Nos. 1-4 with the following maturity dates: - TLFA 1 April, 18, 2008; - TLFA 2 August 29, 2009; - TLFA 3 March 15, 2009 Mortgage Okean B.V. (on basis of Agreement on Assignment of Rights and Obligations Under MA 1, dated July 31, 2006) Mortgaged Property / Appraised Value The Integrated Property Complex, Apartments and 1 registered floating item EUR 13,948,533 Supplementary Agreements Agreement on Amendments No. 1 to MA 1, dated September 19, 2005; Agreement on Amendments No. 2 to MA 1, dated January 18, 2006 (re: removal of 2 floating items); Agreement on Amendments No. 3 to MA 1, dated July 31, 2006 Agreement on Amendments No. 4 to MA 1, dated October 28, 2006 Agreement on Amendments No. 5 to MA 1, dated April 19, 2007 Agreement on Amendments No. 1 to MA 2, dated September 19, 2005; Agreement on Amendments No. 2 to MA 2, dated August 1, 2006; Agreement on Amendments No. 3 to MA 2, dated

2.

MA 2

July 2005

5,

Ibid.

Ibid. (on basis of Agreement on Assignment of Rights and Obligations Under MA 2, dated July 31, 2006)

The Recreation Center EUR 15,183

106

November 13, 2006; Agreement on Amendments No. 4 to MA 2, dated April 20, 2007 Agreement on Amendments No. 1 to MA 3, dated July 31, 2006; Agreement on Amendments No. 2 to MA 3, dated October 28, 2006; Agreement on Amendments No. 3 to MA 3, dated April 19, 2007

3.

MA 3

September 19, 2005

4.

Subsequent MA 4

January 18, 2006

Date of discharge of all payment obligations under TLFAs Nos. 1-4 with the following maturity dates: - TLFA 1 April, 18, 2008; - TLFA 2 August 29, 2009; - TLFA 3 March 15, 2009; - TLFA 4 August 8, 2008 Ibid.

Ibid. (on basis of Agreement on Assignment of Rights and Obligations Under MA 3, dated July 31, 2006)

2 detached buildings, Water Supply & Pump Station EUR 170,966

Ibid. (on basis of Agreement on Assignment of Rights and Obligations Under Subsequent MA 4, dated July 31, 2006)

2 registered floating items EUR 2,513,194

Agreement on Amendments No. 1 to MA 4, dated July 31, 2006; Agreement on Amendments No. 2 to MA 4, dated October 28, 2006; Agreement on Amendments No. 3 to MA 4, dated April 19, 2007 Agreement on Amendments No. 1 to MA 5, dated July 31, 2006; Agreement on Amendments No. 2 to MA 5, dated October 28,

5.

MA 5

April 18, 2006

Ibid.

Ibid. (on basis of Agreement on Assignment of Rights and Obligations Under MA 5, dated July 31,

Land Plot located at 1 Zavodskaya Square, Korabelny District of the city of Mykolaiv with a total area of 1,087,818 (one million eighty seven thousand eight hundred eighteen) square meters. Land cadastre No. 4810136600:07:001:0011. Designation

107

2006)

maintenance of industrial complex of shipyard with industrial land status.

2006; Agreement on Amendments No. 3 to MA 5, dated April 19, 2007

According to the mortgage agreements (hereinafter referred to as the MAs), the Company shall retain possession of the mortgaged property and shall have the right to use the mortgaged property in accordance with the designated use thereof, destruct, or carry out capital repairs of buildings (structures), or to make material improvements thereof, and also to receive products, benefits and income derived from the mortgaged property. In case of destruction, the Company must restore or replace destroyed property with other property with a value and liquidity equal to those of the destroyed mortgaged property and satisfactory to Okean B.V. In the event of default specified in the MAs and/or the Term Loan Facility Agreements Nos. 1-4 by the Company, Okean B.V. shall be entitled to satisfy its claims under these agreements through execution levied on the mortgaged property or any part thereof under one of the following procedures: (i) acquisition by Okean B.V. of the title to the mortgaged property or any part thereof on account of the performance of the Companys obligations in the manner set forth in the MAs; sale of the mortgaged property or any part thereof through the execution of a sale-purchase agreement with a third party buyer as provided by the mortgage law; sale of the mortgaged property or any part thereof, on which execution is levied upon a writ of execution by a notary, via a public auction.

(ii)

(iii)

The Company is permitted to alienate the mortgaged property or a part thereof to third parties, provided that the mortgage remains on the property with respect to such third parties and the prompt notification of Okean B.V. immediately after the sale or alienation otherwise of mortgaged property. It is worth noting that one of the Companys obligations under the MAs is immediately obtaining and during the entire security period maintaining an insurance policy covering accidental destruction, damage or deterioration of the mortgage property for the full value thereof with Okean B.V. named therein as the beneficiary, which, in the event of any insured accident, shall acquire the right to claim from the insurer. In some cases copies of the MAs evidence notarial certification, while in other cases the Agreements on Amendments thereto were certified by a notary. Therefore, the documents appear to be in compliance with Ukrainian legislation and they are duly executed, notarized and registered.

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To summarize, according to the provided documents and information, the Companys practices related to financial matters, including credit facility, pledge and mortgage relations, appear to be in compliance with the effective legislation. It also appears that most of the Companys tangible and intangible assets are pledged or mortgaged in order to secure fulfillment of its obligations under the credit facility agreements. X. Insurance

Pursuant to Article 4 of the Law of Ukraine No. 85/96-VR On Insurance, dated March 7, 1996 (hereinafter referred to as the Insurance Law), objects which may be insured are property interests with regard to (i) life, health, working ability and pension of an individual (personal insurance), (ii) possession, use and disposal of property (property insurance), and (iii) compensation of damage caused by an insured person to another person or his/her/its property (liability insurance). Insurance in Ukraine may be mandatory or voluntary (Article 5 of Insurance Law). A. Mandatory State Social Insurance

Ukrainian law requires that employers insure their employees by the following types of insurance: (i) (ii) state pension insurance (Law of Ukraine On Mandatory State Pension Insurance, dated July 9, 2003, No. 1058-IV, as amended); state social insurance against accidents at the workplace and professional illnesses (Law of Ukraine On Mandatory State Social Insurance against Accidents at the Workplace and Professional Illnesses that Cause Disability, dated September 23, 1999, No. 1105XIV, as amended); state social insurance against temporary disability and expenses caused by birth and funeral (Law of Ukraine On Mandatory State Social Insurance against Temporary Disability and Expenses Caused by Funeral, dated January 18, 2001, No. 2240-III, as amended); state social insurance in case of unemployment (Law of Ukraine On Mandatory State Social Insurance in Case of Unemployment, dated March 2, 2000, No. 1533-III).

