Form 20-F KNOT Offshore Partners For: Dec 31

(1)

KNOT SHUTTLE TANKERS 34 AS, a company incorporated under the laws of Norway with Norwegian registration no. 921 065 698 having its registered office at Smedasundet 40, N-5529 Haugesund, Norway (Borrower A) and KNOT SHUTTLE TANKERS 35 AS, a company incorporated under the laws of Norway with Norwegian registration no. 821 065 852 having its registered office at Smedasundet 40, N-5529 Haugesund, Norway (Borrower B) as joint and several borrowers (together the Borrowers and each individually a Borrower);

(2)

KNUTSEN NYK OFFSHORE TANKERS AS, a company incorporated under the laws of Norway with Norwegian registration no. 995 221 713 having its registered office at Smedasundet 40, N-5529 Haugesund, Norway as guarantor (KNOT);

(3)

MUFG BANK, LTD., acting through its office at 25 Ropemaker Street, London, EC2Y 9AN, United Kingdom as mandated lead arranger (in that capacity, the Mandated Lead Arranger) and bookrunner (in that capacity, the Bookrunner);

(4)

THE FINANCIAL INSTITUTIONS whose names and Facility Offices are listed in Schedule 1 as lenders (the Original Lenders);

(5)

THE FINANCIAL INSTITUTIONS whose names and Facility Offices are listed in Schedule 2 as hedging banks (the Original Hedging Banks); and

(6)

MUFG BANK, LTD., acting through its office at 25 Ropemaker Street, London, EC2Y 9AN, United Kingdom as facility agent and security agent for the other Finance Parties and the Hedging Banks (the Agent).

1.

DEFINITIONS AND INTERPRETATION

1.1

Definitions

(a)

the Borrower A Account; and

(b)

the Borrower B Account,

(a)

the amount of its participation in any outstanding Loans utilised under that Tranche; and

(b)

in relation to any proposed Utilisation, the amount of its participation in any Loans that are due to be made utilised under that Tranche on or before the proposed Utilisation Date.

(a)

31 March 2021 in respect of the Pre-Delivery Tranche A and the Post-Delivery Tranche A; and

(b)

31 May 2021 in respect of the Pre-Delivery Tranche B and the Post-Delivery Tranche B.

(a)

in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 BRRD, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and

(b)

in relation to any state other than such an EEA Member Country or (to the extent that the United Kingdom is not such an EEA Member Country) the United Kingdom, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation.

(a)

any law or regulation implementing the Basel II Accord (including the relevant provisions of directive 2013/36/EU (CRD IV) and regulation 575/2013 (CRR) of the European Union) to the extent only that such law or regulation re-enacts and/or implements the requirements of the Basel II Accord but excluding any provision of such law or regulation implementing the Basel III Accord; and

(b)

any Basel II Approach adopted by a Finance Party or any of its Affiliates.

(a)

the agreements on capital requirements, a leverage ratio and liquidity standards contained in "Basel III: A global regulatory framework for more resilient banks and banking systems", "Basel III: International framework for liquidity risk measurement, standards and monitoring" and "Guidance for national authorities operating the countercyclical capital buffer" published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;

(b)

the rules for global systemically important banks contained in "Global systemically important banks: assessment methodology and the additional loss absorbency requirement - Rules text" published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and

(c)

any further guidance or standards published by the Basel Committee on Banking Supervision relating to "Basel III".

(a)

the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

(b)

the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

(a)

if one or both Borrowers are owned by KNOT:

(i)

if KNOT does not own or is not able to vote for (directly or indirectly) all of the shares in the Borrowers or, following the Drop Down of one of the Borrowers only, the Borrower not owned by KNOP; or

(ii)

if TS Shipping Invest AS (or a 100% owned subsidiary of TS Shipping Invest AS) and NYK Logistics Holding (Europe) B.V. (or Nippon Yusen Kabushiki Kaisha or another 100% subsidiary of Nippon Yusen Kabushiki Kaisha) each does not own or is not able to vote for (directly or indirectly) for 50% the shares in KNOT; and/or

(b)

if one or both Borrowers are owned by KNOP:

(i)

if TS Shipping Invest AS (or a 100% owned subsidiary of TS Shipping Invest AS) and NYK Logistics Holding (Europe) B.V. (or Nippon Yusen Kabushiki Kaisha or another 100 % subsidiary of Nippon Yusen Kabushiki Kaisha) each does not own or is not able to vote for (directly or indirectly) for 50% the shares in KNOT;

(ii)

if KNOP does not own or is not able to vote for (directly or indirectly) all of the shares in the Borrowers or, following the Drop Down of one of the Borrowers only, the Borrower not owned by KNOT;

(iii)

if KNOP does not own or is not able to vote for (directly or indirectly) all of the shares in KNOT ST;

(iv)

if KNOT does not own or is not able to vote for (directly or indirectly) all of the shares in the General Partner (being the general partner in KNOP);

(v)

the General Partner ceases to be to general partner of KNOP;

(vi)

if KNOT does not own at least 25% of all the common and general partner units in KNOP (capital and voting rights to be subject to the limitations on voting rights relating to election of board members, amendments and certain other matters as set out in the limited partnership agreement entered into in relation to KNOP); or

(vii)

if any person or group of persons acting in concert (other than KNOT and/or any of its wholly owned Subsidiaries) acquires, legally or beneficially, and either directly or indirectly, more than 33.33% of the common and general partner units or voting rights in KNOP,

(a)

in relation to an Original Lender, the amount set opposite its name in respect of that Tranche or Facility in Schedule 1 (The Original Lenders) and the amount of any other Commitment in respect of that Tranche or Facility transferred to it under this Agreement; and

(b)

in relation to any other Lender, the amount of any Commitment transferred to it under this Agreement in respect of that Tranche or Facility,

(a)

a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or

(b)

the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

(i)

from performing its payment obligations under the Finance Documents; or

(ii)

from communicating with other Parties in accordance with the terms of the Finance Documents,

(a)

all freight, hire and passage moneys payable to that Borrower, including (without limitation) payments of any nature under any contract or any other agreement for the employment, use, possession, management and/or operation of that Vessel;

(b)

any claim under any guarantees related to hire payable to that Vessel as a consequence of the operation of that Vessel;

(c)

any compensation payable to that Borrower in the event of any requisition of that Vessel or for the use of that Vessel by any government authority or other competent authority;

(d)

remuneration for salvage, towage and other services performed by that Vessel payable to that Borrower;

(e)

demurrage and retention money receivable by that Borrower in relation to that Vessel;

(f)

all moneys which are at any time payable under the Insurances in respect of loss of earnings from that Vessel;

(g)

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

(h)

any other money which arise out of the use of or operation of that Vessel and moneys whatsoever due or to become due to that Borrower from third parties in relation to that Vessel.

(a)

the pollution or protection of the environment or to the carriage of material which is capable of polluting the environment;

(b)

harm to or the protection of human health;

(c)

the conditions of the workplace; or

(d)

any emission or substance capable of causing harm to any living organism or the environment.

(a)

in respect of an Original Lender or Original Hedging Bank, the office through which it will perform its obligations under this Agreement or the relevant Hedging Agreement, as the case may be, being the office specified against its name in Schedule 1 (The Original Lenders) or Schedule 2 (The Original Hedging Banks);

(b)

in respect of any other Lender or Hedging Bank, the office through which it will perform its obligations under this Agreement or the relevant Hedging Agreement, as the case may be, as notified to the Agent in writing on or before the date it becomes a Lender or Hedging Bank; or

(c)

in respect of any other Finance Party, the office in the jurisdiction in which it is resident for tax purposes,

(a)

all amounts which have become due for payment by the Borrowers under the Finance Documents and the Hedging Agreements have been paid;

(b)

no amount is owing or has accrued (without yet having become due for payment) under any of the Finance Documents and the Hedging Agreements;

(c)

none of the Obligors have any future or contingent liability under any provision of this Agreement, the other Finance Documents and the Hedging Agreements; and

(d)

the Agent, the Lenders and the Hedging Banks do not consider that there is a significant risk that any payment or transaction under a Finance Document or a Hedging Agreement would be set aside, or would have to be reversed or adjusted, in any present or possible future proceeding relating to a Finance Document or a Hedging Agreement or any asset covered (or previously covered) by a Security created by a Finance Document or a Hedging Agreement.

(a)

sections 1471 to 1474 of the Code or any associated regulations;

(b)

any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or

(c)

any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.

(a)

in relation to a "withholdable payment" described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014; or

(b)

in relation to a "passthru payment" described in section 1471(d)(7) of the Code not falling within paragraphs (a) above, the first date from which such payment may become subject to a deduction or withholding required by FATCA.

(a)

in respect of the Pre-Delivery Tranche A, the earlier of the Delivery Date of Vessel A and 31 March 2021;

(b)

in respect of the Pre-Delivery Tranche B, the earlier of the Delivery Date of Vessel B and 31 May 2021;

(c)

in respect of the Post-Delivery Tranche A, the date falling 60 Months after the Utilisation Date of the Post-Delivery Tranche A; and

(d)

in respect of the Post-Delivery Tranche B, the date falling 60 Months after the Utilisation Date of the Post-Delivery Tranche B.

(a)

moneys borrowed;

(b)

any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

(c)

any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)

the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with the relevant GAAP, be treated as a finance or capital lease;

(e)

receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f)

any amount raised under any other transaction (including any forward sale or purchase agreement) of a type not referred to in any other paragraph of this definition having the commercial effect of a borrowing;

(g)

any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) of any derivative transaction, only the marked to market value shall be taken into account);

(h)

any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or

(i)

the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above.

(a)

in relation to the Borrowers, KNOT ST and KNOT, generally accepted accounting principles in Norway, including IFRS; and

(b)

in relation to KNOP, generally accepted accounting principles in the United States of America, including IFRS.

