20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

     ¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

     x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

OR

     ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

OR

     ¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: Not applicable

Commission file number 001-33922

DRYSHIPS INC.

(Exact name of Registrant as specified in its charter)

(Translation of Registrant’s name into English)

Republic of the Marshall Islands

(Jurisdiction of incorporation or organization)

80 Kifissias Avenue

GR 15125 Amaroussion

Greece

(Address of principal executive offices)

Mr. George Economou

Tel: + 011 30 210-80 90-570, Fax: + 011 30 210 80 90 585

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

Title of class	Name of exchange on which registered
Common stock, $0.01 par value	The Nasdaq Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: As of December 31, 2009, there were 280,326,721 shares of the registrant’s common stock, $0.01 par value, outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  x Yes  ¨ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  ¨  Yes  x No

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes  ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ¨ Yes  ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definitions of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x                 Accelerated filer  ¨                 Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP  x International Financial Reporting Standards as issued by the International Accounting Standards Board  ¨ Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.   ¨ Item 17  ¨Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨ Yes  x No

FORWARD-LOOKING STATEMENTS

DryShips Inc., or the “Company”, desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection therewith. This document and any other written or oral statements made by the Company or on its behalf may include forward-looking statements, which reflect its current views with respect to future events and financial performance. This document includes assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as “forward-looking statements.” We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. When used in this document, the words “anticipate,” “estimate,” “project,” “forecast,” “plan,” “potential,” “may,” “should,” and “expect” reflect forward-looking statements.

Please note in this annual report, “we,” “us,” “our,” and “the Company,” all refer to DryShips Inc. and its subsidiaries.

All statements in this document that are not statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to, such matters as:

• future operating or financial results;

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

• our ability to enter into new contracts for our drilling rigs and drillships and future utilization rates and contract rates for drilling rigs and drillships;

• future capital expenditures and investments in the construction, acquisition and refurbishment of drilling rigs and drillships (including the amount and nature thereof and the timing of completion thereof);

• statements about drybulk shipping market trends, including charter rates and factors affecting supply and demand;

• our ability to obtain additional financing;

• expectations regarding the availability of vessel acquisitions; and

• anticipated developments with respect to pending litigation.

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although DryShips Inc. believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, DryShips Inc. cannot assure you that it will achieve or accomplish these expectations, beliefs or projections described in the forward-looking statements contained in this annual report.

Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter rates and drybulk vessel, drilling rig and drillship values, failure of a seller to deliver one or more drilling rigs, drillships or drybulk vessels, failure of a buyer to accept delivery of a drilling rig, drillship, or vessel, inability to procure acquisition financing, default by one or more charterers of our ships, changes in demand for drybulk commodities or oil, changes in demand that may affect attitudes of time charterers, scheduled and unscheduled drydocking, changes in DryShips Inc.’s voyage and operating expenses, including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents, international hostilities and political events or acts by terrorists.

ii

TABLE OF CONTENTS

PART I
Item 1	Identity of Directors, Senior Management and Advisers	1
Item 2	Offer Statistics and Expected Timetable	1
Item 3	Key Information	1
Item 4	Information on the Company	34
Item 4A	Unresolved Staff Comments	56
Item 5	Operating and Financial Review and Prospects	56
Item 6	Directors and Senior Management	90
Item 7	Major Shareholders and Related Party Transactions	95
Item 8	Financial Information	99
Item 9	The Offer and Listing	101
Item 10	Additional Information	101
Item 11	Quantitative and Qualitative Disclosures about Market Risk	111
Item 12	Description of Securities Other than Equity Securities	112
PART II
Item 13	Defaults, Dividend Arrearages and Delinquencies	113
Item 14	Material Modifications to the Rights of Security Holders and Use of Proceeds	113
Item 15	Controls and Procedures	113
Item 16A	Audit Committee Financial Expert	114
Item 16B	Code of Ethics	115
Item 16C	Principal Accountant Fees and Services	115
Item 16D	Exemptions from the Listing Standards for Audit Committees	115
Item 16E	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	115
Item 16F	Changes in Registrant’s Certifying Accountant	115
Item 16G	Corporate Governance	116
PART III
Item 17	Financial Statements	116
Item 18	Financial Statements	116
Item 19	Exhibits	117

iii

PART I.

Item 1. Identity of Directors, Senior Management and Advisers

Not Applicable.

Item 2. Offer Statistics and Expected Timetable

Not Applicable.

Item 3. Key Information

A. Selected Financial Data

The following table sets forth the selected consolidated financial data and other operating data for DryShips Inc. as of and for the years ended December 31, 2005, 2006, 2007, 2008 and 2009. The following information should be read in conjunction with Item 5 – “Operating and Financial Review and Prospects” and the consolidated financial statements and related notes included herein. The following selected consolidated financial data of DryShips Inc. is derived from our audited consolidated financial statements and the notes thereto which have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”).

3. A (i) STATEMENT OF OPERATIONS

(In thousands of Dollars	Year Ended December 31,
except per share and share data)	2005			2006			2007			2008			2009
STATEMENT OF OPERATIONS
Revenues		228,913			248,431			582,561			1,080,702		819,834
Loss on forward freight agreements		—			22,473			—			—		—
Voyage expenses		9,592			15,965			31,647			53,172		28,779
Vessels and drilling rigs operating expenses		39,875			54,164			63,225			165,891		201,887
Depreciation and amortization		40,231			58,011			76,511			157,979		196,309
Gain on sale of assets, net		—			(8,845	)		(137,694	)		(223,022	)	(2,045	)
Gain on contract cancellation		—			—			—			(9,098	)	(15,270	)
Contract termination fees and forfeiture of vessels deposits		—			—			—			160,000		259,459
Vessel impairment charge		—			—			—			—		1,578
Goodwill impairment charge					—			—			700,457		—
General and administrative expenses - cash(1)		9,148			12,540			17,072			57,856		52,753
General and administrative expenses - non-cash		—			—			—			31,502		38,070
Operating income/(loss)		130,067			94,123			531,800			(14,035	)	58,314
Interest and finance costs		(20,668	)		(42,392	)		(51,231	)		(113,194	)	(97,599	)
Interest income		749			1,691			5,073			13,085		10,414
Gain/(loss) on interest rate swaps		270			676			(3,981	)		(207,936	)	23,160
Other, net		(175	)		214			(3,037	)		(12,640	)	(6,692	)
Income/(loss) before income taxes and equity in loss of investee		110,243			54,312			478,624			(334,720	)	(12,403	)
Income taxes		—			—			—			(2,844	)	(12,797	)
Equity in loss of investee		—			—			(299	)		(6,893	)	—
Net Income/(loss)		110,243			54,312			478,325			(344,457	)	(25,200	)
Less: Net income attribute to non controlling interests		—			—			—			(16,825	)	(7,178	)
Net income/(Loss) attributable to Dryships Inc.		110,243			54,312			478,325			(361,282	)	(32,378	)
Earnings/(loss) per common share attributable to Dryships Inc. common stockholders, basic and diluted	$	3.81		$	1.68		$	13.40		$	(8.11	)	(0.19	)
Weighted average number of common shares, basic and diluted		28,957,397			32,348,194			35,700,182			44,598,585		209,331,737
Dividends declared per share	$	0.40		$	0.80		$	0.80		$	0.80		—