(iii)

(iv)

Based on the Companys continuing activities and the SDP DDR, the Company appears to be subject to all types of mandatory state social insurance, is registered in the respective state social funds and is a payer of insurance contributions to such funds. Please note that we were not provided with copies of the relevant registration documents described below since the SDP DDR was performed. In connection with the amendments to the State Budget for 2008, the Company pays mandatory state social insurance as follows:
No. Type Registration Document Contribution Amount Payment Term

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1.

State pension insurance

Notification on Registration of Social Contributions Payer, dated December 20, 2005 [NOT REVIEWED] Temporary Insurance Certificate, dated April 28, 2001; Notification No. 92, undated [NOT REVIEWED]

2.

State social insurance against accidents at the workplace and professional illnesses

3.

State social insurance against temporary disability and expenses caused by funeral State social insurance in case of unemployment

4.

Notification on Registration as Insurer, dated December 20, 2005 [NOT REVIEWED] Notification on Registration of Social Contributions Payer, dated December 20, 2005 [NOT REVIEWED]

33.2% from actual remuneration expenses for nondisabled employees, 4% from actual remuneration expenses for disabled employees 0.66 13.6% from actual remuneration expenese, depending on level of risk at the workplace. 3% according to SDP DDR, although this rate may have changed since 2006. 1.5% from actual remuneration

At receipt of cash to pay remuneration, but no later than in 20 days after the current months end At receipt of cash to pay remuneration

At receipt of cash to pay remuneration Date remuneration payment of

1.3% from actual remuneration expenses

Employees are also required to pay contributions to the state social insurance funds. For this purpose, the employer withholds the employees contributions from the employees remuneration and transfers the withholdings to the above social funds as follows: No. 1 1. 2. Withholding Amount 2% from monthly remuneration of employee Social social insurance against 0.5% from monthly remuneration temporary disability and expenses under the statutory minimum cost of caused by funeral living; 1% from monthly remuneration over the statutory minimum cost of living State social insurance in case of 0.5% from monthly remuneration unemployment Type State pension insurance

3.

Please note that there are other Mandatory Insurance types stipulated by Article 7 of the Insurance Law; however, the procedures for certain types of other mandatory insurance have not yet been approved by the Cabinet of Ministers of Ukraine. Until such time, these types of insurance remain voluntary rather than mandatory. According to the documents and information made available to us, it appears that the Company is subject to the following other mandatory insurance:

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(i)

personal insurance of employees of a company fire fighting squad in accordance with subsection 3 of Article 7 of the Insurance Law and Resolution No. 232 of the Cabinet of Ministers of Ukraine, dated April 3, 1995 as amended; civil liability insurance of a business for damages that may be caused by fires and accidents at extra-hazardous objects, including fire and explosive facilities, and of business activity which may lead to accidents of an ecological, sanitary and epidemiological nature in accordance with subsection 14 of Article 7 of the Insurance Law and Resolution No. 1788 of the Cabinet of Ministers of Ukraine, dated November 16, 2002 (see discussion in Section Environmental Matters hereof); civil-legal liability insurance of vehicle owners in accordance with subsection 9 of Article 7 of the Insurance Law and the Law of Ukraine No. 1961-IV On Mandatory Civil Liability Insurance of Vehicle Owners, dated July 1, 2004, as amended, and Order No. 3099 of the State Commission for Regulation of Financial Services Markets, dated December 16, 2004.

(ii)

(iii)

With respect to the above items, the insurance agreements provided for our review are described below: (i) According to the information provided by the Company, the Company has concluded Insurance Agreement No. 00400571921 with the insurance company TAS for insuring the risks of the Companys fire squad. Agreement No. 00400571921 was concluded on May 7, 2007 and will terminate on May 8, 2008. The insurance sum is UAH 2,298,600.00 (two million two hundred ninety eight thousand six hundred Ukrainian Hryvnias) and the annual premium is UAH 4,127.48 (four thousand one hundred twenty seven thousand Ukrainian Hryvnias and forty eight kopecks). Please note that we were not provided with a copy of Insurance Agreement No. 00400571921 for our review and, therefore, we are unable to comment on its compliance with Ukrainian law. (ii) The Company provided for our review a copy of Insurance Agreement No. HO/47-0020471921 of mandatory insurance of civil liability of a subject of business for damage which may be caused by fires and accidents at objects of heightened danger, including flammable and explodable objects and objects on which commercial activity may lead to an accident of an ecological, sanitary and epidemiological nature (hereinafter referred to as IA No. HO/470020471921). IA No. HO/47-0020471921 was entered into by and between the Closed Joint Stock Company Insurance Group TAS, as the Insurer, and the Company, as the Insured, on March 13, 2007, and is concluded for a duration of one year with a termination date of March 13, 2008. The insurance sum is UAH 1,190,000.00 (one million one hundred ninety thousand Ukrainian Hryvnias)

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and the annual premium is UAH 2,856 (two thousand eight hundred fifty six Ukrainian Hryvnias). The insurance sum covers the risks of (i) damage caused to the life and health of third parties, (ii) damage caused to natural resources, territories and objects of the nature reserve fund, and (iii) damage caused to the property of third parties. IA No. HO/47-0020471921 should be re-concluded for another one-year term on March 13, 2008. The Company also provided three insurance agreements with respect to hydrotechnical edifices subject to liability insurance. These agreements are related to the Outfitting Quays Nos. 1 and 2 and the Dry Dock, and are immediately described below. 1. With respect to Outfitting Quay No. 1, the Company provided for our review a copy of Agreement No. HO/47-0079271921 of mandatory insurance of civil liability of a subject of business for damage which may be caused by fires and accidents at objects of heightened danger, including flammable and explodable objects and objects on which commercial activity may lead to an accident of an ecological, sanitary and epidemiological nature (hereinafter referred to as IA No. HO/47-0079271921). IA No. HO/47-0079271921 was entered into by and between the Closed Joint Stock Company Insurance Group TAS, as the Insurer, and the Company, as the Insured, on July 13, 2007, and is concluded for a duration of one year with a termination date of July 20, 2008. The insurance sum is UAH 1,190,000.00 (one million one hundred ninety thousand Ukrainian Hryvnias) and the annual premium is UAH 1,666 (one thousand six hundred sixty six Ukrainian Hryvnias). The insurance sum covers the risks of (i) damage caused to the life and health of third parties, (ii) damage caused to natural resources, territories and objects of the nature reserve fund, and (iii) damage caused to the property of third parties. IA No. HO/47-0079271921 should be re-concluded for another one-year term on July 20, 2008. 2. With respect to Outfitting Quay No. 2, the Company provided for our review a copy of Agreement No. HO/47-0079371921 of mandatory insurance of civil liability of a subject of business for damage which may be caused by fires and accidents at objects of heightened danger, including flammable and explodable objects and objects on which commercial activity may lead to an accident of an ecological, sanitary and epidemiological nature (hereinafter referred to as IA No. HO/47-0079371921). IA No. HO/47-0079371921 was entered into by and between the Closed Joint Stock Company Insurance Group TAS, as the Insurer, and the Company, as the Insured, on July 13, 2007, and is concluded for a duration of one year with a termination date of July 20, 2008. The insurance sum is UAH 1,190,000.00 (one million one hundred ninety thousand Ukrainian Hryvnias) and the annual premium is UAH 1,666 (one thousand six hundred sixty six Ukrainian Hryvnias). The insurance sum covers the risks of (i) damage caused to the life and health of third parties, (ii) damage caused to natural resources, territories and objects of the nature reserve fund, and (iii) damage