(a)

prior to any Drop Down Date, the KNOT Group;

(b)

from the Drop Down Date in respect of one of the Borrowers only, the KNOT Group and the KNOP Group; and

(c)

from the Drop Down Date in respect of both Borrowers, the KNOP Group.

(a)

prior to any Drop Down Date, KNOT;

(b)

from the Drop Down Date in respect of one of the Borrowers only, KNOT (guaranteeing the Loan or Loans relating to the Vessel owned by KNOT's Subsidiary only) and (2) KNOP and KNOT ST jointly and severally (guaranteeing the Loan or Loans relating to the Vessel owned by KNOP's Subsidiary only); and

(c)

from the Drop Down Date in respect of  both Borrowers, KNOP and KNOT ST jointly and severally.

(a)

entered or to be entered into between a Borrower and a Hedging Bank pursuant to a Hedging Master Agreement made between them (including any schedule thereto or confirmation thereunder); and

(b)

made solely for the purpose of hedging the interest rate in relation to a Loan to which the relevant Borrower's Vessel relates and/or for hedging that Borrower's currency exposure in relation to the daily operation of its Vessel.

(a)

the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of that Loan; and

(b)

the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of that Loan,

(a)

the novation agreement to be made between Borrower A, KNOT and MUFG Securities EMEA plc (as hedging bank) pursuant to which rate swap transactions dated 12 April 2019 and 29 May 2019 (as evidenced by confirmations dated 12 April 2019 and 30 May 2019 from MUFG Securities EMEA plc to KNOT) and entered into pursuant to an ISDA Master Agreement dated 12 April 2019 between MUFG Securities EMEA plc and KNOT are to be novated from and out of the name of KNOT into the name of Borrower A; and

(b)

the novation agreement to be made between Borrower B, KNOT and MUFG Securities EMEA plc (as hedging bank) pursuant to which rate swap transactions dated 12 April 2019 and 29 May 2019 (as evidenced by confirmations dated 12 April 2019 and 30 May 2019 from MUFG Securities EMEA plc to KNOT) and entered into pursuant to an ISDA Master Agreement dated 12 April 2019 between MUFG Securities EMEA plc and KNOT are to be novated from and out of the name of KNOT into the name of Borrower B.

(a)

any Original Lender; and

(b)

any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 27 (Changes to the Lenders),

(a)

the applicable Screen Rate;

(b)

(if no Screen Rate is available for the Interest Period of that Loan) the Interpolated Screen Rate for that Loan; or

(c)

if:

(i)

no Screen Rate is available for USD; or

(ii)

no Screen Rate is available for the Interest Period of that Loan and it is not possible to calculate an Interpolated Screen Rate for that Loan,

(a)

if there are no Loans then outstanding, a Lender or Lenders whose Commitments aggregate more than 66²/₃% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66²/₃% of the Total Commitments immediately prior to the reduction); or

(b)

at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate more than 66²/₃% of all the Loans then outstanding.

(a)

the business, condition (financial or otherwise), operations, performance, assets or prospects of an Obligor or the Group taken as a whole since the date at which its latest audited financial statements were prepared; or

(b)

the ability of an Obligor to perform its obligations under the Finance Documents or the Hedging Agreements; or

(c)

the validity or enforceability of, or the effectiveness or ranking of any Security granted or purporting to be granted pursuant to, any Finance Document or Hedging Agreement; or

(d)

the right or remedy of a Finance Party or a Hedging Bank in respect of a Finance Document or a Hedging Agreement.

(a)

if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

(b)

if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month.

(a)

in relation to each Borrower, the audited financial statements (being the audited financial statements for the financial year ending 31 December 2019) delivered to the Agent pursuant

(b)

in relation to KNOT, its audited financial statements for its financial year ended 31 December 2018.

(a)

in relation to Refund Guarantee A, the acknowledgement and consent substantially in the form appended to the Shipbuilding Contract Novation Agreement for Vessel A issued or to be issued by the Refund Guarantor in favour of Borrower A confirming that Refund Guarantee A remains valid and continues to guarantee the New Shipyard's refund obligations under Shipbuilding Contract A on the same basis as if the New Shipyard had originally been a party to Shipbuilding Contract A in place of the Existing Shipyard; and

(b)

in relation to Refund Guarantee B, the acknowledgement and consent substantially in the form appended to the Shipbuilding Contract Novation Agreement for Vessel B issued or to be issued by the Refund Guarantor in favour of Borrower B confirming that Refund Guarantee B remains valid and continues to guarantee the New Shipyard's refund obligations under Shipbuilding Contract B on the same basis as if the New Shipyard had originally been a party to Shipbuilding Contract B in place of the Existing Shipyard.

(a)

each member of the Group; and

(b)

each of its directors, officers, employees, agents and representatives.

(a)

formally designated, nominated or recommended as the replacement for the Screen Rate by:

(i)

the administrator of the Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by the Screen Rate); or

(ii)

any Relevant Nominating Body,

(b)

in the opinion of the Majority Lenders and the Borrowers, generally accepted in the international syndicated loan markets as the appropriate successor to the Screen Rate; or

(c)

in the opinion of the Majority Lenders and the Borrowers, an appropriate successor to the Screen Rate.

(a)

listed on any Sanctions List or targeted by Sanctions (whether designated by name or by reason of being included in a class of person); or

(b)

located in or incorporated under the laws of any country or territory that is the target of comprehensive, country- or territory-wide Sanctions; or

(c)

directly or indirectly owned or controlled by, or acting on behalf, at the direction or for the benefit of, a person referred to in (a) and/or (b) above.

(a)

the methodology, formula or other means of determining the Screen Rate has, in the opinion of the Majority Lenders and the Borrowers, materially changed; or

(A)

the administrator of the Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

(B)

information is published in any order, decree, notice, petition or filing, however described, of or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of the Screen Rate is insolvent,

(ii)

the administrator of the Screen Rate publicly announces that it has ceased or will cease, to provide the Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide the Screen Rate; or

(iii)

the supervisor of the administrator of the Screen Rate publicly announces that the Screen Rate has been or will be permanently or indefinitely discontinued; or

(iv)

the administrator of the Screen Rate or its supervisor announces that the Screen Rate may no longer be used; or

(c)

the administrator of the Screen Rate determines that the Screen Rate should be calculated in accordance with its reduced submissions or other contingency or fallback policies or arrangements and either:

(i)

the circumstances or events leading to such determination are not (in the opinion of the Majority Lenders and the Borrowers) temporary; or

(ii)

the Screen Rate is calculated in accordance with any such policy or arrangement for a period no less than 3 months; or

(d)

in the opinion of the Majority Lenders and the Borrowers, the Screen Rate is otherwise no longer appropriate for the purposes of calculating interest under this Agreement.

(a)

the Vessels;

(b)

the Earnings;

(c)

the Insurances;

(d)

the Accounts;

(e)

any Requisition Compensation;

(f)

the Shipbuilding Contracts;

(g)

the Refund Guarantees;

(h)

the shares in each Borrower; and

(i)

the rights of each Borrower under the Hedging Agreements.

(a)

the date on which the Loans relating to that Vessel are prepaid in full under Clause 8.5 (Mandatory prepayment – Total Loss or sale of a Vessel) together with all other sums then due and payable under the Finance Documents following the sale or Total Loss of that Vessel;

(b)

any date on which (with the approval of the Lenders and the Hedging Banks) the relevant Mortgage and all other Security Documents relating to that Vessel are released without being replaced by a new Mortgage and any other relevant Security Documents; and

(c)

the last day of the Facility Period.

(a)

in relation to Vessel A, the novation agreement made or to be made between Borrower A, the Existing Shipyard and the New Shipyard pursuant to which Shipbuilding Contract A is to be novated out of the name of the Existing Shipyard into the name of the New Shipyard; and

(b)

in relation to Vessel B, the novation agreement made or to be made between Borrower B, the Existing Shipyard and the New Shipyard pursuant to which Shipbuilding Contract B is to be novated out of the name of the Existing Shipyard into the name of the New Shipyard.

(b)

at all times thereafter, the New Shipyard.

(a)

the actual, constructive, compromised, agreed, arranged or other total loss of that Vessel;

(b)

the requisition for title or compulsory acquisition of that Vessel by any government or other competent authority;

(c)

the capture, seizure, destruction, abandonment, condemnation, arrest, detention or confiscation of that Vessel by any government or by persons acting or purporting to act on behalf of any government or public authority, unless that Vessel is released and returned to the possession of the relevant Borrower within 30 days after the capture, seizure, arrest, detention or confiscation in question; or

(d)

any piracy, hijacking or theft of that Vessel, unless that Vessel is released and restored to the relevant Borrower within 30 days after the occurrence of such incident.

(a)

in the case of an actual total loss of a Vessel, the date on which it occurred or, if that is unknown, the date when that Vessel was last heard of;

(b)

in the case of a constructive, compromised, agreed or arranged total loss of a Vessel, the earlier of (i) the date on which a notice of abandonment is given to the insurers (provided a claim for total loss is admitted by such insurers) or, if such insurers do not forthwith admit such a claim, at the date at which either a total loss is subsequently admitted by the insurers or a total loss is subsequently adjudged by a competent court of law or arbitration panel to have occurred or, if earlier, the date falling 3 Months after notice of abandonment of that Vessel was given to the insurers and (ii) the date of compromise, arrangement or agreement made by or on behalf of the relevant Borrower with that Vessel's insurers in which the insurers agree to treat that Vessel as a total loss; or

(c)

in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred.

(a)

the proposed Transfer Date specified in the relevant Transfer Certificate; and

(b)

the date on which the Agent executes the relevant Transfer Certificate.

(a)

a Borrower which is resident for tax purposes in the US; or

(b)

an Obligor some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.