1

3.A.(ii) BALANCE SHEET AND OTHER FINANCIAL DATA

(In thousands of Dollars	As of and for the Year Ended December 31,
except per share and share data and fleet data)	2005		2006		2007		2008		2009
Current assets	18,777		25,875		153,035		720,427		1,180,650
Total assets	906,778		1,161,973		2,344,432		4,842,680		5,799,088
Current liabilities, including current portion of long-term debt	135,745		129,344		239,304		2,525,048		1,896,023
Total long-term debt, including current portion	525,353		658,742		1,243,778		3,158,870		2,684,684
Common stock	304		355		367		706		2,803
Number of shares outstanding	30,350,000		35,490,097		36,681,097		70,600,000		280,326,271
Stockholders’ equity	352,720		444,692		1,021,729		1,291,572		2,804,635
OTHER FINANCIAL DATA
Net cash provided by operating activities	163,806		99,082		407,899		540,129		286,217
Net cash used in investing activities	(847,649	)	(287,512	)	(955,749	)	(2,110,852	)	(162,043	)
Net cash provided by financing activities	680,656		185,783		656,381		1,762,769		265,881
EBITDA (2)	170,393		153,024		600,994		(100,350	)	263,913
DRYBULK FLEET DATA:
Average number of vessels (3)	21.6		29.76		33.67		38.56		38.12
Total voyage days for drybulk carrier fleet (4)	7,710		10,606		12,130		13,896		13,660
Total calendar days for drybulk carrier fleet (5)	7,866		10,859		12,288		14,114		13,914
Drybulk carrier fleet utilization (6)	98.00	%	97.70	%	98.71	%	98.46	%	98.17	%
(In Dollars)
AVERAGE DAILY RESULTS
Time charter equivalent (7)	28,446		21,918		45,417		58,155		30,425
Vessel operating expenses (8)	5,069		4,988		5,145		5,644		5,434
DRILLING RIG FLEET DATA:
Average number of drilling rigs (3)	—		—		—		2.0		2.0
Total voyage days for drilling rig fleet (4)	—		—		—		410		695
Total calendar days for drilling rig fleet (5)	—		—		—		462		730
Drilling rig fleet utilization (6)	—		—		—		88.66	%	95.25	%
(In Dollars)
AVERAGE DAILY RESULTS
Rig operating expenses (8)	—		—		—		181,821		192,988

2

(1) Cash compensation to members of our senior management and directors amounted to $1.4 million, $1.4 million, $1.5 million, $9.7 million and $5.3 million for the years ended December 31, 2005, 2006, 2007, 2008 and 2009, respectively.

(2) EBITDA represents net income before interest, taxes, depreciation and amortization. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or US GAAP, and our calculation of EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is a basis upon which the Company measures its operations and efficiency. EBITDA is also used by our lenders as a measure of our compliance with certain loan covenants and because the Company believes that it presents useful information to investors regarding a company’s ability to service and/or incur indebtedness.

	For the Year Ended December 31,
(Dollars in thousands)	2005	2006	2007	2008		2009
Net income/(loss)	110,243	54,312	478,325	(361,282	)	(32,378	)
Add: Net interest expense	19,919	40,701	46,158	100,109		87,185
Add: Depreciation and amortization	40,231	58,011	76,511	157,979		196,309
Add: Income taxes	—	—	—	2,844		12,797
EBITDA	170,393	153,024	600,994	(100,350	)	263,913

(3) Average number of vessels is the number of vessels that constituted the respective fleet for the relevant period, as measured by the sum of the number of days each vessel in that fleet was a part of the fleet during the period divided by the number of calendar days in that period.

(4) Total voyage days for the respective fleet are the total days the vessels in that fleet were in the Company’s possession for the relevant period net of off-hire days associated with major repairs, drydockings or special or intermediate surveys.

(5) Calendar days are the total days the vessels in that fleet were in the Company’s possession for the relevant period including off-hire days associated with major repairs, drydockings or special or intermediate surveys.

(6) Fleet utilization is the percentage of time that the vessels in that fleet were available for revenue-generating voyage days, and is determined by dividing voyage days by fleet calendar days for the relevant period.

(7) Time charter equivalent, or “TCE”, is a measure of the average daily revenue performance of a vessel on a per voyage basis. The Company’s method of calculating TCE is determined by dividing voyage revenues (net of voyage expenses) by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, as well as commissions. TCE revenues, a non-GAAP measure, provides additional meaningful information in conjunction with revenues from our vessels, the most directly comparable GAAP measure, because it assists Company’s management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. TCE is also a standard shipping industry performance measure used primarily to compare period -to-period changes in a shipping company’s performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods. The following table reflects the calculation of our TCE rates for the periods presented.

3

Drybulk Carrier Segment	Year Ended December 31,
(In thousands of Dollars, except for TCE rates, which are expressed in Dollars and voyage days)	2005		2006		2007		2008		2009
Voyage revenues	228,913		248,431		582,561		861,296		444,385
Voyage expenses	(9,592	)	(15,965	)	(31,647	)	(53,172	)	(28,779	)
Time charter equivalent revenues	219,321		232,466		550,914		808,124		415,606
Total voyage days for drybulk fleet	7,710		10,606		12,130		13,896		13,660
Time charter equivalent (TCE) rate	28,446		21,918		45,417		58,155		30,425

Drilling Rig Carrier Segment	Year Ended December 31,
(In thousands of Dollars)	2008		2009
Revenue from drilling contracts	219,406		375,449
Drilling rig operating expenses	(86,180	)	(126,282	)
	133,226		249,167
Total employment days for drilling rigs.	410		695

(8) Daily vessel/rig operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, is calculated by dividing vessel/rig operating expenses by drybulk carrier/drilling rig fleet calendar days for the relevant time period.

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk factors

Some of the following risks relate principally to the industries in which we operate and our business in general. Other risks relate principally to the securities market and ownership of our common stock. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results, cash flows or our ability to pay dividends, if any, in the future, or the trading price of our common stock.

4

International Drybulk Shipping Industry Specific Risk Factors

While the drybulk carrier charter market has recently strengthened, it remains significantly below the high in 2008, which has adversely affected our revenues, earnings and profitability and our ability to comply with our loan covenants.