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caused to the property of third parties. IA No. HO/47-0079371921 should be re-concluded for another one-year term on July 20, 2008. 3. With respect to the Companys Dry Dock, the Company provided for our review a copy of Agreement No. HO/47-0079471921 of mandatory insurance of civil liability of a subject of business for damage which may be caused by fires and accidents at objects of heightened danger, including flammable and explodable objects and objects on which commercial activity may lead to an accident of an ecological, sanitary and epidemiological nature (hereinafter referred to as IA No. HO/47-0079471921). IA No. HO/47-0079471921 was entered into by and between the Closed Joint Stock Company Insurance Group TAS, as the Insurer, and the Company, as the Insured, on July 13, 2007, and is concluded for a duration of one year with a termination date of July 20, 2008. The insurance sum is UAH 1,190,000.00 (one million one hundred ninety thousand Ukrainian Hryvnias) and the annual premium is UAH 1,666 (one thousand six hundred sixty six Ukrainian Hryvnias). The insurance sum covers the risks of (i) damage caused to the life and health of third parties, (ii) damage caused to natural resources, territories and objects of the nature reserve fund, and (iii) damage caused to the property of third parties. IA No. HO/47-0079471921 should be re-concluded for another one-year term on July 20, 2008. With respect to the Companys mandatory automobile insurance, the Company provided a copy of Agreement No. 18 on International Mandatory Insurance of CivilLegal Liability of Owners of Land Transportation Means, entered into with OJSC National Joint Stock Insurance Company Oranta, as the Insurer, dated February 21, 2007 in the city of Mykolaiv. This insurance policy was concluded with respect to the automobile Mitsubishi (registration number BE 9189 AE) and it covers damages caused to the life, health and property of third parties as a result of the operation of the automobile on the territory of those countries located within the Green Card system. This insurance policy only covers drivers, who have labor relations with the Company, and was valid only for six months. We were not provided with any documents or information, evidencing that this insurance policy was renewed. The Company also provided a copy of Agreement No. 39/0003930/9011/07 on mandatory insurance of civil-legal liability of owners of land transportation means, entered into with the Insurance Company Providna, dated April 24, 2007 (hereinafter referred to as IA No. 39/0003930/9011/07). IA No. 39/0003930/9011/07 is concluded with respect to twenty three of the Companys automobiles pursuant to which the date of the insurance policy commencement varies and the date of exiration for each vehicle arises on April 27, 2008. IA No. 39/0003930/9011/07 covers damages caused to third parties from an automobile accident involving an insured vehicle as a result of which civil-legal liability arises with respect to an insured person under the agreement. The annual premium under the agreement is UAH 7,720.00 (seven thousand seven hundred twenty Ukrainian Hryvnias). The Insurers liability is limited as follows: (i) damages caused to the property UAH 25,500.00 (twenty five thousand five hundred Ukrainian Hryvnias) per third party. In case the

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total amount of damages for one insured event exceeds five times the limit of liability of the insurer for damage caused to property, the compensation of damage caused to the third party shall proportionately decrease; (ii) (iii) damages caused to the life and health of a third party UAH 51,000.00 (fifty one thousand Ukrainan Hryvnias) for each third party; moral damages caused to third party UAH 2,550.00 (two thousand five hundred fifty Ukrainian Hryvnias) for each third party.

The following vehicles are insured under IA No. 39/0003930/9011/07: No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. Make, model Izh 2712 Moskvich GAZ 33023 Gazelle GAZ 22171 GAZ 3110 Volga GAZ 31029 Volga Citroen C25 ZIL 431412 40 ZIL 130 40 ZIL 43412 40 ZIL 43412 40 GAZ 31029 Volga Vokswagen Passat Ford Focus 1.6 Ford Focus 1.6 Ford Focus 1.6 Ford Focus 1.6 Ford Focus 1.6 Ford Focus 1.6 Ford Mondeo Ford Mitsubishi Pajero Volkswagen Passat Mitsubishi Year 2004 2001 2001 1997 1995 1995 1986 1985 1987 1988 2001 2003 2005 2005 2005 2005 2005 2005 2005 2005 2006 2006 2006 Registration Number BE 42-49 AA 052 64 HK 049 77 HK 048 02 HK BE 55-93 AA 023 14 HK 004 34 HK 032 45 HK 032 46 HK 032 40 HK BE 12-87 AE 555-37 HK BE 2583 AC BE 2584 AC BE 2585 AC BE 4186 AC BE 4187 AC BE 4189 AC BE 1553 AC BE 5949 AC BE 9189 AE BE 0881 BE BE 1355 BE Body Number XT21170040053769 Y6C33023010000407 Y7D22170010005957 590040342V0027358 S0299444304028 VF7290C92D3310351 VF7290C92D310351 2543203 2336704 2730828 5580 WVWZZZ3BZ3P433131 WFOMXXGCDM5C10039 WFO4XXWPD45G27906 WFO4XXWPD45G30804 WFOWXXGSDM5K68892 WFOMXXGSDW5K68900 WFOWXXGSDM5K68888 WFO4XXGBB45R24768 WFOTXXBDFT4K76896 JMBORK9606J002562 WVWZZZ3CZ6Z000049 JMBORK9606J002857