(a)

any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112);

(b)

value added tax as provided for in the Norwegian Value Added Tax Act of 19 June 2009 no. 58 (in Norwegian, Merverdiavgiftsloven); or

(c)

any other tax of a similar nature.

(a)

in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and

(b)

in relation to any other applicable Bail-In Legislation or UK Bail-In Legislation:

(i)

any powers to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers that are related to or ancillary to any of those powers; and

(ii)

any similar or analogous powers under that Bail-In Legislation or UK Bail-In Legislation.

1.2

Construction

(a)

Unless a contrary indication appears, any reference in this Agreement to:

(i)

the Agent, the Mandated Lead Arranger, the Bookrunner, any Finance Party, any Lender or any Party shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Finance Documents;

(ii)

a Hedging Bank shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under any Hedging Agreement;

(iii)

the Charterer shall be construed so as to include its successors in title under any Charter;

(iv)

assets includes present and future properties, revenues and rights of every description;

(v)

a Finance Document, Transaction Document or any other agreement or instrument is a reference to that Finance Document, Transaction Document or other agreement or instrument as amended, novated, supplemented, extended or restated;

(vi)

a group of Lenders includes all the Lenders;

(vii)

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

(viii)

a person includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium, partnership or other entity (whether or not having separate legal personality);

(ix)

a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation;

(x)

a provision of law is a reference to that provision as amended or re-enacted;

(xi)

words importing the singular shall include the plural and vice versa; and

(xii)

a time of day is a reference to Bergen time unless specified otherwise.

(b)

Section, Clause and Schedule headings are for ease of reference only.

(c)

Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(d)

Each Hedging Agreement shall operate subject to the terms of this Agreement and accordingly, in the event of any inconsistency between the terms of a Hedging Agreement and this Agreement, the terms of this Agreement will prevail.

(e)

A Default is continuing if it has not been remedied or waived and an Event of Default is continuing if it has not been waived.

1.3

Currency symbols and definitions

1.4

Third party rights

(a)

Unless expressly provided to the contrary in that Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999.

(b)

The consent of any third party to whom rights have been provided under a Finance Document is not required, unless otherwise specifically required under the terms of any Finance Document, to rescind, vary, amend or terminate a Finance Document at any time.

2.

THE FACILITIES

2.1

The Pre-Delivery Facility

2.2

The Post-Delivery Facility

2.3

Finance Parties' and Hedging Banks' rights and obligations

(a)

The obligations of each Finance Party and each Hedging Bank under the Finance Documents are several. Failure by a Finance Party or a Hedging Bank to perform its obligations under the Finance Documents or the Hedging Agreements does not affect the obligations of any other Party under the Finance Documents or the Hedging Agreements. No Finance Party or Hedging Bank is responsible for the obligations of any other Finance Party or Hedging Bank under the Finance Documents and the Hedging Agreements.

(b)

The rights of each Finance Party and each Hedging Bank under or in connection with the Finance Documents and the Hedging Agreements are separate and independent rights and any debt arising under the Finance Documents to a Finance Party or under the Hedging Agreements to a Hedging Bank from an Obligor shall be a separate and independent debt.

(c)

A Finance Party and a Hedging Bank may, except as otherwise stated in the Finance Documents and the Hedging Agreements, separately enforce its rights under the Finance Documents and the Hedging Agreements.

(d)

No Finance Party or Hedging Bank will be liable (including, without limitation, for negligence or any other category of liability whatsoever) for any action taken by it under or in connection with any Finance Document or Hedging Agreement, unless directly caused by its gross negligence or wilful misconduct.

3.

PURPOSE

3.1

Purpose of the Pre-Delivery Facility

3.2

Purpose of the Post-Delivery Facility

3.3

Monitoring

4.

CONDITIONS OF UTILISATION

4.1

Initial conditions precedent

(a)

The Borrowers may not deliver a Utilisation Request relating to a Loan under the Pre-Delivery Facility unless the Agent is satisfied that it has received all of the documents and other evidence listed in Part 1 (General Conditions Precedent) and Part 2 (Conditions Precedent To The Utilisation Of Each Loan Under The Pre-Delivery Facility) of Schedule 3 (Conditions Precedent And Subsequent), except those documents which specifically will only be available on the Utilisation Date or within another specified date as previously notified and agreed to by the Majority Lenders. The Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied.

(b)

The Borrowers may not deliver a Utilisation Request relating to a Loan under the Post-Delivery Facility unless the Agent is satisfied that it has received all of the documents and other evidence listed in Part 1 (General Conditions Precedent) and Part 3 (Conditions Precedent To The Utilisation Of Each Loan Under The Post-Delivery Facility) of Schedule 3 (Conditions Precedent And Subsequent), except those documents which specifically will only be available on the Utilisation Date or within another specified date as previously notified and agreed to by the Majority Lenders. The Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied.

(c)

Other than to the extent that the Majority Lenders notify the Agent in writing to the contrary before the Agent gives the notification described in paragraph (a) above, the Lenders authorise (but do not require) the Agent to give that notification. The Agent shall not be liable for any damages, costs or losses whatsoever as a result of giving any such notification.

4.2

Further conditions precedent

(a)

no Default is continuing or would result from the proposed Loan;

(b)

no Change of Control has occurred; and

(c)

the Repeating Representations to be made by each Obligor are true in all material respects.

4.3

Conditions subsequent

4.4

Maximum number of Loans

(a)

The Pre-Delivery Tranche A may be drawn in no more than 3 Loans.

(b)

The Pre-Delivery Tranche B may be drawn in no more than 3 Loans.

(c)

The Post-Delivery Tranche A may be drawn in no more than one Loan.

(d)

The Post-Delivery Tranche B may be drawn in no more than one Loan.

4.5

Form and content

(a)

be in form and substance satisfactory to the Agent;

(b)

if required by the Agent, be in original; and

(c)

if required by the Agent, be certified, notarised, legalised or attested in a manner acceptable to the Agent.

4.6

Waiver of conditions precedent

5.

UTILISATION

5.1

Delivery of a Utilisation Request

5.2

Completion of a Utilisation Request

(a)

the proposed Utilisation Date is a Business Day within the Availability Period, and complies with Clause 5.3 (Utilisation Dates);

(b)

the currency and amount of the Utilisation comply with Clause 5.4 (Currency and amount); and

(c)

the proposed Interest Period complies with Clause 10 (Interest Periods).

5.3

Utilisation Dates

(a)

The Pre-Delivery Tranche A may only be utilised on the following dates:

(i)

on the date of the third instalment under the Shipbuilding Contract A, within 3 Business Days of receipt by Borrower A of a facsimiled advice from the Shipyard confirmed by the Classification Society that steel cutting of Vessel A has been commenced, but in no event earlier than 8 July 2019;

(ii)

on the date of the fourth instalment under the Shipbuilding Contract A, within 3 Business Days of receipt by Borrower A of a facsimiled advice from the Shipyard confirmed by the Classification Society that the first block of the keel of Vessel A has been laid, but in no event earlier than 18 November 2019; and

(iii)

on the date of the fifth instalment under the Shipbuilding Contract A, within one month prior to the delivery of Vessel A.

(b)

The Pre-Delivery Tranche B may only be utilised on the following dates:

(i)

on the date of the third instalment under the Shipbuilding Contract B, within 3 Business Days of receipt by Borrower B of a facsimiled advice from the Shipyard confirmed by the Classification Society that steel cutting of Vessel B has been commenced, but in no event earlier than 8 July 2019;

(ii)

on the date of the fourth instalment under the Shipbuilding Contract B, within 3 Business Days of receipt by Borrower B of a facsimiled advice from the Shipyard confirmed by the Classification Society that the first block of the keel of Vessel B has been laid, but in no event earlier than 18 November 2019; and

(iii)

on the date of the fifth instalment under the Shipbuilding Contract B, within one month prior to the delivery of Vessel B.

(c)

The Post-Delivery Tranche A may only be utilised on or after the Delivery Date of Vessel A.

(d)

The Post-Delivery Tranche B may only be utilised on or after the Delivery Date of Vessel B.

5.4

Currency and amount

(a)

The currency specified in a Utilisation Request must be USD.

(b)

The amount of the proposed Loan must be an amount which is not more than the Available Facility in respect of the relevant Tranche, provided that:

(i)

the Loans utilised under the Pre-Delivery Tranche A must be amounts which are not more than:

(A)

USD17,250,000 in respect of the Loan described in paragraph (a)(i) of Clause 5.3 (Utilisation Dates);

(B)

USD11,050,000 in respect of the Loan described in paragraph (a)(ii) of Clause 5.3 (Utilisation Dates);

(C)

USD14,200,000 in respect of the Loan described in paragraph (a)(iii) of Clause 5.3 (Utilisation Dates);

(ii)

the Loans utilised under the Pre-Delivery Tranche B must be amounts which are not more than:

(A)

USD17,250,000 in respect of the Loan described in paragraph (b)(i) of Clause 5.3 (Utilisation Dates);

(B)

USD11,050,000 in respect of the Loan described in paragraph (b)(ii) of Clause 5.3 (Utilisation Dates);

(C)

USD14,200,000in respect of the Loan described in paragraph (b)(iii)(i) of Clause 5.3 (Utilisation Dates);

(iii)

the Loan utilised under the Post-Delivery Tranche A must be an amount which is not more than the lesser of (a) USD96,050,000 and (b) 85% of the Aggregate Project Cost of Vessel A, and shall be applied by Borrower A towards financing the delivery instalment of Vessel A and applicable project costs; and

(iv)

the Loan utilised under the Post-Delivery Tranche B must be an amount which is not more than the lesser of (a) USD96,050,000 and (b) 85% of the Aggregate Project Cost of Vessel B, and shall be applied by Borrower B towards financing the delivery instalment of Vessel B and applicable project costs.