The Baltic Drybulk Index, or BDI, declined from a high of 11,793 in May 2008 to a low of 663 in December 2008, which represents a decline of 94%. The BDI fell over 70% during the month of October alone. Over the comparable period of May through December 2008, the high and low of the Baltic Panamax Index and the Baltic Capesize Index represent a decline of 96% and 99%, respectively. During 2009 the BDI increased from a low of 772 and reached a high of 4,661 in November of 2009. In 2010, the BDI decreased from a high of 3,235 in January 2010 to 2,911 in March 2010, reaching its high of 3,299 in January 2010. On April 1, 2010, the BDI was 2,991. The decline and volatility in charter rates is due to various factors, including the lack of trade financing for purchases of commodities carried by sea, which had resulted in a significant decline in cargo shipments. In 2009 Chinese iron ore imports increased by 41% compared to 2008 and coal imports rose by 210% in the same period. The decline and volatility in charter rates in the drybulk market also affects the value of our drybulk vessels, which follows the trends of drybulk charter rates, and earnings on our charters, and similarly, affects our cash flows, liquidity and compliance with the covenants contained in our loan agreements.

As of April 6, 2010, we employ no vessels in the spot market. We employ 35 of the 37 vessels in our drybulk carrier fleet on time charters and the remaining two vessels on bareboat charters at fixed rates as of April 6, 2010. If the low charter rates in the drybulk market continue for any significant period in 2010, this would have an adverse effect on our vessel values and our ability to comply with the financial covenants in our loan agreements. In such a situation, unless our lenders are willing to provide waivers of covenant compliance or modifications to our covenants, our lenders could accelerate our debt and we could face the loss of our vessels.

Charter hire rates for drybulk carriers have decreased, which have continued to adversely affect our earnings.

The drybulk shipping industry is cyclical with attendant volatility in charter hire rates and profitability. For example, the degree of charter hire rate volatility among different types of drybulk carriers has varied widely. After reaching historical highs in mid-2008, charter hire rates for Panamax and Capesize drybulk carriers reached near historical lows levels in December 2008, began improving in January and February 2009 and after a volatile year, the BDI rose to over 4,000 in November 2009, the high for the year, although still below the historical highs of recent years. In 2010, the BDI decreased from a high of 3,235 in January 2010 to 2,911 in March 2010, reaching its high of 3,299 in January 2010. On April 1, 2010, the BDI was 2,991. We may not be able to successfully charter our vessels in the future or renew existing charters at rates sufficient to allow us to meet our obligations. Because the factors affecting the supply and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable.

If charter rates in the drybulk market decline and remain at low levels for any significant period in 2010, this could have an adverse effect on our vessel values and our ability to comply with the financial covenants in our loan agreements.

Factors that influence demand for vessel capacity include:

• supply and demand for energy resources, commodities, semi-finished and finished consumer and industrial products;

• changes in the exploration or production of energy resources, commodities, semi-finished and finished consumer and industrial products;

• the location of regional and global exploration, production and manufacturing facilities

5

• the location of consuming regions for energy resources, commodities, semi-finished and finished consumer and industrial products;

• the globalization of production and manufacturing;

• global and regional economic and political conditions, including armed conflicts, terrorist activities, embargoes and strikes;

• developments in international trade;

• changes in seaborne and other transportation patterns, including the distance cargo is transported by sea;

• environmental and other regulatory developments;

• currency exchange rates; and

• weather.

The factors that influence the supply of vessel capacity include:

• the number of newbuilding deliveries;

• port and canal congestion;

• the scrapping rate of older vessels;

• vessel casualties; and

• the number of vessels that are out of service.

We anticipate that the future demand for our drybulk carriers will be dependent upon continued economic growth in the world’s economies, including China and India, seasonal and regional changes in demand, changes in the capacity of the global drybulk carrier fleet and the sources and supply of drybulk cargoes to be transported by sea. The capacity of the global drybulk carrier fleet seems likely to increase and economic growth may not continue. Adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.

An over-supply of drybulk carrier capacity may lead to reductions in charter hire rates and profitability.

The market supply of drybulk carriers has been increasing, and the number of drybulk carriers on order is near historic highs. These newbuildings were delivered in significant numbers starting at the beginning of 2006 and continued through 2009. As of March 2010, newbuilding orders had been placed for an aggregate of more than 61.1% of the existing global drybulk fleet, with deliveries expected during the next 3 years. An over-supply of drybulk carrier capacity may result in a further reduction of charter hire rates. If such a reduction occurs, upon the expiration or termination of our vessels’ current charters we may only be able to re-charter our vessels at reduced or unprofitable rates or we may not be able to charter these vessels at all.

The market values of our vessels may decrease, which could limit the amount of funds that we can borrow or trigger certain financial covenants under our current or future credit facilities and or we may incur a loss if we sell vessels following a decline in their market value.

6

The fair market values of our vessels are related to prevailing freight charter rates. While the fair market value of vessels and the freight charter market have a very close relationship as the charter market moves from trough to peak, the time lag between the effect of charter rates on market values of ships can vary.

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

• prevailing level of charter rates;

• general economic and market conditions affecting the shipping industry;

• types and sizes of vessels;

• supply and demand for vessels;

• other modes of transportation;

• cost of newbuildings;

• governmental and other regulations; and

• technological advances.

In addition, as vessels grow older, they generally decline in value. If the fair market value of our vessels declines, we may not be in compliance with certain provisions of our credit facilities, and our lenders could accelerate our indebtedness or require us to pay down our indebtedness to a level where we are again in compliance with our loan covenants. If our indebtedness is accelerated, we may not be able to refinance our debt or obtain additional financing. In addition, if we sell one or more of our vessels at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our consolidated financial statements, the sale may be less than the vessel’s carrying value on our consolidated financial statements, resulting in a loss and a reduction in earnings. Furthermore, if vessel values fall significantly we may have to record an impairment adjustment in our financial statements which could adversely affect our financial results.

An economic slowdown in the Asia Pacific region could exacerbate the effect of recent slowdowns in the economies of the United States and the European Union and may have a material adverse effect on our business, financial condition and results of operations.

We anticipate a significant number of the port calls made by our vessels will continue to involve the loading or discharging of drybulk commodities in ports in the Asia Pacific region. As a result, any negative changes in economic conditions in any Asia Pacific country, particularly in China, may exacerbate the effect of recent slowdowns in the economies of the United States and the European Union and may have a material adverse effect on our business, financial condition and results of operations, as well as our future prospects. In recent years, China has been one of the world’s fastest growing economies in terms of gross domestic product, which has had a significant impact on shipping demand. For the year ended December 31, 2009, the growth of China’s gross domestic product from the prior year ended December 31, 2008 was approximately 8.7%, compared with a growth rate of 10.6% over the same two-year period ended December 31, 2008. It is possible that China and other countries in the Asia Pacific region will continue to experience slower economic growth in the near future. Moreover, the current economic slowdown in the economies of the United States, the European Union and other Asian countries may further adversely affect economic growth in China and elsewhere. Our business, financial condition and results of operations, as well as our future prospects, will likely be adversely affected by a further economic downturn in any of these countries.