According to information provided by the Company, the Company has also concluded Agreement No. 651500305 with the insurance company INGO Ukraine for civil liability of automobile owners on January 22, 2007. This agreement was set to terminate in January 2008 and contained an insurance sum of UAH 76,500.00 (seventy six thousand five hundred Ukrainian Hryvnias) and an annual premium of UAH 3,732.83 (three thousand seven hundred thirty two Ukrainian Hryvnias and

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eighty three kopecks). We were not provided with a copy of Agreement No. 651500305 for our review and, therefore, we are unable to confirm whether this agreement was for mandatory insurance and whether it expired in January 2008 upon re-conclusion of a new agreement. Also, it appears that, as soon as the Cabinet of Ministers establishes the relevant insurance procedure, the Company may be required to obtain the following insurance policies: (i) insurance of water transport vessels (subsection 10 of Article 7 of Insurance Law) because the Company owns several boats, which may be classified as water transport vessels by the yet-to-be adopted implementation procedure; insurance of electrical power lines and electricity transforming equipment of suppliers against damages caused by natural disasters or man-made disasters and against unlawful actions of third parties (subsection 33 of Article 7 of Insurance Law) because the Company may own certain qualifying electricity equipment; insurance of mortgaged property from risks of accidental destruction, accidental loss or spoilage (subsection 35 of Article 7 of Insurance Law) because of the mortgages granted by the Company to Okean B.V. and Raiffeisen Aval.

(ii)

(iii)

B.

Accident/Health Insurance

The Company did not provide for our review copies of any medical insurance it has in place for its employees pursuant to subsection 1 of Article 7 of the Insurance Law. Such medical insurance has not yet become mandatory under the current legislation. However, the Company provided for our review Agreement No. 39 On Provision of Medical Services, dated February 27, 2007, entered into with LLC Medical Company UniMed for the provision of medical services to the Companys employees for the year 2007. The termination date of the agreement is February 29, 2008, and we were not provided with a copy of a renewed agreement for the year 2008. However, we assume that the terms and conditions of the agreement for 2008 may still be in the negotiation stages. The cost of the medical services provided by UniMed is UAH 72,000.00 (seventy two thousand Ukrainian Hryvnias) per month and the total amount of the agreement is UAH 864,000.00 (eight hundred sixty four thousand Ukrainian Hryvnias) for 12 months. At the time of the signing of the agreement, the amount of employees covered under the agreement was 2,900 (two thousand nine hundred) individuals. In case of a change in the amount of covered employees from 5% of the total amount of individuals, the cost of the medical services and the total amount of the agreement is reviewed by the parties with a calculation of UAH 24.83 (twenty four Ukrainian Hryvnias and eighty three kopecks) for each individual per month. The medical service program includes the provision of 24-hour urgent medical assistance, mandatory preliminary and periodical medical examinations, hospital care,

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worker protection participation and analytical work. The Company also provided a copy of Additional Agreement No. 1 to Agreement No. 1/M-01/07 of January 1, 2007, under which the parties agreed that UniMed will provide medication for the first aid kits located on the premises of the Company, medication for out-patient services (with a 10% discount) and medication and treatment for those in the production facilities of the Company. The Company did not provide a copy of Agreement No. 1/M-01/07 for our review and, therefore, we are unable to comment on its validity or legality. UniMed must send a written proposal to the Company to prolong the agreement no later than 3 months before the termination date of the agreement. We were not provided with evidence that such proposal was sent to the Company. The Company has one month to respond to the written prolongation proposal of UniMed. If agreed, the prolongation of the agreement must be effectuated by an additional agreement for a new period with all amendments and additions to the original agreement. Based on the information made available by the Company, we are unable to conclude whether the agreement was prolonged or whether it will expire on the termination date thereof. Generally, the Companys risks with regard to work accidents and health insurance of its employees are covered by the state social mandatory insurance. We were also provided with several insurance policies/agreements that have already expired. These policies include: 1. Agreement No. 081 of Mandatory Personal Insurance of Employees of Institutional and Town Fire Safety and Members of Voluntary Fire Squads, dated April 11, 2006, entered into by and between the Company and the Joint Stock Company Ukrainian Fire-Insurance Company, dated April 11, 2006 (expired April 11, 2006); Agreement on Mandatory Insurance of Civil Liability of Subjects of Business for Damage Which May Be Caused By Fires and Accidents on Objects of Heightened Danger, Including Flammable and Explosive Objects and Objects on Which Business Activities May Cause Accidents of an Ecological, Sanitary and Epidemiological Nature No. 653900536, entered into by and between the Company and the Insurance Company INGO Ukraine, dated February 1, 2006 (January 31, 2007). Voluntary Insurance

2.

C.

We were only provided with a limited number of voluntary insurance policies, which are standard forms with no onerous or unusual provisions. Based on the documents reviewed and the SDP DDR, it appears that the Company has insurance agreements/policies for a number of its Shipbuilding Contracts; however, these agreements/policies were not provided for our review. Based on our review of the Shipbuilding Contracts and additional information provided by the Company, we immediately below provide a brief summary of the insurance provisions:

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According to information provided by the Company, the Company has concluded Agreement No. SK/10/2005 on August 25, 2005 with the Insurance Company INGO Ukraine for covering the risks during the construction of the following vessels: YN 9123, YN 9124, YN 9125, YN 9126, and YN 9127. The insurance sum under the agreement is UAH 43,236,550.00 (forty three million two hundred thirty six thousand five hundred fifty Ukrainian Hryvnias) and the annual premium is UAH 701,594.70 (seven hundred one thousand five hundred ninety four Ukrainian Hryvnias and seventy kopecks). The termination date of Agreement No. SK/10/2005 is March 2008. No other information regarding this agreement was provided by the Company. The Company provided for our review Insurance Agreement No. 10/0009679/9013/07 entered into with the Closed Joint Stock Insurance Company Providna, dated June 25, 2007, for the insurance of the Companys ownership interests related to the ownership, use and control of DSO 7129 Bramax Tanker and its machinery and equipment in the course of construction, reconstruction, repair or conversion (hereinafter referred to as IA No. 10/0009679/9013/07). The beneficiaries under the agreement are Aker Braila S.A. and Aker Brevik AS. The agreement covers the period from 00.00 hours Kyiv time 16th July 2007 to 24.00 hours Kyiv time 30th April 2008. The principal provisions are as follows: Sums Insured: Maximum EUR 75,000,000 (or equivalent in other currency(ies) for any one vessel, including additional costs in connection with rebuilding, the Companys liability for the buyers interest claim for installments paid and the Companys loss of interest and daily penalties in the event of late delivery. Including immaterial values as declared, not exceeding 20% of values. Deductible: In respect of 78% share of the sums insured deductible 0.15% or minimum EUR 50,000 for each claim to each insured event. In respect of 22% share of the sums insured deductible 0.3% or minimum EUR 75,000 for each claim to each insured event including tows, but deductible to be agreed in respect of military sea vessels. The total insurance premium under the policy is EUR 51,004.56 and was to be paid in full on the Insurers current account by October 21, 2007. This policy covers all vessels declared within the stipulated period in Addendum No.1 (see below) and to continue until delivery of the vessels to their respective buyer(s) at the yard or to be agreed irrespective of policy expiry. According to Addendum No.1: Current Construction Program for Account of Aker Yards ASA Group DSO 7129 Bramax Tanker approx 18,000 cubic meters Final Contract Value EUR 12,627.399 Immaterial Values 10% of Final Contract Value Sections to be constructed elsewhere Foreship contructed at Zaliv, Ukraine, and towed to Okean prior to keel laying Attachment 25.06.2007 Estimated final delivery 15.04.2008 117