5.5

Lenders' participation

(a)

If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Loan available by the Utilisation Date through its Facility Office.

(b)

The amount of each Lender's participation in each Loan will be equal to the proportion borne by its Available Commitment to the Available Facility (each in respect of the Tranche to which that Loan relates) immediately prior to making that Loan.

(c)

The Agent shall notify each Lender of the amount of each Loan and the amount of its participation in that Loan by 12:00 noon London time on the date falling one Business Day prior to the relevant Utilisation Date.

5.6

Cancellation of Commitments

6.

EXTENT OF LIABILITY

6.1

Joint and several liability

(a)

the payment of each and every sum from time to time due from the Borrowers;

(b)

each and every obligation undertaken; and

(c)

each and every liability incurred on the part of the Borrowers,

6.2

Limitations

(a)

Notwithstanding the joint and several liability of each Borrower with the other Borrower under the Finance Documents:

(i)

the maximum liability of each Borrower under the Finance Documents shall always be limited to USD230,520,000 plus (1) any interest, default interest, Break Cost or other costs, fees and expenses related to the Borrowers' obligations under the Finance Documents and (2) any default interest or other costs, fees and expenses related to the liability of that Borrower hereunder; and

(ii)

the joint and several liability of each Borrower with the other Borrower does not apply to any liability if and to the extent that it would constitute unlawful financial assistance within the meaning of Chapter 8 of the Norwegian Companies Act or any equivalent and applicable provisions under the laws of the relevant jurisdiction of the Borrowers.

(b)

The limitations set out in this Clause 6.2 (Limitations) shall only apply to the extent the joint and several obligations (or parts thereof) are deemed to be guarantee obligations (in Norwegian, kausjon) pursuant to the terms of the FA Act.

(c)

The joint and several liability of each Borrower with the other Borrower shall not apply from the date a Drop Down in respect of one Borrower has occurred until a Drop Down has occurred also for the other Borrower (whereupon such joint and several liability shall automatically reinstate), and during this time:

(i)

Borrower A shall only be liable for the Outstanding Indebtedness relating to the Pre-Delivery Tranche A and the Post-Delivery Tranche A (if any); and

(ii)

Borrower B shall only be liable for the Outstanding Indebtedness relating to the Pre-Delivery Tranche B and the Post-Delivery Tranche B (if any).

6.3

Waiver of defences

(a)

any time, waiver or consent granted to, or composition with, the other Borrower or any other person;

(b)

the release of the other Borrower or any other person under the terms of any composition or arrangement with any creditor of that Borrower;

(c)

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the other Borrower or any other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d)

any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the other Borrower or any other person;

(e)

any amendment, novation, supplement, extension (whether of maturity or otherwise) or restatement (in each case, however fundamental and of whatsoever nature) or replacement of a Finance Document or any other document or security in relation to the other Borrower;

(f)

any unenforceability, illegality or invalidity of any obligation of the other Borrower under any Finance Document or any other document or security; or

(g)

any insolvency or similar proceedings in relation to the other Borrower.

6.4

FA Act

(a)

§ 29 (as the Agent shall be entitled to exercise all its rights under this Agreement and applicable law in order to secure payment. Such rights shall include the right to set-off any credit balance in any currency, on any bank account that Borrower might have with each of the Finance Parties individually against the amount due);

(b)

§ 63 (1) – (2) (to be notified of a Default or an Event of Default hereunder and to be kept informed thereof);

(c)

§ 63 (3) (to be notified of any extension granted to the other Borrower in payment of principal and/or interest);

(d)

§ 63 (4) (to be notified of the other Borrower's bankruptcy proceedings or debt reorganisation proceedings and/or any application for the latter);

(e)

§ 65 (3) (that the consent of that Borrower is required for that Borrower to be bound by amendments to the Finance Documents that may be detrimental to its interest);

(f)

§ 66 (that its consent is required for the release of other Security);

(g)

§ 67 (2) (about any reduction of that Borrower's liabilities hereunder, since no such reduction shall apply as long as any amount is outstanding under the Finance Documents);

(h)

§ 67 (4) (that that Borrower's liabilities hereunder shall lapse after 10 years, as that Borrower shall remain liable hereunder as long as any amount is outstanding under any of the Finance Documents);

(i)

§ 70 (as that Borrower shall not have any right of subrogation into the rights of the Finance Parties under the Finance Documents until and unless the Finance Parties shall have received all amounts due or to become due to them under the Finance Documents);

(j)

§ 71 (as the Finance Parties shall have no obligation first to make demand upon or seek to enforce remedies against any other Obligor or any other Security provided in respect of any other Obligor's liabilities under the Finance Documents before demanding payment under or seeking to enforce the guarantee obligations of that Borrower hereunder);

(k)

§ 72 (as all interest and default interest due under any of the Finance Documents shall be secured by the guarantee obligations of that Borrower hereunder);

(l)

§ 73 (1) – (2) (as all costs and expenses related to a termination event, a Default or an Event of Default shall be secured by the guarantee obligations of that Borrower hereunder); and

(m)

§ 74 (1) – (2) (as that Borrower shall not make any claim against the other Borrower for payment by reason of performance by it of its obligations under the Finance Documents until and unless the Finance Parties first shall have received all amounts due or to become due to them under the Finance Documents).

7.

REPAYMENT

7.1

Repayment of the Pre-Delivery Tranche A

(a)

The Pre-Delivery Tranche A and any Outstanding Indebtedness related thereto is due and payable on the Final Maturity Date of the Pre-Delivery Tranche A.

(b)

No Borrower may reborrow any part of the Pre-Delivery Tranche A which is repaid.

7.2

Repayment of the Pre-Delivery Tranche B

(a)

The Pre-Delivery Tranche B and any Outstanding Indebtedness related thereto is due and payable on the Final Maturity Date of the Pre-Delivery Tranche B.

(b)

No Borrower may reborrow any part of the Pre-Delivery Tranche B which is repaid.

7.3

Repayment of the Post-Delivery Tranche A

(a)

The Post-Delivery Tranche A shall be repaid by 20 consecutive quarterly repayment instalments over a 20 year profile as set out in Schedule 9 (Repayment Schedule), provided that if the full amount of the Post-Delivery Tranche A is not advanced to the Borrowers, the amount of each such repayment instalment shall be reduced pro rata to the amount of the Post-Delivery Tranche A actually advanced. The first such repayment instalment is due and payable on the date falling 3 months after the Delivery Date of Vessel A and subsequent repayment instalments are due and payable at successive 3 monthly intervals thereafter.

(b)

Any Outstanding Indebtedness related to the Post-Delivery Tranche A is due and payable on the Final Maturity Date of the Post-Delivery Tranche A.

(c)

No Borrower may reborrow any part of the Post-Delivery Tranche A which is repaid.

7.4

Repayment of the Post-Delivery Tranche B

(a)

The Post-Delivery Tranche B shall be repaid by 20 consecutive quarterly repayment instalments over a 20 year profile as set out in Schedule 9 (Repayment Schedule), provided that if the full amount of the Post-Delivery Tranche B is not advanced to the Borrowers, the amount of each such repayment instalment shall be reduced pro rata to the amount of the Post-Delivery Tranche B actually advanced. The first such repayment instalment is due and payable on the date falling 3 months after the Delivery Date of Vessel B and subsequent repayment instalments are due and payable at successive 3 monthly intervals thereafter.

(b)

Any Outstanding Indebtedness related to the Post-Delivery Tranche B is due and payable on the Final Maturity Date of the Post-Delivery Tranche B.

(c)

No Borrower may reborrow any part of the Post-Delivery Tranche B which is repaid.

8.

PREPAYMENT AND CANCELLATION

8.1

Voluntary cancellation

8.2

Voluntary prepayment of Loans

(a)

The Borrowers may, if they give the Agent not less than 10 Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of the Loans (but, if in part, being an amount that reduces the amount of the Loan by a minimum amount of USD2,000,000).

(b)

Any prepayment under this Clause 8.2 (Voluntary Prepayment Of Loans) shall rateably satisfy the Borrowers' obligations under (1) Clause 7.1 (Repayment Of The Pre-Delivery Tranche A) and Clause 7.2 (Repayment Of The Pre-Delivery Tranche B) or (2) Clause 7.3 (Repayment Of The Post-Delivery Tranche A) and Clause 7.4 (Repayment Of The Post-Delivery Tranche B) (as the case may be, depending on whether or not the Vessels have been delivered and the Post-Delivery Facility utilised), pro rata to the remaining instalments and the balloon payment.

8.3

Mandatory prepayment - Drop Down

8.4

Mandatory prepayment – illegality

(a)

that Lender shall promptly notify the Agent upon becoming aware of that event;

(b)

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

(c)

to the extent that the Lender's participation has not been transferred pursuant to paragraph (d) of Clause 8.8 (Right of replacement or repayment and cancellation in relation to a single Lender), the Borrowers shall repay that Lender's participation in the Loans on the last day of the Interest Period for each Loan occurring after the Agent has notified the Borrowers or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law) and that Lender's corresponding Commitment shall be cancelled in the amount of the participations repaid.