7

Changes in the economic and political environment in China and policies adopted by the government to regulate its economy may have a material adverse effect on our business, financial condition and results of operations.

The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in such respects as structure, government involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation and balance of payments position. Prior to 1978, the Chinese economy was a planned economy. Since 1978, increasing emphasis has been placed on the utilization of market forces in the development of the Chinese economy. Annual and five-year state plans are adopted by the Chinese government in connection with the development of the economy. Although state-owned enterprises still account for a substantial portion of the Chinese industrial output, in general, the Chinese government is reducing the level of direct control that it exercises over the economy through state plans and other measures. There is an increasing level of freedom and autonomy in areas such as allocation of resources, production, pricing and management and a gradual shift in emphasis to a “market economy” and enterprise reform. Limited price reforms were undertaken with the result that prices for certain commodities are principally determined by market forces. Many of the reforms are unprecedented or experimental and may be subject to revision, change or abolition based upon the outcome of such experiments. If the Chinese government does not continue to pursue a policy of economic reform, the level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions, all of which could adversely affect our business, operating results and financial condition.

Disruptions in world financial markets and the resulting governmental action in the United States and in other parts of the world could have a further material adverse impact on our results of operations, financial condition and cash flows, and could cause the market price of our common stock to further decline.

The United States and other parts of the world have exhibited weak economic conditions and have been in a recession. For example, the credit markets in the United States have experienced significant contraction, de-leveraging and reduced liquidity, and the United States federal government and state governments have implemented and are considering a broad variety of governmental action and/or new regulation of the financial markets. Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements. The U.S. Securities and Exchange Commission, or the SEC, other regulators, self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies, and may effect changes in law or interpretations of existing laws.

Recently, a number of financial institutions have experienced serious financial difficulties and, in some cases, have entered bankruptcy proceedings or are in regulatory enforcement actions. The uncertainty surrounding the future of the credit markets in the United States and the rest of the world has resulted in reduced access to credit worldwide. As of December 31, 2009, we had total long term debt outstanding of $2.9 billion.

We face risks attendant to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world, among other factors. Major market disruptions and the current adverse changes in market conditions and regulatory climate in the United States and worldwide may adversely affect our business or impair our ability to borrow amounts under our credit facilities or any future financial arrangements. We cannot predict how long the current market conditions will last. However, these recent and developing economic and governmental factors, together with the concurrent decline in charter rates and vessel values, may have a material adverse effect on our results of operations, financial condition or cash flows, have caused the price of our common stock on the Nasdaq Global Select Market to decline and could cause the price of our common stock to decline further.

Acts of piracy on ocean-going vessels have recently increased in frequency, which could adversely affect our business.

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea and in the Gulf of Aden off the coast of Somalia. Throughout 2008 and 2009, the frequency of piracy incidents increased significantly, particularly in the Gulf of Aden. For example, in November 2008, the MV Sirius Star, a tanker vessel not affiliated with us, was captured by pirates in the Indian Ocean while carrying crude oil estimated to be worth $100 million. In February 2009, the vessel MV Saldanha, which is owned by our subsidiary, Team-Up Owning Company Limited, was seized by pirates while transporting coal through the Gulf of

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Aden. If these piracy attacks result in regions (in which our vessels are deployed) being characterized by insurers as “war risk” zones, as the Gulf of Aden temporarily was in May 2008, or Joint War Committee (JWC) “war and strikes” listed areas, premiums payable for such insurance coverage could increase significantly and such insurance coverage may be more difficult to obtain. Crew costs, including those due to employing onboard security guards, could increase in such circumstances. In addition, while we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterer may dispute this and withhold charter hire until the vessel is released. A charterer may also claim that a vessel seized by pirates was not “on-hire” for a certain number of days and it is therefore entitled to cancel the charter party, a claim that we would dispute. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, detention hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition, results of operations and cash flows.

World events could affect our results of operations and financial condition.

Terrorist attacks such as those in New York on September 11, 2001 and in London on July 7, 2005 and in Mumbai in 2008 and the continuing response of the United States to these attacks, as well as the threat of future terrorist attacks in the United States or elsewhere, continues to cause uncertainty in the world’s financial markets and may affect our business, operating results and financial condition. The continuing conflicts in Afghanistan and Iraq may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs.

Terrorist attacks on vessels, such as the October 2002 attack on the VLCC Limburg, a vessel not related to us, may in the future also negatively affect our operations and financial condition and directly impact our vessels or our customers. Future terrorist attacks could result in increased volatility of the financial markets in the United States and globally and may impact the economic recession in the United States and other countries. Any of these occurrences could have a material adverse impact on our revenues and costs.

Our revenues are subject to seasonal fluctuations, which could affect our operating results and our ability to pay dividends, if any, in the future.

We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter hire rates. This seasonality may result in quarter-to-quarter volatility in our operating results, which could affect our ability to pay dividends, if any, in the future from quarter to quarter. The drybulk carrier market is typically stronger in the fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere during the winter months. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and supplies of certain commodities. As a result, our revenues have historically been weaker during the fiscal quarters ended June 30 and September 30, and, conversely, our revenues have historically been stronger in fiscal quarters ended December 31 and March 31. This seasonality may adversely affect our operating results and our ability to pay dividends, if any, in the future.

Rising fuel prices may adversely affect our profits.

While we do not bear the cost of fuel or bunkers, under our time and bareboat charters, fuel is a significant, if not the largest, expense in our shipping operations when vessels are under spot charter. Changes in the price of fuel may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by the Organization of Petroleum Exporting Countries, or OPEC, and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.

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We are subject to international safety regulations and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in our vessels being denied access to, or detained in, certain ports.

Our business and the operation of our vessels are materially affected by government regulation in the form of international conventions, national, state and local laws and regulations in force in the jurisdictions in which the vessels operate, as well as in the country or countries of their registration. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such conventions, laws and regulations or the impact thereof on the resale prices or useful lives of our vessels. Additional conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations. We are required by various governmental and quasi governmental agencies to obtain certain permits, licenses, certificates, and financial assurances with respect to our operations.

In addition, vessel classification societies also impose significant safety and other requirements on our vessels. In complying with current and future environmental requirements, vessel-owners and operators may also incur significant additional costs in meeting new maintenance and inspection requirements, in developing contingency arrangements for potential spills and in obtaining insurance coverage. Government regulation of vessels, particularly in the areas of safety and environmental requirements, can be expected to become stricter in the future and require us to incur significant capital expenditures on our vessels to keep them in compliance.