Hull No. DSO 7129 Bramax Tanker

Scheduled keel Scheduled laying delivery 16.06.2007 15.04.2008

Final contract value As above

Insured Risks: The vessel under construction is insured against damage or destruction (constructional full destruction or full destruction) of the vessel as a result of accidents and perils arising in the course of building, rebuilding, repairs or conversion (building) of the vessel. The insurance of additional costs in connection with the rebuilding is subject to amounts as declared; however, it may not exceed 30% of Final Contract Value. The insurance of the Companys liability for the buyers interest claim is for installments paid; however, it may not exceed 30% of Final Contract Value. The policy is extended to cover vessels where construction is completed and such vessels are awaiting delivery to owners, not exceeding 9 months. There is an additional premium of 50% of extension rate per month or pro rata thereof. Owners Supplies: The owners supplies are subject to a sub-limit of EUR 55,000,000 (fifty five million euros) in the aggregate for any one new building; however, subject to the maximum value of any one individual unit of Owners Supplies not exceeding EUR 500,000 (five hundred thousand euros) unless otherwise agreed. The parties agreed that the deductibe applying to the owners supplies is: (i) in respect of 78% of the sums insured EUR 25,000 (twenty five thousand euros) and (ii) in respect of 22% of the sums insured EUR 10,000 (ten thousand euros). Conflict: In the event of a conflict between the terms, exclusions, limitations and conditions of the agreement and the Norwegian Marine Insurance Plan 1996, the Plan and the commentary to the Plan shall take precedence, subject always to the priority of the current law of Ukraine. The construction, interpretation and meaning of the terms, exclusions, limitations and conditions of the agreement shall be determined in accordance with Ukrainian legislation and in accordance with (i) the Ukrainian text of the agreement insofar as the provisions are customary under Ukrainian insurance legislation and (ii) the English text of the agreement insofar as the text is dreived from the Plan and amendments thereto. Supplementary Agreement No. 1 to IA No. 10/0009679/9013/07 was signed on October 24, 2007 by the Insurer, CJSC IC Providna and by the Company on November 30, 2007 for purposes of adding the current construction program of Aker Yards ASA Group pursuant to the schedule below: Current Construction Program of Aker Yards ASA Group DSO 7135 Bramax Tanker approx 18,000 cubic meters Final Contract Value EUR 14,312,322.76 Immaterial Values 10% of Final Contract Value Sections to be constructed elsewhere Foreship to be supplied by Aker Braila and towed to Okean prior to keel laying 118

Attachment Estimated date of launch Estimated final delivery Hull No. DSO 7135 Bramax Tanker

24.10.2007 17.03.2008 31.10.2008 Scheduled keel Scheduled laying delivery 24.10.2007 31.10.2008 Final contract value As above

The Company provided for our review a copy of Insurance Agreement No. 303502134, entered into with the Joint Stock Insurance Company INGO Ukraine (hereinafter referred to as IA No. 303502134). According to the information provided by the Company, IA No. 303502134 was concluded in relation to the Bramax Tanker and its machinery under construction. IA No. 303502134 was concluded for the period from April 1, 2007 to March 31, 2008 (in total 365 days). The major provisions of IA No. 303502134 are as follows: 1) coverage of material interests of the Insured associated with the Insureds obligation to indemnify damages caused to (i) third parties (third party public liability) and (ii) customers (product liability). The activity covered under the agreement is building and repair of ships and boats. Limit of indemnity per each and every occurrence and during the insurance period is UAH 6,810,400.00 (six million eight hundred ten thousand four hundred Ukrainian Hryvnias) that is equal to EUR 1,000,000 (one million euros). An insured event includes coverage of any third party claim with respect to (i) injury to life and health and (ii) property damage as a result of unintentional errors and omissions of the insured (including any of its directors, employees, agents, representatives or other authorized and responsible persons) directly connected with the insureds activity. In case of loss, UAH 847,064.68 (eight hundred forty seven thousand sixty four Ukrainian Hryvnias and sixty eight kopecks) shall be deducted from the sum of indemnification as per each and every loss in respect of life, health and property damage of third parties. The total insurance premium under this agreement is UAH 32,420 (thirty two thousand four hundred twenty Ukrainian Hryvnias), which is equivalent to EUR 4,760.47 (four thousand seven hundred sixty euros and forty seven cents). The agreement contains the following International Clause:

2)

3)

4)

5)

6)

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19.1

The present agreement is an integral part of If P&C Insurance Company Ltd. Insurance program for enterprises of Aker Yards ASA. The insurer is obligated to reinsure the risks under this Agreement with If P&C Insurance Company Ltd. on the agreed between them terms and conditions. The insured agrees that the liability of the local insurer to pay claims to the insured does not commence until the local insurer receives the claim of payment from the reinsurer, excluding the insurers share of liability. This policy is part of an international General Liability and Products Liability program which consists of a master policy and local policies in the countries forming part of the program.