8.5

Mandatory prepayment – Total Loss or sale of a Vessel

(a)

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

(b)

in the case of a Total Loss, on the earlier of the date falling 90 days after the Total Loss Date and the receipt by the Agent of the proceeds of Insurance relating to such Total Loss (or in the event of a requisition for title of the Vessel, immediately after the occurrence of such requisition of title)

8.6

Mandatory prepayment – Market Value

(a)

If:

(i)

following the Delivery Date of the first Vessel to be delivered but before the Delivery Date of the second Vessel to be delivered, the Market Value of the Vessel which has been delivered falls below 110% of the Post-Delivery Tranche relating to that Vessel; or

(ii)

following the Delivery Date of both Vessels but after a Drop Date has occurred in respect of one Borrower only, the Market Value of a Vessel falls below 110% of the Post-Delivery Tranche relating to that Vessel;

(A)

prepay the Post-Delivery Tranche relating to that Vessel or a part of that Post-Delivery Tranche (as the case may be); and/or

(B)

provide the Lenders with such additional security, in form and substance and being of a kind and having a value satisfactory to the Lenders,

(b)

Any prepayment under paragraph (a) shall satisfy the relevant Borrower's obligations under Clause 7.3 (Repayment Of The Post-Delivery Tranche A) or 7.4 (Repayment of the Post-Delivery Tranche B) (as applicable) pro rata to the remaining instalments and the balloon payment.

(c)

If following the Delivery Date of both Vessels and no Drop Down has occurred or a Drop Down has occurred in respect of both Borrowers, the aggregate Market Value of the Vessels falls below 110% of the aggregate amount of the Post Delivery Tranches, the Borrowers shall, unless otherwise agreed with the Agent within 30 days, either:

(i)

prepay the Post-Delivery Tranches or a part of the Post-Delivery Tranches (as the case may be); and/or

(ii)

provide the Lenders with such additional security, in form and substance and being of a kind and having a value satisfactory to the Lenders,

(d)

Any prepayment under paragraph (c) shall rateably satisfy the Borrowers' obligations under Clause 7.3 (Repayment Of The Post-Delivery Tranche A) and Clause 7.4 (Repayment Of The Post-Delivery Tranche B), pro rata to the remaining instalments and the balloon payments.

(e)

Any additional security shall be documented and perfected in such terms as the Agent (on behalf of all Lenders) may approve or require.

8.7

Mandatory prepayment – Change of Control or delisting of KNOP

(a)

If a Change of Control occurs in relation to both Borrowers or, if a Drop Down has taken place in relation to both Borrowers, KNOP ceases to be listed on the New York Stock Exchange:

(i)

the Borrowers shall promptly notify the Agent upon becoming aware of that event;

(ii)

a Lender shall not be obliged to fund a Utilisation; and

(iii)

the Agent (acting on the instructions of the Majority Lenders) may, by giving notice to the Borrowers of not less than the relevant period specified in paragraph (c) below, cancel the Total Commitments and declare all outstanding Loans together with accrued interest, and all other amounts accrued under the Finance Documents immediately due and payable, whereupon the Total Commitments will be cancelled and all such outstanding Loans and amounts will become immediately due and payable.

(b)

If a Change of Control occurs in relation to one Borrower only or, if a Drop Down has taken place in relation to one Borrower only, KNOP ceases to be listed on the New York Stock Exchange (in each case, such Borrower being the Affected Borrower):

(i)

the Borrowers shall promptly notify the Agent upon becoming aware of that event;

(ii)

a Lender shall not be obliged to fund a Utilisation for the Tranche which relates to the Vessel owned by the Affected Borrower (the Affected Tranche); and

(iii)

the Agent (acting on the instructions of the Majority Lenders) may, by giving notice to the Borrowers of not less than the relevant period specified in paragraph (c) below, cancel the Total Commitments for the Affected Tranche and declare all outstanding Loans in connection with the Affected Tranche, together with accrued interest, and all other amounts in connection with the Affected Tranche accrued under the Finance Documents immediately due and payable, whereupon the Total Commitments for the Affected Tranche will be cancelled and all such outstanding Loans for the Affected Tranche and amounts will become immediately due and payable.

(c)

The relevant notice period specified in paragraphs (a)(iii) and (b)(iii) above is:

(i)

30 days in relation to a Change of Control (other than a KNOP Change of Control); or

(ii)

60 days in relation to a KNOP Change of Control or a delisting of KNOP.

8.8

Right of replacement or repayment and cancellation in relation to a single Lender

(a)

If:

(i)

any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 13.2 (Tax gross-up); or

(ii)

any Lender claims indemnification from a Borrower under Clause 13.3 (Tax indemnity) or Clause 14.1 (Increased costs),

(b)

On receipt of a notice of cancellation referred to in paragraph (a) above, the Commitment(s) of that Lender shall immediately be reduced to zero.

(c)

On the last day of each Interest Period which ends after the Borrowers have given notice of cancellation under paragraph (a) above (or, if earlier, the date specified by the Borrowers in that notice), the Borrowers shall repay that Lender's participation in that Loan.

(d)

If:

(i)

any of the circumstances set out in paragraph (a) above apply to a Lender; or

(ii)

an Obligor becomes obliged to pay any amount in accordance with Clause 8.4 (Mandatory prepayment – illegality) to any Lender,

(e)

The replacement of a Lender pursuant to paragraph (d) above shall be subject to the following conditions:

(i)

the Borrowers shall have no right to replace the Agent;

(ii)

neither the Agent nor any Lender shall have any obligation to find a replacement Lender;

(iii)

in no event shall the Lender replaced under paragraph (d) above be required to pay or surrender any of the fees received by such Lender pursuant to the Finance Documents; and

(iv)

the Lender shall only be obliged to transfer its rights and obligations pursuant to paragraph (d) above once it is satisfied that it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations In relation to that transfer.

(f)

A Lender shall perform the checks described in paragraph (e)(iv) above as soon as reasonably practicable following delivery of a notice referred to in paragraph (d) above and shall notify the Agent and the Borrowers when it is satisfied that it has complied with this checks.

8.9

Restrictions

(a)

Any notice of cancellation or prepayment given by any Party under this Clause 8 (Prepayment and cancellation) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b)

Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs and amounts (if any) payable under the Hedging Agreements in connection with that prepayment, without premium or penalty.

(c)

The Borrowers may not reborrow any part of a Facility which is prepaid.

(d)

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

(e)

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

(f)

If the Agent receives a notice under this Clause 8 (Prepayment and cancellation) it shall promptly forward a copy of that notice to either the Borrowers or the affected Lender, as appropriate.

(g)

If all or part of any Lender's participation in a Loan is repaid or prepaid, an amount of that Lender's Commitment (equal to the amount of the participation which is repaid or prepaid) will be deemed to be cancelled on the date of repayment or prepayment.

8.10

Application of prepayments

9.

INTEREST

9.1

Calculation of interest

(a)

The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:

(i)

Margin; and

(ii)

LIBOR.

(b)

Interest shall be calculated on the actual number of days elapsed on the basis of a 360 day year.

(c)

For purpose of calculation of such number of days, the first day of each Interest Period shall be included and the last day thereof shall be excluded.

(d)

If, after calculation of any amount payable under this Clause 9, there is any fraction equating to less than one hundredth of one dollar (USD0.01), such fraction shall be discarded.

9.2

Payment of interest

9.3

Default interest

(a)

If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which is 2.00% per annum higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably).

(b)

If a Relevant Event of Default has occurred and is continuing in respect of a Loan and notice to pay default interest on it is given by the Agent to the relevant Borrower or the Borrowers (as the case may be) in accordance with paragraph (a) of Clause 26.16 (Acceleration), interest shall accrue on such Loan (but only to the extent that default interest is not then accruing on it under paragraph (a) above) from the date when such notice is given by the Agent to the relevant Borrower or the Borrowers (save in case of breach of Clause 21.6 (Notification of default), in which case default interest shall be payable from the date when the Relevant Event of Default occurred) up to the date on which the Relevant Event of Default is remedied at a rate which is 2.00% per annum higher than the normal interest rate then applicable to the relevant Loan.

(c)

Any interest accruing under this Clause 9.3 shall be immediately payable by the Obligor on demand by the Agent.

(d)

If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:

(i)

the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and

(ii)

the rate of interest applying to the overdue amount during that first Interest Period shall be 2.00% per annum higher than the rate which would have applied if the overdue amount had not become due.

(e)

Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

9.4

Notification of rates of interest

(a)

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

(b)

The Agent shall promptly notify the relevant Borrower of each Funding Rate relating to a Loan.

10.

INTEREST PERIODS

10.1

Interest Periods

(a)

Except as provided in Clause 10.1(c) and Clause 10.1(d), each Interest Period shall be in relation to a Loan and shall be for a duration of 3 months.

(b)

The first Interest Period in respect of the first Loan to be utilised in respect of a Pre-Delivery Tranche shall commence on the first Utilisation Date for that Loan and end on the date falling 3 months after and each subsequent Interest Period for that Loan shall commence on the last day of the immediately preceding Interest Period.

(c)

The first Interest Period in respect of each subsequent Loan for that Pre-Delivery Tranche shall commence on its Utilisation Date and end on the last day of the then current Interest Period for the other Loans already drawn in relation to that Pre-Delivery Tranche (so that the Interest Periods for all Loans shall be consolidated) and each subsequent Interest Period shall commence on the last day of the immediately preceding Interest Period.

(d)

No Interest Period in respect of a Pre-Delivery Tranche that commences before the Utilisation Date of its applicable Post-Delivery Tranche  shall extend beyond the Utilisation Date for such Post-Delivery Tranche and for the purposes of ensuring that the then current Interest Period for the Loans for the relevant Pre-Delivery Tranche ends on that date, Interest Periods of less than 3 months' duration may be set by the Agent so that it ends on the Utilisation Date of relevant Post-Delivery Tranche.

(e)

An Interest Period in respect of a Loan shall not extend beyond the relevant Final Maturity Date and shall be shortened so that it ends on the relevant Final Maturity Date.

10.2

Non-Business Day

11.

CHANGES TO THE CALCULATION OF INTEREST

11.1

Unavailability of Screen Rate

(a)

Interpolated Screen Rate: If no Screen Rate is available for LIBOR for the Interest Period of a Loan, the applicable LIBOR shall be the Interpolated Screen Rate for a period equal in length to the Interest Period of that Loan.