The operation of our vessels is also affected by the requirements set forth in the United Nations’ International Maritime Organization’s, or IMO’s, International Management Code for the Safe Operation of Ships and Pollution Prevention, or ISM Code. The ISM Code requires shipowners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. Each of the vessels that has been delivered to us is ISM Code-certified and we expect that any vessels that we acquire in the future will be ISM Code-certified when delivered to us. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject it to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. If we are subject to increased liability for non-compliance or if our insurance coverage is adversely impacted as a result of non-compliance, it may negatively affect our ability to pay dividends, if any, in the future. If any of our vessels are denied access to, or are detained in, certain ports, this may decrease our revenues.

We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.

Our operations are subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These requirements include, but are not limited to, the International Convention on Civil Liability for Oil Pollution Damage of 1969, the International Convention for the Prevention of Pollution from Ships of 1975, the International Convention for the Prevention of Marine Pollution of 1973, the International Convention for the Safety of Life at Sea of 1974, the International Convention on Load Lines of 1966, the U.S. Oil Pollution Act of 1990, or OPA, the U.S. Clean Air Act, U.S. Clean Water Act and the U.S. Marine Transportation Security Act of 2002. Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. We may also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions, the management of ballast waters, maintenance and inspection, elimination of tin-based paint, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability to address pollution incidents. These costs could have a material adverse effect on our business, results of operations, cash flows and financial condition. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally

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strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States. An oil spill could result in significant liability, including fines, penalties and criminal liability and remediation costs for natural resource damages under other federal, state and local laws, as well as third-party damages. We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have arranged insurance to cover certain environmental risks, such insurance may not be sufficient to cover all such risks. As a result, claims against us could result in a material adverse effect on our business, results of operations, cash flows and financial condition and our ability to pay dividends, if any, in the future.

Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.

International shipping is subject to various security and customs inspections and related procedures in countries of origin, destination and trans-shipment points. Inspection procedures may result in the seizure of the contents of our vessels, delays in the loading, offloading or delivery of our vessels and the levying of customs duties, fines or other penalties against us.

It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, financial condition and results of operations.

Maritime claimants could arrest one or more of our vessels, which could interrupt our cash flow.

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a claimant may seek to obtain security for its claim by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flow and require us to pay large sums of money to have the arrest or attachment lifted. In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel which is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could attempt to assert “sister ship” liability against a vessel in our fleet for claims relating to another of our vessels.

Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings.

A government could requisition one or more of our vessels for title or for hire. Requisition for title occurs when a government takes control of a vessel and becomes her owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes her charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Although we would be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of payment would be uncertain. Government requisition of one or more of our vessels may negatively impact our revenues and reduce the amount of dividends, if any, in the future.

In the highly competitive international shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources and as a result, we may be unable to employ our vessels profitably.

We employ our vessels in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of whom have substantially greater resources than we do. Competition for the transportation of drybulk cargo by sea is intense and depends on price, location, size, age, condition and the acceptability of the vessel and its operators to the charterers. Due in part to the highly fragmented market, competitors with greater resources could enter the drybulk shipping industry and operate larger fleets through consolidations or acquisitions and may be able to offer lower charter rates and higher quality vessels than we are able to offer. If we are unable to successfully compete with other drybulk shipping companies, this would have an adverse impact on our results of operations.

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Risks associated with operating ocean-going vessels could affect our business and reputation, which could adversely affect our revenues and stock price.

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

• marine disaster;

• environmental accidents;

• cargo and property losses or damage;

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

• piracy.

The involvement of our vessels in an environmental disaster may harm our reputation as a safe and reliable vessel owner and operator. Any of these circumstances or events could increase our costs or lower our revenues.

The shipping industry has inherent operational risks that may not be adequately covered by our insurance.

We procure insurance for our fleet against risks commonly insured against by vessel owners and operators. Our current insurance includes hull and machinery insurance, war risks insurance and protection and indemnity insurance (which includes environmental damage and pollution insurance). We may not be adequately insured against all risks or our insurers may not pay a particular claim. Even if our insurance coverage is adequate to cover our losses, we may not be able to timely obtain a replacement vessel in the event of a loss. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our fleet. We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations through which we receive indemnity insurance coverage for tort liability. Our insurance policies also contain deductibles, limitations and exclusions which, although we believe are standard in the shipping industry, may nevertheless increase our costs.

The operation of drybulk carriers has certain unique operational risks.

The operation of certain ship types, such as drybulk carriers, has certain unique risks. With a drybulk carrier, the cargo itself and its interaction with the ship can be a risk factor. By their nature, drybulk cargoes are often heavy, dense, easily shifted, and react badly to water exposure. In addition, drybulk carriers are often subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted cargoes out of the hold), and small bulldozers. This treatment may cause damage to the vessel. Vessels damaged due to treatment during unloading procedures may be more susceptible to breach to the sea. Hull breaches in drybulk carriers may lead to the flooding of the vessels holds. If a drybulk carrier suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the vessel’s bulkheads, leading to the loss of a vessel. If we are unable to adequately maintain our vessels we may be unable to prevent these events. Any of these circumstances or events could negatively impact our business, financial condition, results of operations and our ability to pay dividends, if any, in the future. In addition, the loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.

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Offshore Drilling Industry—Specific Risk Factors

Our business in the offshore drilling sector depends on the level of activity in the offshore oil and gas industry, which is significantly affected by, among other things, volatile oil and gas prices and may be materially and adversely affected by a decline in the offshore oil and gas industry.

The offshore contract drilling industry is cyclical and volatile. Our business in the offshore drilling sector depends on the level of activity in oil and gas exploration, development and production in offshore areas worldwide. The availability of quality drilling prospects, exploration success, relative production costs, the stage of reservoir development and political and regulatory environments affect customers’ drilling campaigns. Oil and gas prices and market expectations of potential changes in these prices also significantly affect this level of activity and demand for drilling units.

Oil and gas prices are extremely volatile and are affected by numerous factors beyond our control, including the following:

• worldwide production and demand for oil and gas;

• the cost of exploring for, developing, producing and delivering oil and gas;

• expectations regarding future energy prices;

• advances in exploration, development and production technology;

• the ability of OPEC to set and maintain levels and pricing;

• the level of production in non-OPEC countries;

• government regulations;

• local and international political, economic and weather conditions;

• domestic and foreign tax policies;

• development and exploitation of alternative fuels;

• the policies of various governments regarding exploration and development of their oil and gas reserves; and

• the worldwide military and political environment, including uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in the Middle East or other geographic areas or further acts of terrorism in the United States, or elsewhere.