19.2

19.3

19.4

We were also provided with Agreement No. 06\0010599\9011\07 on Voluntary Insurance of Land Transportation, which was entered into by and between the Company, as the Insured, and the Closed Joint Stock Insurance Company Providna, as the Insurer, on September 8, 2007 for purposes of insuring the Companys automobiles, civil liability of the owner of the automobiles, and the driver and passengers in case of an accident (hereinafter referred to as IA No. 06\0010599\9011\07). The termination date of the agreement is April 27, 2008. IA No. 06\0010599\9011\07 covers direct damages caused to the property interests of the Company connected with the possesion, use or disposal of the insured vehicles and additional equipment. The insured risks include (i) collisions, broken glass and other accidents; (ii) natural disasters; (iii) fire, explosion, etc. not connected with unlawful acts of third parties, etc. The total insured amount under IA No. 06\0010599\9011\07 is UAH 1,323,125.00 (one million three hundred twenty three thousand one hundred twenty five Ukrainian Hryvnias). The insured amount for each automobile varies in the agreement. The following automobiles are covered under the agreement: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Vokswagen Passat Ford Focus 1.6 Ford Focus 1.6 Ford Focus 1.6 Ford Focus 1.6 Ford Focus 1.6 Ford Focus 1.6 Ford Mondeo Ford Mitsubishi Pajero Volkswagen Passat Mitsubishi Pajero 3 2003 2005 2005 2005 2005 2005 2005 2005 2005 2006 2006 2006 555-37 HK BE 2583 AC BE 2584 AC BE 2585 AC BE 4186 AC BE 4187 AC BE 4189 AC BE 1553 AC BE 5949 AC BE 9189 AE BE 0881 BE BE 1355 BE WVWZZZ3BZ3P433131 WFOMXXGCDM5C10039 WFO4XXWPD45G27906 WFO4XXWPD45G30804 WFOWXXGSDM5K68892 WFOMXXGSDW5K68900 WFOWXXGSDM5K68888 WFO4XXGBB45R24768 WFOTXXBDFT4K76896 JMBORK9606J002562 WVWZZZ3CZ6Z000049 JMBORK9606J002857

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The liability limit of the Insurer for the civil liability of the owner of the vehicles is UAH 100,000.00 (one hundred thousand Ukrainian Hryvnias) for each separate vehicle. The total liability limit is UAH 1,200,000.00 (one million two hundred thousand Ukrainian Hryvnias). The insurance amount for insurance of drivers and passengers in case of accidents is UAH 252,500 (two hundred fifty two thousand five hundred Ukrainian Hryvnias) for one vehicle and the insurance is conducted according to the system of number of passenger seats. The total insurance amount is UAH 3,030,000.00 (three million thirty thousand Ukrainian Hryvnias). The insurance premium under IA No. 06\0010599\9011\07 is (i) UAH 22,119.32 (for overall coverage), (ii) UAH 5,400.00 (for civil liability of owners of the vehicles), and (iii) UAH 12,1200.00 (for insurance of drivers and passengers). The total insurance premium under the agreement is UAH 39,639.32 (thirty nine thousand six hundred thirty nine Ukrainian Hryvnias and thirty two kopecks). To summarize, according to the documents and information provided for our review, the insurance related practices of the Company appear to be in compliance with the effective law. XI. Litigation Matters

According to the documents and information provided for our review, the Company appears to be a party to the following litigation cases: No. 1. Plaintiff Defendant Essence of Suit Collection of debt in the amount of $560,994.85 Results of Court Review By decision of the Arbitration Court of the Sakhalin Region, the bankruptcy proceeding has been extended to February 25, 2008 By decision of the Commercial Court of the Mykolaiv Region the claim was refused. The Odessa Appellate Court confirmed the

OJSC Damen RPK Shipyards Okean Starodubskye

2.

Mykolaiv Regional OJSC Damen Department of the Shipyards Okean Social Protection Fund for Disabled

Collection penalties the failure create workplaces disabled individuals 2005 (1,535,396 UAH)

of for to for in

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decision of the Commercial Court of the Mykolaiv Region. The Plaintiff submitted a cassation claim. The date of the hearing is not determined. Konvers Invest Issuance of Disputable Promissory Notes Based on the only information provided in the SDP DDR, the background of this dispute is as follows: On November 9, 1995, Okean Shipyard and BNT, a Cyprus-based company, entered into Contract No. 95-30 that provided for the supply of 24,000 tons of structural shipbuilding steel by BNT to Okean Shipyard. On October 7, 1997, Okean Shipyard and BNT made the Supplementary Agreement to Contract No. 95-30 stipulating for new terms of payment and a late payment fee. On October 9, 1997, Okean Shipyard and BNT signed the Verification Act evidencing (i) Okean Shipyards indebtedness to BNT in the amount of USD 2,237,916.09, (ii) penalties in the amount of USD 2,225,641.00, and (iii) the cost of reusable containers in the amount of USD 1,869.00, for a total amount of 4,465,426.00. On October 9, 1997, (i) BNT notified Okean Shipyard about assignment of BNTs rights under Contract No. 95-30 to Ukragroprompostach, and (ii) Ukragroprompostach and Okean Shipyard entered into a Debt Repayment Agreement whereby Okean Shipyard issued 17 interest-bearing USD-denominated promissory notes payable at sight to the order of Ukragroprompostach not earlier than March 22, 1998. On January 3, 1998, Ukragroprompostach notified Okean Shipyard on the transfer of the notes to Konvers Invest in the course of an alleged set-off carried out between Ukragroprompostach and Konvers Invest. According to Ukrainian law (Article 34 of the Regulations on the Promissory Note and the Bill of Exchange effective until the Conventions coming into effect on January 6, 2000) applicable to promissory notes and bills of exchange on the date of their issue, the notes had to be presented to Okean Shipyard for payment within a year from the payment term. On March 10, 1999, Okean Shipyard received the Notarys Notice regarding payment due under the disputable notes. Since the Notarys Notices were given to Okean Shipyard in less than a year from the payment term, the statutory term of the presentment of the disputable notes was observed.