(b)

Reference Bank Rate: If no Screen Rate is available for LIBOR for:

(i)

USD; or

(ii)

the Interest Period of a Loan and it is not possible to calculate the Interpolated Screen Rate,

11.2

Calculation of Reference Bank Rate

(a)

Subject to paragraph (b) below, if LIBOR is to be determined on the basis of a Reference Bank Rate but a Reference Bank does not supply a quotation by noon London time on the Quotation Day, the Reference Bank Rate shall be calculated on the basis of the quotations of the remaining Reference Banks.

(b)

If at or about noon London time on the Quotation Day, none or only one of the Reference Banks supplies a quotation, there shall be no Reference Bank Rate for the relevant Interest Period.

(c)

If paragraph (b) above applies but no Reference Bank Rate is available for USD or the relevant Interest Period there shall be no LIBOR for that Loan and Clause 11.4 (Cost of funds) shall apply to that Loan for that Interest Period.

11.3

Market disruption

11.4

Cost of funds

(a)

If this Clause 11.4 (Cost of funds) applies, the rate of interest on each Lender's share of the relevant Loan for the relevant Interest Period shall be the percentage rate per annum which is the sum of:

(i)

the Margin; and

(ii)

the rate notified to the Agent by that Lender as soon as practicable and in any event within 3 Business Days of the first day of that Interest Period (or, if earlier, on the date falling 3 Business Days before the date on which interest is due to be paid in respect of that Interest Period), to be that which expresses as a percentage rate per annum the cost to the relevant Lender of funding its participation in that Loan from whatever source it may reasonably select.

(b)

If this Clause 11.4 (Cost of Funds) applies and the Agent or a Borrower so requires, the Agent and the Borrowers shall enter into negotiations (for a period of not more than 30 days with a view to agreeing a substitute basis for determining the rate of interest.

(c)

Any alternative basis agreed pursuant to paragraph (b) above shall, with the prior consent of all the Lenders and the Borrowers, be binding on all Parties.

11.5

Break Costs

(a)

Each Borrower shall, within 3 Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by the Borrowers on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.

(b)

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

12.

FEES

12.1

Commitment fee

(a)

The Borrowers shall pay to the Agent (for the account of each Lender) a commitment fee computed at the rate of 0.70% per annum on that Lender's Net Available Commitment for the period commencing on the date of this Agreement and ending on the last day of the Availability Period.

(b)

For the purposes of this Clause 12.1 (Commitment fee), the Net Available Commitment of a Lender is equal to the aggregate of:

(i)

its Available Commitments in respect of the Pre-Delivery Tranches; plus

(ii)

the amount by which its Available Commitments in respect of the Post-Delivery Tranches exceed the amount in paragraph (i) above.

(c)

The accrued commitment fee is payable on the last day of each successive period of 3 Months which ends during the Availability Period, on the last day of the Availability Period and, if cancelled in full, on the cancelled amount of the relevant Lender's Commitment at the time the cancellation is effective.

12.2

Flat fee

(a)

a fee of USD510,500 to be paid to MUFG Bank, Ltd.;

(b)

a fee of USD960,500 to be paid to Mizuho Bank, Ltd.; and

(c)

a fee of USD450,000 to be paid to Sumitomo Mitsui Trust Bank, Limited (London Branch),

12.3

Other fees

13.

TAX GROSS UP AND INDEMNITIES

13.1

Definitions

13.2

Tax gross-up

(a)

Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b)

The Borrowers shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Borrowers and that Obligor.

(c)

If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d)

If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(e)

Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party

13.3

Tax indemnity

(a)

The Borrowers shall (within 3 Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

(b)

Paragraph (a) above shall not apply:

(i)

with respect to any Tax assessed on a Finance Party:

(A)

under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

(B)

under the law of the jurisdiction in which that Finance Party's Facility Office is located in respect of amounts received or receivable in that jurisdiction,

(ii)

to the extent a loss, liability or cost:

(A)

is compensated for by an increased payment under Clause 13.2 (Tax gross-up); or

(B)

would have been compensated for by an increased payment under Clause 13.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 13.2 (Tax gross-up) applied; or

(C)

relates to a FATCA Deduction required to be made by a Party.

(c)

A Protected Party making, or intending to make a claim under paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Borrowers.

(d)

A Protected Party shall, on receiving a payment from an Obligor under this Clause 13.3 (Tax indemnity), notify the Agent.

13.4

Stamp taxes

13.5

VAT

(a)

All amounts expressed to be payable under a Finance Document by any Party to a Finance Party which (in whole or in part) constitute the consideration for any supply for VAT purposes are deemed to be exclusive of any VAT which is chargeable on that supply, and accordingly, subject to paragraph (b) below, if VAT is or becomes chargeable on any supply made by any Finance Party to any Party under a Finance Document and such Finance Party is required to account to the relevant tax authority for the VAT, that Party must pay to such Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of the VAT (and such Finance Party must promptly provide an appropriate VAT invoice to that Party).

(b)

If VAT is or becomes chargeable on any supply made by any Finance Party (the Supplier) to any other Finance Party (the Recipient) under a Finance Document, and any Party other than the Recipient (the Relevant Party) is required by the terms of any Finance Document to pay an amount equal to the consideration for that supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):

(i)

(where the Supplier is the person required to account to the relevant tax authority for the VAT) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT.  The Recipient must (where this paragraph (i) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and

(ii)

(where the Recipient is the person required to account to the relevant tax authority for the VAT) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT.

(c)

Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part of it as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.

(d)

Any reference in this Clause 13.5 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term representative member to have the same meaning as in the Value Added Tax Act 1994).

(e)

In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Party's VAT registration and such other information as is reasonably requested in connection with such Finance Party's VAT reporting requirements in relation to such supply.

13.6

FATCA Information

(a)

Subject to paragraph (c) below, each Party shall, within 10 Business Days of a reasonable request by another Party:

(i)

confirm to that other Party whether it is:

(A)

a FATCA Exempt Party; or

(B)

not a FATCA Exempt Party;

(ii)

supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA;

(iii)

supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party's compliance with any other law, regulation, or exchange of information regime.

(b)

If a Party confirms to another Party pursuant to paragraph (a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.

(c)

Paragraph (a) above shall not oblige any Finance Party to do anything, and paragraph (a)(iii)

(i)

any law or regulation;

(ii)

any fiduciary duty; or

(iii)

any duty of confidentiality.

(d)

If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph (a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.

(e)

If an Obligor is a US Tax Obligor or the Agent reasonably believes that its obligations under FATCA or any other applicable law or regulation require it, each Lender shall, within 10 Business Days of:

(i)

where that Obligor is a US Tax Obligor and the relevant Lender is an Original Lender, the date of this Agreement;

(ii)

where that Obligor is a US Tax Obligor on a Transfer Date and the relevant Lender is a New Lender, the relevant Transfer Date; or

(iii)

where that Obligor is not a US Tax Obligor, the date of a request from the Agent,

(A)

a withholding certificate on Form W-8, Form W-9 or any other relevant form; or

(B)

any withholding statement or other document, authorisation or waiver as the Agent may require to certify or establish the status of such Lender under FATCA or that other law or regulation.

(f)

The Agent shall provide any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) above to the relevant Obligor.

(g)

If any withholding certificate, withholding statement, document, authorisation or waiver provided to the Agent by a Lender pursuant to paragraph (e) above is or becomes materially inaccurate or incomplete, that Lender shall promptly update it and provide such updated withholding certificate, withholding statement, document, authorisation or waiver to the Agent unless it is unlawful for the Lender to do so (in which case the Lender shall promptly notify the Agent). The Agent shall provide any such updated withholding certificate, withholding statement, document, authorisation or waiver to the relevant Obligor.

(h)

The Agent may rely on any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) or (g) above without further verification. The Agent shall not be liable for any action taken by it under or in connection with paragraphs (e), (f) or (g) above.

13.7

FATCA Deduction

(a)

Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.

(b)

Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or

14.

INCREASED COSTS

14.1

Increased costs

(a)

Subject to Clause 14.3 (Exceptions) the Borrowers shall, within 3 Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation, (ii) compliance with any law or regulation made after the date of this Agreement or (iii) the implementation or application of or compliance with any Basel III Regulation (whether such implementation, application or compliance is by a government, regulator, Finance Party or any of its Affiliates).

(b)

In this Agreement Increased Costs means:

(i)

a reduction in the rate of return from the Facility or on a Finance Party's (or its Affiliate's) overall capital;

(ii)

an additional or increased cost; or

(iii)

a reduction of any amount due and payable under any Finance Document,

14.2

Increased cost claims

(a)

A Finance Party intending to make a claim pursuant to Clause 14.1 (Increased costs) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers.

(b)

Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.

14.3

Exceptions

(a)

Clause 14.1 (Increased costs) does not apply to the extent any Increased Cost is:

(i)

attributable to a Tax Deduction required by law to be made by an Obligor;

(ii)

attributable to a FATCA Deduction required to be made by a Party;

(iii)

compensated for by Clause 13.3 (Tax indemnity) (or would have been compensated for under Clause 13.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 13.3 (Tax indemnity) applied); or

(iv)

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

(b)

In this Clause 14.3 (Exceptions), a reference to a Tax Deduction has the same meaning given to the term in Clause 13.1 (Definitions).

15.

OTHER INDEMNITIES

15.1

Currency indemnity

(a)

If any sum due from an Obligor under the Finance Documents (a Sum), or any order, judgment

(i)

making or filing a claim or proof against that Obligor;

(ii)

obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

(b)

Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

15.2

Other indemnities

(a)

the occurrence of any Event of Default in respect of any Loan in respect of which that Obligor is then liable as Borrower or Guarantor;

(b)

a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 31 (Sharing among the Finance Parties);

(c)

any claim, action, civil penalty or fine against, any settlement, and any other kind of loss or liability, and all reasonable costs and expenses (including reasonable counsel fees and disbursements) incurred by the Agent or any Lender as a result of conduct of any Obligor or any of their partners, directors, officers, employees, agents or advisors, that violates any Sanctions;

(d)

funding, or making arrangements to fund, its participation in a Loan requested by the Borrowers in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone); or

(e)

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

15.3

Indemnity to the Agent

(a)

investigating any event which it reasonably believes is a Default;

(b)

acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or

(c)

instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under this Agreement.