Declines in oil and gas prices for an extended period of time, or market expectations of potential decreases in these prices, could negatively affect our business in the offshore drilling sector. Sustained periods of low oil prices typically result in reduced exploration and drilling because oil and gas companies’ capital expenditure budgets are subject to their cash flow and are therefore sensitive to changes in energy prices. These changes in commodity prices can have a dramatic effect on rig demand, and periods of low demand can cause excess rig supply and intensify the competition in the industry which often results in drilling units, particularly lower specification drilling units, being idle for long periods of time. We cannot predict the future level of demand for our services or future conditions of the oil and gas industry. Any decrease in exploration, development or production expenditures by oil and gas companies could reduce our revenues and materially harm our business and results of operations.

In addition to oil and gas prices, the offshore drilling industry is influenced by additional factors, including:

• the availability of competing offshore drilling vessels;

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• the level of costs for associated offshore oilfield and construction services;

• oil and gas transportation costs;

• the discovery of new oil and gas reserves; and

• the cost of non-conventional hydrocarbons, such as the exploitation of oil sands.

The offshore drilling industry is highly competitive and there is intense price competition, and as a result, we may be unable to compete successfully with other providers of contract drilling services that have greater resources than we have.

The offshore contract drilling industry is highly competitive with numerous industry participants, none of which has a dominant market share, and characterized by high capital and maintenance requirements. Drilling contracts are traditionally awarded on a competitive bid basis. Intense price competition is often the primary factor in determining which qualified contractor is awarded the drilling contract, although rig availability, location, and the quality and technical capability of service and equipment are key factors which are considered. Some of our competitors in the drilling industry are larger than we are and have more diverse fleets, or fleets with generally higher specifications, and greater financial and other resources than us. In addition, because of the relatively small size of our offshore drilling segment, we may be unable to take advantage of economies of scale to the same extent as some of our larger competitors. Given the high capital requirements that are inherent in the offshore drilling industry, we may also be unable to invest in new technologies or expand our fleet in the future as may be necessary for us to succeed in this industry, while our larger competitors with superior financial resources may be able to respond more rapidly to changing market demands and compete more efficiently on price for drillship and drilling rig employment. In addition, mergers among oil and natural gas exploration and production companies have reduced the number of available customers, resulting in increased competition for projects. We may not be able to maintain our competitive position, and we believe that competition for contracts will continue to be intense in the foreseeable future. Our inability to compete successfully may reduce our revenues and profitability.

An over-supply of drilling units may lead to a reduction in day-rates and therefore may materially impact our profitability in our offshore drilling segment.

During the recent period of high utilization and high day-rates, industry participants have increased the supply of drilling units by ordering the construction of new drilling units. Historically, this has resulted in an over-supply of drilling units and has caused a subsequent decline in utilization and day-rates when the drilling units enter the market, sometimes for extended periods of time until the units have been absorbed into the active fleet. According to industry sources, the worldwide fleet of ultra-deepwater drilling units as of March 20, 2010 consisted of 57 units, comprised of 33 semi-submersible rigs and 24 drillships. An additional 26 semi-submersible rigs and 35 drillships are under construction or on order as of March 10, 2010, which would bring the total fleet to 118 drilling units by the end of 2012. A relatively large number of the drilling units currently under construction have been contracted for future work, which may intensify price competition as scheduled delivery dates occur. The entry into service of these new, upgraded or reactivated drilling units will increase supply and has already led to a reduction in day-rates as drilling units are absorbed into the active fleet. In addition, the new construction of high-specification rigs, as well as changes in our competitors’ drilling rig fleets, could require us to make material additional capital investments to keep our fleet competitive. Lower utilization and day-rates could adversely affect our revenues and profitability. Prolonged periods of low utilization and day-rates could also result in the recognition of impairment charges on our drilling units if future cash flow estimates, based upon information available to management at the time, indicate that the carrying value of these drilling units may not be recoverable.

The market value of our current drilling units and drilling units we may acquire in the future may decrease, which could cause us to incur losses if we decide to sell them following a decline in their market values.

If the offshore contract drilling industry suffers adverse developments in the future, the fair market value of our drilling units may decline. The fair market value of the drilling units we currently own or may acquire in the future may increase or decrease depending on a number of factors, including:

• prevailing level of drilling services contract day-rates;

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• general economic and market conditions affecting the offshore contract drilling industry, including competition from other offshore contract drilling companies;

• types, sizes and ages of drilling units;

• supply and demand for drilling units;

• costs of newbuildings;

• governmental or other regulations; and

• technological advances.

If we sell any drilling unit when drilling unit prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the drilling unit’s carrying amount on our financial statements, resulting in a loss. Additionally, our lenders may accelerate loan repayments should there be a loss in the market value of our drilling units. Such loss or repayment could materially and adversely affect our business prospects, financial condition, liquidity, results of operations, and our ability to pay dividends to our shareholders.

Consolidation of suppliers may limit our ability to obtain supplies and services at an acceptable cost, on our schedule or at all, which may have a material adverse effect on our results of operations and financial condition.

We rely on certain third parties to provide supplies and services necessary for our offshore drilling operations, including but not limited to drilling equipment suppliers, catering and machinery suppliers. Recent mergers have reduced the number of available suppliers, resulting in fewer alternatives for sourcing key supplies. We may not be able to obtain supplies and services at an acceptable cost, at the times we need them or at all. Such consolidation, combined with a high volume of drilling units under construction, may result in a shortage of supplies and services thereby potentially inhibiting the ability of suppliers to deliver on time. These cost increases or delays could have a material adverse effect on our results of operations and financial condition.

Our international operations in the offshore drilling sector involve additional risks.

We operate in the offshore drilling sector in various regions throughout the world, including Ghana that may expose us to political and other uncertainties, including risks of:

• terrorist acts, piracy, war and civil disturbances;

• seizure, nationalization or expropriation of property or equipment;

• repudiation, nullification, indemnification or reregulation of contracts;

• limitations on insurance coverage, such as war risk coverage, in certain areas;

• political unrest;

• foreign and U.S. monetary policy and foreign currency fluctuations and devaluations;

• the inability to repatriate income or capital;

• complications associated with repairing and replacing equipment in remote locations;

• import-export quotas, wage and price controls, imposition of trade barriers and other forms of government regulation and economic conditions that are beyond our control;

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• regulatory or financial requirements to comply with foreign bureaucratic actions; and

• changing taxation policies.

In addition, international contract drilling operations are subject to various laws and regulations in countries in which we operate, including laws and regulations relating to:

• use and compensation of local employees and suppliers by foreign contractors.

• taxation of offshore earnings and earnings of expatriate personnel;

• oil and gas exploration and development;

• repatriation of foreign earnings; and

• the equipping and operation of drilling units.