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On March 12, 1999, Mykolaiv Notary protested the disputable notes by issuing Protest Acts. According SDP DDR, it appears that the Protest Acts as well as the statutory procedure of protest of the disputable notes comply with applicable laws and regulations (See Form No. 66 in the Forms of Registers for Registration of Notarial Actions, Notarial Certificates, Certifying Writs on Agreements and Certified Documents entered by Order of the Ministry of Justice of Ukraine No. 7/5, dated February 7, 1994, as amended). The Company challenged the Protest Acts in Leninsky Local Court of Mykolaiv City. According to the Determination of Hon. Judge Gubachev of Leninsky Local Court of Mykolaiv City, dated October 16, 2001, the review of the Companys complaint was suspended until November 1, 2001, due to the Companys failure to meet certain formal procedural requirements. We are not aware of further development of the case. In 1999, Konvers Invest applied to the Korabelny Execution Service to enforce the disputable notes protested by Mykolaiv Notary, but the enforcement proceedings were suspended several times due to challenging by the Company of the executors actions in court and bankruptcy proceedings against the Company. On August 20, 2001, the Dnipropetrovsk Notary issued execution writs with respect to the protested disputable notes. The enforcement proceedings against the Company based on the execution writs were commenced and suspended by Korabelny Execution Service on the same day, August 31, 2001, due to bankruptcy proceedings against the Company. Also, the Company challenged the execution writs in Kirov District Court in Dnipropetrovsk. According to the decision of the Kirov District Court in Dnipropetrovsk on Case No. 2-643, dated March 6, 2002, the execution writs were cancelled due to non-compliance with formal requirements of law. On April 17, 2001, based on the mentioned decision, enforcement proceedings on compulsory execution of the execution writs were cancelled. Based on the fact that under Ukrainian law promissory notes could only be issued against goods rendered and not a contractual penalty, the Company challenged the validity of certain disputable notes issued in the amount of penalties under Contract No. 95-30 in Kyiv City Commercial Court. According to the Decision of the Kyiv City Commercial Court on Case No. 14/603, dated November 15, 2001, the disputable notes Nos. 743264160575, 743264160576, 743264160577, 743264160591, 743264160593, 743264160594, and 743264160595 in the amount of USD 2,215,426.00 were invalidated. Konvers Invest appealed the mentioned decision to Kyiv Commercial City Court of Appeal, which sustained it, and then to the High Commercial Court of Ukraine, which reversed both the Decision of the Kyiv City Commercial Court and the Ruling of Kyiv Commercial Court of Appeal and rejected the Companys claim. The Company appealed the Ruling of the High Commercial Court on the case, dated June 11, 2002, to the Supreme Court of Ukraine, which on September 17, 2002 sustained the High Commercial Courts Ruling. Thus, the disputable notes remained valid.

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After the execution writs were cancelled by the Decision of the Kirov District Court in Dnipropetrovsk, in 2002, Konvers Invest once again applied to Dnipropetrovsky Notary for issuance of execution writs. Apparently, under a special arrangement with Konvers Invest aimed at the judicial confirmation of the effectiveness of the limitation period to apply for such writs, Dnipropetrovsk Notary declined to issue such writs, and Konvers Invest challenged her refusal in Kirov District Court in Dnipropetrovsk. On August 21, 2002, the Decision of Kirov District Court in Dnipropetrovsk on Case No. 2-1573-2002 obliged Dnipropetrovsk Notary to make execution writs on the ground that the limitation period in question had been renewed as of the date of the Ruling of the High Commercial Court on Case No. 14/603 in favor of Konvers Invest. The Company was deliberately uninformed on the case hearing by Kirov District Court in Dnipropetrovsk. In November of 2003, the Company brought a claim to Kirov District Court in Dnipropetrovsk requesting the above-noted decision to be reviewed due to newly discovered facts. On December 18, 2003 the court allowed the Company to be a party to Case No. 2-1573-2002 and reversed the decision in question. On December 24, 2003, the Konvers Invests claim against the Dnipropetrovsk Notary was rejected by the Decision of the Kirov District Court in Dnipropetrovsk on the ground that the limitation period to apply for notary execution writs regarding the disputable notes expired. Konvers Invest appealed this decision to Dnipropetrovsky Court of Appeal. However, in July 2004 Dnipropetrovsk Court of Appeal rejected this claim. The Decision of the Dnipropetrovsk Court of Appeal entered into force and was not appealed. It appears that, in practice, based on certain legal norms, Konvers Invest had the opportunity to appeal the above-noted decision of the Dnipropetrovsk Court of Appeal during 1 year after the ruling was rendered (Article 321 of the Code of Civil Procedure of Ukraine, dated July 18, 1963, enacted by Law of the Ukrainian SSR, dated July 18, 1963). As this term was missed by Konvers Invest, the chance that such appeal may be accepted by a higher court if filed by Konvers Invest is very insubstantial. However, it should be noted that there is still a slight chance for this if Konvers Invest try to file the appeal based on newly discovered facts doctrine. Nevertheless, in this case the court considering such a petition shall apply very strict tests to allow for the appeal to be heard. Normally, this is extremely difficult task to achieve for the petitioner. Therefore, based on the effective Decision of the Dnipropetrovsk Court of Appeal, it appears that Konvers Invest cannot enforce the disputable notes through Ukrainian notaries because the 1-year limitation period for applying for respective execution writs had expired. Enforcement of Disputable Notes Through Court

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On May 4, 2005, Konvers Invest sued the Company in Kyiv City Commercial Court (Case No. 36/15) to collect under the disputable notes (total UAH 110,748,385). The Company raised the defence of the expiry of the 3-year promissory note limitation period that bars the court enforcement of the Konvers Invests claim. However, on July 1, 2005, Kyiv City Commercial Court partially satisfied the Konvers Invests claim and ruled the Company to pay Konvers Invest UAH 110,747,385.34 on the ground that the limitation period was renewed on June 12, 2002, i.e., the date following the date of the Ruling of the High Commercial Court on Case No. 14/603 confirming validity of the disputable notes. The Company appealed the Decision of Kyiv City Commercial Court on Case No. 36/15 to Kyiv Commercial Court of Appeal. On September 5, 2005 the panel of judges adjudicating the case was replaced. Then, Konvers Invest filed with the High Commercial Court of Ukraine a petition to transfer the case to another court of Ukraine. On October 14, 2005, the High Commercial Court of Ukraine rejected the Konvers Invests petition. This ruling was appealed by Konvers Invest to the Supreme Court of Ukraine. On December 29, 2005, the Supreme Court of Ukraine rejected the Konvers Invests petition and ruled the case to be considered on the merits by Kyiv Commercial Court of Appeal. On February 18, 2006 Kyiv Commercial Court of Appeal sustained the Companys appeal and repealed the Ruling of Kyiv City Commercial Court dated July 1, 2005. We have no information regarding the further appeals in this case. Since the developments of the above-mentioned background to the Konvers Invest dispute, we were not provided with any documents regarding the present status of the dispute with the exception of the information below. We were provided with a copy of Minutes No. 3-3 of the Meeting of the Supervisory Council of the Company dated December 22, 2006, which mentions the Konvers Invest case (specifically 16 promissory notes issued by the Company on October 9, 1997). Minutes No. 3-3 discussed the situation as follows: Mr. Romanchuk, acting on behalf of Mr. Levinsen and the Directorate in this matter, who delivered the Report substantially as follows. The most recent court decisions concerning the Litigation are (i) the Ruling of the Supreme Court of Ukraine, dated October 31, 2006, that upheld the Ruling of the Kyiv City Commercial Court dated July 1, 2005 (the Commercial Court Ruling), whereby the Claimant had been awarded a payment from the Company in the total amount of 110,603,516.11 Hryvnias (the Payment) and (ii) the Ruling of the Supreme Court of Ukraine dated December 5, 2006 (the Supreme Court Ruling). The Supreme Court Ruling reaffirmed the Commercial Court Ruling that may result in enforcement of the latter through the state execution service and attempts by the Claimant (Special Partnership Boxhaul Holdings Limited and the company IFC KonversInvest) to collect the Payment from the Company.