16.

MITIGATION BY THE LENDERS

16.1

Mitigation

(a)

Each Finance Party shall, in consultation with the Borrowers, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 8.4 (Mandatory prepayment – illegality), Clause 13 (Tax gross-up and indemnities) or Clause 14 (Increased costs) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

(b)

Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.

16.2

Limitation of liability

(a)

The Borrowers shall promptly indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 16.1 (Mitigation).

(b)

A Finance Party is not obliged to take any steps under Clause 16.1 (Mitigation) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.

17.

COSTS AND EXPENSES

17.1

Transaction expenses

(a)

this Agreement and any other documents referred to in this Agreement; and

(b)

any other Finance Documents executed after the date of this Agreement.

17.2

Amendment and enforcement costs

(a)

responding to, evaluating, negotiating or complying with a request or requirement for any amendment, waiver or consent;

(b)

the granting of any release, waiver or consent under the Finance Documents;

(c)

any amendment or variation of a Finance Document; and

(d)

the enforcement of, or the preservation, protection or maintenance of, or attempt to preserve or enforce, any of the rights of the Finance Parties under the Finance Documents.

17.3

Costs and expenses payable even if no Utilisation

18.

SECURITY

18.1

Security

(a)

the Account Pledge executed by that Borrower;

(b)

the Factoring Agreement executed by that Borrower;

(c)

the Share Pledge in respect of that Borrower;

(d)

the Hedging Agreement Security executed by that Borrower;

(e)

during the Pre-Delivery Security Period relating to its Vessel, the Pre-Delivery Assignment Agreement executed by that Borrower; and

(f)

during the Post-Delivery Security Period relating to its Vessel, the Mortgage and Post-Delivery Assignment Agreement executed by that Borrower,

18.2

Ranking

(a)

rank with first priority;

(b)

secure all obligations of that Borrower under the Finance Documents and the Hedging Agreements to which it is a party, subject always to the provisions of Clause 32.5 (Partial Payments); and

(c)

as between the Hedging Banks and the other Finance Parties, secure the obligations of that Borrower under the Hedging Agreements to which it is a party on a pari passu basis with the rights of the other Finance Parties.

18.3

Perfection etc.

19.

GUARANTEE AND INDEMNITY

19.1

Guarantee and indemnity

(a)

guarantees to each Finance Party and each Hedging Bank punctual performance by each Borrower of all that Borrower's obligations under the Finance Documents and the Hedging Agreements;

(b)

undertakes with each Finance Party and each Hedging Bank that whenever a Borrower does not pay any amount when due under or in connection with any Finance Document or any Hedging Agreement, each Guarantor shall immediately on demand pay that amount as if it was principal obligor, and no Guarantor shall have any right of reservation or objection to such demand for payment by the Agent and no conflict or dispute of whatsoever nature between the Agent and the Borrowers shall have an impact on a Guarantor's obligation to pay under the guarantee set out in this Clause 19 (Guarantee and indemnity);

(c)

agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify that Finance Party and that Hedging Bank immediately on demand against any cost, loss or liability it incurs as a result of a Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document or any Hedging Agreement on the date when it would have been due. The amount payable by each Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause 19 (Guarantee and indemnity) if the amount claimed had been recoverable on the basis of a guarantee,

19.2

Guarantee limitations

(a)

the maximum guarantee liability of that Guarantor hereunder shall always be limited to USD230,520,000 plus (i) any interest, default interest, Break Cost or other costs, fees and expenses related to the Borrowers' obligations under the Finance Documents and the Hedging Agreements and (ii) any default interest or other costs, fees and expenses related to the liability of that Guarantor hereunder;

(b)

the guarantee set out in this Clause 19 (Guarantee and indemnity) does not apply to any liability if and to the extent that it would result in this guarantee constituting unlawful financial assistance within the meaning of Chapter 8 of the Norwegian Companies Act or any equivalent and applicable provisions under the laws of the relevant jurisdiction of that Guarantor; and

(c)

with effect from the date a Drop Down in respect of one Borrower has occurred and until a Drop Down has occurred also for the other Borrower (whereafter KNOP and KNOT ST shall be jointly and severally liable for both Borrowers' obligations under the Finance Documents):

(i)

the guarantee liabilities of KNOT shall be limited to the obligations of the Borrower owned by it only; and

(ii)

the joint and several guarantee liabilities of KNOP and KNOT ST shall be limited to the obligations of the Borrower owned by KNOP or a Subsidiary of KNOP only.

19.3

Continuing guarantee

19.4

Reinstatement

19.5

Waiver of defences

(a)

any time, waiver or consent granted to, or composition with, any Obligor or other person;

(b)

the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;

(c)

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d)

any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

(e)

any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document, any Hedging Agreement or any other document or security including without limitation any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document, any Hedging Agreement or other document or security;

(f)

any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

(g)

any insolvency or similar proceedings.

19.6

Immediate recourse

19.7

Appropriations

(a)

refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party or that Hedging Bank (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and

(b)

hold in an interest-bearing suspense account any moneys received from a Guarantor or on account of a Guarantor's liability under this Clause 19 (Guarantee and indemnity).

19.8

Deferral of the Guarantors' rights

(a)

to be indemnified by an Obligor;

(b)

to claim any contribution from any other guarantor of any Obligor's obligations under the Finance Documents and the Hedging Agreements;

(c)

to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party or any rights of the Hedging Banks under the Hedging Agreements or of any other guarantee or security taken pursuant to, or in connection with, the Hedging Agreements by any Hedging Bank;

(d)

to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which that Guarantor has given a guarantee, undertaking or indemnity under Clause 19 (Guarantee and Indemnity);

(e)

to exercise any right of set-off against any Obligor; and/or

(f)

to claim or prove as a creditor of any Obligor in competition with any Finance Party or any Hedging Bank.

19.9

Additional security

19.10

FA Act

(a)

§ 29 (as the Agent shall be entitled to exercise all its rights under this Agreement and applicable law in order to secure payment. Such rights shall include the right to set-off any credit balance in any currency, on any bank account that Guarantor might have with each of the Finance Parties individually against the amount due);

(b)

§ 63 (1) – (2) (to be notified of a Default or an Event of Default hereunder or under a Hedging Agreement and to be kept informed thereof);

(c)

§ 63 (3) (to be notified of any extension granted to a Borrower in payment of principal and/or interest);

(d)

§ 63 (4) (to be notified of a Borrower's bankruptcy proceedings or debt reorganisation

(e)

§ 65 (3) (that its consent is required for it to be bound by amendments to the Finance Documents and the Hedging Agreements that may be detrimental to its interest);

(f)

§ 66 (that its consent is required for the release of other Security);

(g)

§ 67 (2) (about any reduction of its liabilities hereunder, since no such reduction shall apply as long as any amount is outstanding under the Finance Documents and the Hedging Agreements);

(h)

§ 67 (4) (that its liabilities hereunder shall lapse after 10 years, as it shall remain liable hereunder as long as any amount is outstanding under any of the Finance Documents and the Hedging Agreements);

(i)

§ 70 (as it shall not have any right of subrogation into the rights of the Finance Parties under the Finance Documents and/or the Hedging Banks under the Hedging Agreements until and unless the Finance Parties and the Hedging Banks shall have received all amounts due or to become due to them under the Finance Documents and the Hedging Agreements);

(j)

§ 71 (as the Finance Parties and the Hedging Banks shall have no liability first to make demand upon or seek to enforce remedies against any other Obligor or any other Security Interest provided in respect of any other Obligor's liabilities under the Finance Documents and the Hedging Agreements before demanding payment under or seeking to enforce its guarantee obligations hereunder);

(k)

§ 72 (as all interest and default interest due under any of the Finance Documents and the Hedging Agreements shall be secured by its guarantee obligations hereunder);

(l)

§ 73 (1) – (2) (as all costs and expenses related to a termination event or an Event of Default under this Agreement and under the Hedging Agreements shall be secured by its guarantee obligations hereunder); and

(m)

§ 74 (1) – (2) (as it shall not make any claim against any other Obligor for payment by reason of performance by it of its obligations under the Finance Documents and the Hedging Agreements until and unless the Finance Parties and the Hedging Banks first shall have received all amounts due or to become due to them under the Finance Documents and the Hedging Agreements)).

20.

REPRESENTATIONS

20.1

Date of representations and warranties

(a)

Subject to paragraph (b), each Obligor makes the representations and warranties set out in this Clause 20 (Representations) to each Finance Party and each Hedging Bank on the date of this Agreement and on the dates on which the Repeating Representations are made.

(b)

Each Borrower make the representations and warranties set out in Clause 20.13 (Financial statements) (in so far as they relate to a Borrower's Original Financial Statements) to each Finance Party and each Hedging Bank on the date on which the first set of audited financial statements (being the audited financial statements for the financial year ending 31 December 2019) are delivered by each Borrower to the Agent pursuant to Clause 21.2(a) (Financial statements) and on the dates on which the Repeating Representations are made.

20.2

Status

(a)

It is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.

(b)

It has the power to own its assets and carry on its business as it is being conducted.

20.3

Binding obligations

(a)

The obligations expressed to be assumed by it in each Finance Document are, subject to any general principles of law limiting its obligations which are specifically referred to in any legal opinion delivered pursuant to Clause 4 (Conditions of Utilisation), legal, valid, binding and enforceable obligations.