One of our two existing drilling rigs is currently operating offshore Ghana and the other drilling rig is operating in the Black Sea. In the past we have operated our drilling rig the Eirik Raude in the Gulf of Mexico, offshore Canada, and Norway while the drilling rig Leiv Eiriksson has operated offshore in West Africa and in the North Sea. Some foreign governments favor or effectively require the awarding of drilling contracts to local contractors, require use of a local agent or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These practices may adversely affect our ability to compete in those regions. It is difficult to predict what governmental regulations may be enacted in the future that could adversely affect the international drilling industry. The actions of foreign governments, including initiatives by OPEC, may adversely affect our ability to compete.

We are indemnified to some extent against loss of capital assets, but generally not loss of revenue, from most of these risks through provisions in our drilling contracts.

Governmental laws and regulations, including environmental laws and regulations, may add to our costs or limit our drilling activity.

Our business in the offshore drilling industry is affected by public policy and laws and regulations relating to the energy industry and the environment in the geographic areas where we operate.

The offshore drilling industry is dependent on demand for services from the oil and gas exploration and production industry, and accordingly, we are directly affected by the adoption of laws and regulations that for economic, environmental or other policy reasons curtail exploration and development drilling for oil and gas. We may be required to make significant capital expenditures to comply with governmental laws and regulations. It is also possible that these laws and regulations may in the future add significantly to our operating costs or significantly limit drilling activity. Governments in some countries are increasingly active in regulating and controlling the ownership of concessions while favoring local contractors, the exploration for oil and gas, and other aspects of the oil and gas industries. In recent years, increased concern has been raised over protection of the environment. Offshore drilling in certain areas has been opposed by environmental groups, and has in certain cases been restricted.

To the extent new laws are enacted or other governmental actions are taken that prohibit or restrict offshore drilling or impose additional environmental protection requirements that result in increased costs to the oil and gas industry in general or the offshore drilling industry in particular, our business or prospects could be materially adversely affected. The operation of our drilling units will require certain governmental approvals, the number and prerequisites of which cannot be determined until we identify the jurisdictions in which we will operate upon securing contracts for the drilling units. Depending on the jurisdiction, these governmental approvals may involve public hearings and costly undertakings on our part. We may not obtain such approvals or such approvals may not be obtained in a timely manner. If we fail to timely secure the necessary approvals or permits, our customers may have the right to terminate or seek to renegotiate their drilling contracts to our detriment. The amendment or

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modification of existing laws and regulations or the adoption of new laws and regulations curtailing or further regulating exploratory or development drilling and production of oil and gas could have a material adverse effect on our business, operating results or financial condition. Future earnings may be negatively affected by compliance with any such new legislation or regulations. In addition, we may become subject to additional laws and regulations as a result of future rig operations or repositioning.

We may be subject to liability under environmental laws and regulations, which could have a material adverse effect on our results of operations and financial condition.

Our operations in the offshore drilling industry may involve the use or handling of materials that may be classified as environmentally hazardous substances. Environmental laws and regulations applicable in the countries in which we conduct operations have generally become more stringent. Such laws and regulations may expose us to liability for the conduct of or for conditions caused by others, or for our acts that were in compliance with all applicable laws at the time such actions were taken.

During our drilling operations in the past, we have caused the release of oil, waste and other pollutants into the sea and into protected areas, such as the Barents Sea. While we conduct maintenance on our drilling rigs in an effort to prevent such releases, future releases could occur, especially as our rigs age. Such releases may be large in quantity, above our permitted limits or in protected or other areas in which public interest groups or governmental authorities have an interest. These releases could result in fines and other costs to us, such as costs to upgrade our drilling rigs, costs to clean up the pollution, and costs to comply with more stringent requirements in our discharge permits. Moreover, these releases may result in our customers or governmental authorities suspending or terminating our operations in the affected area, which could have a material adverse effect on our business, results of operation and financial condition.

We expect that we will be able to obtain some degree of contractual indemnification from our customers in most of our drilling contracts against pollution and environmental damages. But such indemnification may not be enforceable in all instances, the customer may not be financially capable in all cases of complying with its indemnity obligations and we may not be able to obtain such indemnification agreements in the future.

We currently maintain insurance coverage against certain environmental liabilities, including pollution caused by sudden and accidental oil spills. However, such insurance may not continue to be available or carried by us or, if available and carried, may not be adequate to cover any liability in all circumstances, which could have a material adverse effect on our business, operating results and financial condition.

Acts of terrorism and political and social unrest could affect the markets for drilling services, which may have a material adverse effect on our results of operations.

Acts of terrorism and political and social unrest, brought about by world political events or otherwise, have caused instability in the world’s financial and insurance markets in the past and may occur in the future. Such acts could be directed against companies such as ours. Our drilling operations could also be targeted by acts of piracy. In addition, acts of terrorism and social unrest could lead to increased volatility in prices for crude oil and natural gas and could affect the markets for drilling services and result in lower day-rates. Insurance premiums could increase and coverage may be unavailable in the future. U.S. government regulations may effectively preclude us from actively engaging in business activities in certain countries. These regulations could be amended to cover countries where we currently operate or where we may wish to operate in the future. Increased insurance costs or increased cost of compliance with applicable regulations may have a material adverse effect on our results of operations.

Company Specific Risk Factors

We are in breach of certain financial covenants contained in our loan agreements, have obtained waivers from certain of our lenders regarding these covenant breaches, and are currently in discussions with our lenders for additional waivers, extensions of existing waivers and amendments of such financial covenants, and if we are not successful in obtaining such waivers and amendments, our lenders may declare an event of default and accelerate our outstanding indebtedness under the relevant agreement, which would impact our ability to continue to conduct our business.

Our credit facilities, which are secured by mortgages on our vessels, require us to comply with specified collateral coverage ratios and satisfy certain financial and other covenants. The current low drybulk charter rates and drybulk vessel values, and even lower rates and values experienced over the past year, have affected our ability to comply with these covenants.

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The current low drybulk charter rates and drybulk vessel values have affected our ability to comply with certain financial and other covenants. A violation of these covenants constitutes an event of default under our credit facilities, which, unless waived by our lenders, provides our lenders with the right to require us to post additional collateral, enhance our equity and liquidity, increase our interest payments, pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet, reclassify our indebtedness as current liabilities and accelerate our indebtedness and foreclose their liens on our vessels, which would impair our ability to continue to conduct our business.

As of December 31, 2008, we were in breach of certain financial covenants including the value maintenance clause, contained in our secured loan facilities. During 2009, we obtained waivers from all the lenders of the affected debt, which waivers expire between midnight on December 31, 2009 and October 31, 2011. We are currently in discussions with lenders to extend the waiver period for those waivers that have already expired or will expire later in 2010. In addition, on December 31, 2009, we were in breach of a financial covenant in our $230 million loan facilities dated September 10, 2007, as amended. We are in discussions with our lenders regarding a resolution.