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Please note that we were not provided with the above-mentioned court decisions for our review and risk assessment. As the Payment constitutes a very substantial amount, the Company recognized that it is hardly possible for the Company to make the Payment within the period of time envisaged by law for voluntary payment upon commencement of the enforcement procedures. Therefore, according to the Company, the enforcement of the Commercial Court Ruling may result in attachment to the Companys assets. Also, the above mentioned court rulings qualify as an event of default under Sections 6.1(g) of (i) the Term Loan Facility Agreement No. 1, dated March 15, 2004, with subsequent amendments, additions and annexes thereto, (ii) Term Loan Facility Agreement No. 2, dated March 15, 2004, with subsequent amendments, additions and annexes thereto, (iii) Term Loan Facility Agreement No. 3, dated March 15, 2004, with subsequent amendments, additions and annexes thereto, and (iv) Term Loan Facility Agreement No. 4, dated August 8, 2005, with subsequent amendments, additions and annexes thereto (collectively the Facility Agreements). Therefore, the lender under the Facility Agreements Okean B.V. (the Creditor) may declare any loan, interest accrued thereon, and all other amounts payable by the Company under the Facility Agreements (the Debt) to be forthwith due and payable, whereupon such amounts shall be immediately due and payable upon receipt of the Default Notices (as defined in the Facility Agreements). Should the Company fail to repay the Debt within three days upon receipt of the Default Notices under the Facility Agreements, the Creditor can trigger the levy of execution on substantially all Companys assets under the pledge and mortgage agreements concluded by the Company to secure its obligations under the Facility Agreements. As of September 30, 2006, the Debt amounted to UAH 225,683,045.12 (two hundred twenty five million six hundred eighty three thousand forty five Ukrainian Hryvnias and twelve kopecks). According to the Company, the financial condition of the Company would not allow it to forthwith repay the Debt. Moreover, the Payment and/or repayment of the Debt could lead the Company into serious financial difficulties, the most adverse of which may be the Companys bankruptcy. Mr. Romanchuk informed that the Directorate suggests taking certain actions to resolve the situation beneficially for the Company (the Plan). The Plan envisages the following actions: (i) continuing to challenge the Commercial Court Ruling, related court decisions, and the enforcement procedures, if commenced, related to the Commercial Court Ruling, in the due course of law and by all legal means available under Ukrainian and international law; if the actions envisaged under point (i) above turns out unsuccessful negotiating with the Claimant (i) an amicable settlement and purchase of the promissory notes at discount or (2) the Payment by installments during a long period of time;

(ii)

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(iii)

if the action envisaged under point (ii)(1) above turns out unsuccessful approaching the Creditor with a request for waivers under the Facility Agreements and approaching the Creditor and Ukrainian banks for long-term loans allowing the Company to make the Payment, in case of successful enforcement of the Commercial Court Ruling by the Claimant, and/or to repay the Debt to the Creditor, in case of the Default Notices receipt from the Creditor.

According to the copy of Minutes No. 3-3 of the Meeting of the Supervisory Council of the Company dated December 22, 2006, the Company resolved: (i) (ii) (iii) to unconditionally approve the Plan; to authorize the Directorate to resolve the situation subject to the rights of the Council; to continue business in the ordinary course with the Directorate reporting on any measures taken against the Company.

Please note that we were not provided with any further information regarding the Konvers Invest dispute. Therefore, we are unable to assess the current risks involved in the dispute and the current status of the matter in general. Please note that we were not provided with any further information on: 1. The litigation matter with Mr. Gubarov regarding his claim against the State Property Fund of Ukraine and B.V. Holding to invalidate the tender notice for privatization of the Company, invalidate the final privatization order and invalidate shares purchase agreement. According to information provided by the Company, the Company was engaged in the case as a third party. Manfred Forberich Litigation Manfred sued the Company to collect USD 157,540.01 (one hundred fifty seven thousand five hundred forty United States Dollars and one cent). Manfred appealed a decision of the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry. No further information is available in the data room. Employee and VAT refund claims no further information is available in the data room.

2.

3.

To summarize, the Company participates in certain litigation matters which can affect its financial position. However, we were not provided with sufficient information to assess the current risks facing the Company due to these litigation matters and their current status. XII. Qualifications The qualifications to which this report is subject are as follows:

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This report is addressed to you on condition that it shall be treated as solely for your benefit and shall not be relied upon by anyone else and may not, without our prior consent, be: (1) disclosed by you to any other party other than persons who, in the ordinary course of your business, have access to your papers and records and to the parties to the documents we have reviewed (Relevant Documents) and their permitted assigns in connection with the transactions specified therein on the basis that they will similarly make no further disclosure; or, (2) filed with any governmental agency or authority or quoted in any public document. We have not, except as specifically identified herein, been retained or engaged to perform, nor have we performed, any independent review or investigation of any statutes, ordinances, laws, regulations, agreements, contracts, instruments, corporate records, orders, writs, judgments, rules or decrees to which each Company (Relevant Party) may be a party or to which the Relevant Party or its property may be subject, or by which the Relevant Party or any of its property may be bound, nor have we been retained or engaged to perform, or performed, any independent review or investigation as to the existence of any actions, suits, proceedings, orders, investigations or claims before any court, arbitrator, or governmental department, commission, board, bureau, agency or instrumentality pending or threatened against or relating to the Relevant Party or its property or in which the Relevant Party is a party. This report and all statements herein to the best of our knowledge or concerning matters of which we are made aware, is given in the context of the foregoing. This report is based, as to matters of law, solely on the law, legislative acts, rules and regulations of Ukraine, and we express no opinion as to any other laws, statutes, regulations or ordinances. We assume no obligation to advise you of any changes in the foregoing subsequent to the issuance of the provided documents and delivery of this report.

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