(b)

Save as provided herein or therein and/or as have been or shall be completed prior to the relevant Utilisation Date, no registration, filing, payment of tax or fees or other formalities are necessary or desired to render the Finance Documents enforceable against the Obligors, and in respect of a Vessel, for the Mortgage over that Vessel to constitute a valid and enforceable first priority mortgage over that Vessel.

20.4

Non-conflict with other obligations

(a)

any law, statute, rule or regulation applicable to it, or any order, judgment, decree or permit to which it is subject (including the Council Directive 2001/97/EC of the European Parliament and of the Council of 4 December 2001 amending Council Directive 91/308/EEC of the Council of the European Community implemented to combat "money laundering");

(b)

its constitutional documents; or

(c)

any agreement or instrument binding upon it or any of its assets.

20.5

Power and authority

(a)

It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents and the Transaction Documents to which it is a party and the transactions contemplated by those Finance Documents and Transaction Documents.

(b)

All necessary corporate, shareholder and other action have been taken by it to approve and authorise the execution of the Finance Documents and the Transaction Documents, the compliance with the provisions thereof and the performance of its obligations thereunder.

(c)

Each Borrower acts for its own account by entering into the Finance Documents and obtaining the Facilities.

20.6

Validity and admissibility in evidence

(a)

to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents and the Transaction Documents to which it is a party;

(b)

to make the Finance Documents and the Transaction Documents to which it is a party admissible in evidence in its jurisdiction of incorporation; and

(c)

in connection with its business and ownership of assets,

20.7

Governing law and enforcement

(a)

The choice of English and Norwegian law respectively as the governing law of the Finance Documents (other than the Mortgage on any Vessel whose Flag State is not Norway or the

(b)

Any judgment obtained in England and Wales and/or Norway in relation to a Finance Document will be recognised and enforced in its jurisdiction of incorporation and each Flag State.

20.8

Insolvency

20.9

Deduction of Tax

20.10

No filing or stamp taxes

(a)

each Mortgage in the ship registry of the relevant Vessel's Flag State; and

(b)

the Factoring Agreements with the Norwegian Register of Moveable Property (Løsøreregisteret) (and payment of associated fees),

20.11

No default

(a)

No Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.

(b)

No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or to which its assets are subject  (including, without limitation, the Finance Documents and the Transaction Documents) which might have a Material Adverse Effect.

20.12

No misleading information

(a)

Any factual information provided by any member of the Group was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.

(b)

The financial information provided by any member of the Group has been prepared on the basis of recent historical information and on the basis of reasonable assumptions.

(c)

Nothing has occurred or been omitted and no information has been given or withheld that results in the information provided by any member of the Group being untrue or misleading in any material respect.

20.13

Financial statements

(a)

Its Original Financial Statements and the financial information most recently delivered to the Agent pursuant to Clause 21 (Information Undertakings) were prepared in accordance with the relevant GAAP consistently applied.

(b)

Its Original Financial Statements and the financial information most recently delivered to the

(c)

As of the date of the Original Financial Statements and the financial information most recently delivered to the Agent pursuant to Clause 21 (Information Undertakings), no Obligor has had any material liabilities, direct or indirect, actual or contingent which has not been disclosed to the Agent, and there is no material, unrealised or anticipated losses from any unfavourable commitments not disclosed by or reserved against it in the Original Financial Statements, the most recent delivered financial information or in the notes thereto.

(d)

There has been no material adverse change in its business or financial condition (or the business or consolidated financial condition of the Group) since the date of delivery of its latest financial statements.

20.14

Pari passu ranking

20.15

No proceedings pending or threatened

20.16

Title

20.17

No security

20.18

No immunity

20.19

Ranking of Security Documents

20.20

Taxation

(a)

It is not overdue in the filing of any Tax returns.

(b)

No claims or investigations are being, or are reasonably likely to be, made or conducted against it with respect to Taxes which is reasonably likely to have a Material Adverse Effect.

(c)

It is resident for Tax purposes only in the jurisdiction of its incorporation, unless the Agent shall have been otherwise informed in writing.

20.21

Environmental compliance

20.22

Environmental Claims

20.23

ISM Code and ISPS Code compliance

20.24

The Vessels

(a)

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

(b)

registered in the name of the relevant Borrower with the relevant Approved Ship Registry under the laws and flag applicable for the relevant Approved Ship Registry;

(c)

operationally seaworthy in every way and fit for service; and

(d)

classed with the Classification Society, free of all overdue requirements and other recommendations.

20.25

Financial Indebtedness

20.26

Sanctions

(a)

a Restricted Party or the owner or controller of a Restricted Party; or

(b)

in breach of Sanctions; or

(c)

subject to or involved in any complaint, claim, proceeding, formal notice, investigation or other action by any regulatory or enforcement authority or third party concerning any Sanctions.

20.27

Ownership

20.28

Transaction Documents

(a)

No material terms of any of the Transaction Documents have been amended or terminated, nor have any waivers of any material terms thereof been agreed, without the prior written consent of the Agent.

(b)

It has not received any notice of termination or force majeure under any of the Transaction Documents and is not aware of any event which is reasonably likely to cause termination or force majeure under any of the Transaction Documents.

20.29

Repetition

21.

INFORMATION UNDERTAKINGS

21.1

General

21.2

Financial statements

(a)

as soon as the same become available, but in any event within 150 days after the end of each of their financial years:

(i)

their audited financial statements for that financial year; and

(ii)

the audited consolidated financial statements of the Guarantors for that financial year;

(b)

as soon as the same become available, but in any event within 90 days after the end of their financial quarters (other than for the 4^th financial quarter in each financial year):

(i)

their unaudited financial statements for that financial quarter; and

(ii)

the unaudited consolidated financial statements of the Guarantors for that financial quarter;

(c)

as soon as the same become available, but in any event on or before 31 January of each financial year, the consolidated annual budget and cash flow projections for that financial year and for the next 5 years for the Guarantors, specifying major assumptions and structure charts which correctly reflects the KNOT Group and/or the KNOP Group on such date.

21.3

Compliance Certificate

21.4

Requirements as to financial statements

(a)

Each set of financial statements delivered by the Borrowers pursuant to Clause 21.2 (Financial

(b)

The Borrowers shall procure that each set of financial statements of an Obligor delivered pursuant to Clause 21.2 (Financial statements) is prepared using the relevant GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for that Obligor unless, in relation to any set of financial statements, it notifies the Agent that there has been a change in the relevant GAAP, the accounting practices or reference periods and its auditors (or, if appropriate, the auditors of the Obligor) deliver to the Agent:

(i)

a description of any change necessary for those financial statements to reflect the relevant GAAP, accounting practices and reference periods upon which that Obligor's Original Financial Statements were prepared; and

(ii)

sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to determine whether Clause 22 (Financial covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and that Obligor's Original Financial Statements.

21.5

Information: miscellaneous

(a)

promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which might, if adversely determined, have a Material Adverse Effect;

(b)

promptly upon becoming aware of them, the details of any inquiry, claim, action, suit, proceeding or investigation by any Sanctions Authority against it, any of its direct or indirect owners, other member of the Group, any of their joint ventures or any of their respective directors, officers, employees, agents or representatives, as well as information on what steps are being taken with regards to answer or oppose such;

(c)

promptly upon becoming aware that it, any of its direct or indirect owners, other member of the Group or any of their respective directors, officers, employees, agents or representatives has become or is likely to become a Restricted Party; and

(d)

promptly, such further information regarding the financial condition, business and operations of any member of the Group as any Finance Party (through the Agent) may reasonably request.

21.6

Notification of default

(a)

Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).

(b)

Promptly upon a request by the Agent, each Obligor shall supply to the Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

21.7

Notification of Environmental Claims

(a)

if any Environmental Claim has been commenced or (to the best of its knowledge and belief) is threatened against an Obligor (or any of its Affiliates), the Manager or any Vessel; and

(b)

of any fact and circumstances which will or are reasonably likely to result in any Environmental Claim being commenced or threatened against an Obligor (or any of its Affiliates), the Manager or any Vessel,

21.8

Market Value

(a)

The Borrowers shall arrange or undertake to let the Agent arrange for the Market Value of each Vessel to be determined:

(i)

(if applicable) prior to the Drop Down Date in relation to the Borrower which owns that Vessel;

(ii)

semi-annually; and

(iii)

at any other time when requested by the Majority Lenders.

(b)

The cost of each valuation obtained for the purposes of paragraphs (i) and (ii) of paragraph (a) above shall be at the expense of the Borrowers.

(c)

The cost of each valuation obtained for the purposes of paragraph (iii) of paragraph (a) above shall be at the expense of the Lenders, unless an Event of Default has occurred in which case each such valuation shall be at the expense of the Borrowers (if they are then jointly and severally liable for the Loans) or at the expense of the Borrower who owns the relevant Vessel (if the Borrowers are then severally liable for the Loans).

21.9

Inspection reports

22.

FINANCIAL COVENANTS

22.1

Definitions

(a)

receivables in relation to Tax;

(b)

exceptional items and other non-operating items;

(c)

insurance claims; and

(d)

any interest owing to any member of the relevant Group.

(a)

deducting any provision on account of taxation;

(b)

deducting any interest, discounts or other fees incurred or payable, by any member of the relevant Group in respect of Financial Indebtedness;

(c)

taking into account any items treated as exceptional or extraordinary items; and

(d)

any amount attributable to the amortisation of intangible assets and depreciation of tangible assets.

(a)

cash in hand or on deposit with any bank or financial institution;

(b)

cash equivalents as reported in accordance with the relevant GAAP; and

(c)

(when determining the Free Liquidity of KNOP) the undrawn portion of all revolving facilities to the KNOP Group maturing in no less than 3 months.