There can be no assurance that our lenders will grant us waivers for the covenant breaches for which we do not currently have waivers. Accordingly, our lenders could accelerate our indebtedness and foreclose their liens on our vessels, which would impair our ability to conduct our business and continue as a going concern. In addition, there can be no assurance that the lenders under our other secured loan agreements will extend the waivers of covenant breaches thereunder, if we are not in compliance with the covenants as such waivers expire, with the same potential consequences. For further discussion, please see “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Breach of Loan Covenants.”

Because of the presence of cross default provisions in all of our loan agreements, the refusal of any one lender to grant or extend a waiver could result in all of our indebtedness being accelerated even if our other lenders have waived covenant defaults under the respective loan agreements. A cross default provision means that if we default on one loan we would then default on all of our other loans.

If our indebtedness is accelerated, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing and we could lose our vessels if our lenders foreclose their liens. In addition, if the fair value of our vessels, which is calculated using undiscounted cash flows, deteriorates significantly from their currently depressed levels, we may have to record a further impairment adjustment to our financial statements, which would adversely affect our financial results and further hinder our ability to raise capital. Further, as discussed below, our independent registered public accounting firms have issued their opinions with an explanatory paragraph in connection with our audited financial statements included in this report that expresses substantial doubt about our ability to continue as a going concern.

Moreover, in connection with any waivers and/or amendments to our loan agreements, our lenders may impose additional operating and financial restrictions on us and/or modify the terms of our existing loan agreements. These restrictions may limit our ability to, among other things, pay dividends, make capital expenditures and/or incur additional indebtedness, including through the issuance of guarantees. In addition, our lenders may require the payment of additional fees, require prepayment of a portion of our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge us on our outstanding indebtedness.

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Our inability to comply with certain financial and other covenants under our loan agreements raises substantial doubt about our ability to continue as a going concern.

As discussed above, we were in breach of certain financial and other covenants contained in our loan agreements as a result of the decline in the drybulk charter market and related decline in vessel values in the drybulk sector and have obtained waivers which expire in 2010 and 2011. When the waivers expire we may be unable to meet the financial and other covenants contained in our loan agreements for the foreseeable future and our lenders may choose to accelerate our indebtedness. Therefore, our ability to continue as a going concern is dependent on management’s ability to successfully generate revenue and to meet our obligations as they become due and the continued support of our lenders. In 2009, we have issued a total of 165,054,595 common shares pursuant to our two at the market offerings under our ATM Equity Offering™ Sales Agreements, dated January 28, 2009 and May 7, 2009 by and between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated as our agent for the sale of up to $500 million and $475 million of our common shares, respectively, resulting in net proceeds of $952.4 million. In 2009, the Company also offered $460 million aggregate principal amount of our 5% Convertible Senior Notes due December 1, 2014, resulting in net proceeds of $447.8 million. Our independent registered public accounting firm has issued its opinion with an explanatory paragraph in connection with our financial statements included in this annual report that expresses substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of our inability to continue as a going concern. However, there is a material uncertainty related to events or conditions which raises significant doubt on our ability to continue as a going concern and, therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of business.

As a result of our inability to comply with certain financial and other covenants under our loan agreements a significant amount of our indebtedness was reclassified as current liabilities as of December 31, 2009.

A total of $1.3 billion of our indebtedness as of December 31, 2009 has been reclassified as current liabilities as a result of our non-compliance with financial covenants contained in our loan agreements. As a result of this reclassification we had a working capital deficit of $715.4 million as of December 31, 2009. Consequently, our independent registered public accounting firms included an explanatory paragraph in their respective opinions on our most recently audited financial statements for the year ended December 31, 2009 that expressed substantial doubt about our ability to continue as a going concern. Charter rates and vessel values, particularly in the drybulk sector, may remain at low levels for an extended period of time, in which case it may be difficult for us to comply with the financial and other covenants in our loan agreements absent extensions of the existing waivers.

Our credit facilities and waivers impose operating and financial restrictions on us, and if we receive additional waivers and/or amendments to our loan agreements, our lenders may impose additional operating and financial restrictions on us and/or modify the terms of our existing loan agreements.

In addition to certain financial covenants relating to our financial position, operating performance and liquidity, the restrictions contained in our loan agreements limit our ability to, among other things:

• pay dividends to investors or make capital expenditures if we do not repay amounts drawn under the credit facilities, if there is a default under the credit facilities or if the payment of the dividend or capital expenditure would result in a default or breach of a loan covenant;

• incur additional indebtedness, including through the issuance of guarantees;

• change the flag, class or management of our vessels;

• create liens on our assets;

• sell or otherwise change the ownership of our vessels;

• merge or consolidate with, or transfer all or substantially all our assets to, another person;

• drop below certain minimum cash deposits, as defined in our credit facilities; and/or

• receive dividends from certain subsidiaries.

See “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Breach of Loan Covenants.” In connection with future waivers or amendments, lenders may impose additional restrictions on us.

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Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions. Our lenders’ interests may be different from ours and we may not be able to obtain our lenders’ permission when needed. In addition to the above restrictions, our lenders may require the payment of additional fees, require prepayment of a portion of our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge us on our outstanding indebtedness. These potential restrictions and requirements may limit our ability to pay dividends, if any, in the future, to you, finance our future operations, make acquisitions or pursue business opportunities.

The failure of our counterparties to meet their obligations under our time charter agreements could cause us to suffer losses or otherwise adversely affect our business.

Thirty-five of our drybulk vessels are currently employed under time charters, two of our drybulk vessels are currently employed on bareboat charters and our two drill rigs are under contracts for two and three years. The ability and willingness of each of our counterparties to perform its obligations under a time charter agreement with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the drybulk shipping industry and the overall financial condition of the counterparties. In addition, in challenging market conditions, there have been reports of charterers, including some of our charterers, renegotiating their charters or defaulting on their obligations under charters and our customers may fail to pay charterhire or attempt to renegotiate charter rates. The time charters on which we deploy 21 of the vessels in our fleet provide for charter rates that are significantly above current market rates. Should a counterparty fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters would be at lower rates given currently decreased charter rate levels, particularly in the drybulk carrier market. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends, if any, in the future, and comply with covenants in our credit facilities.

We are subject to certain risks with respect to our counterparties on drilling contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.

In addition to time charters, we enter into drilling services contracts with our customers, newbuilding contracts with shipyards, interest rate swap agreements and forward exchange contracts, and have employed and may employ our drilling rigs and newbuild drillships on fixed-term and well contracts. Our drilling contracts, newbuilding contracts, and hedging agreements subject us to counterparty risks. The ability of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the offshore contract drilling industry, the overall financial condition of the counterparty, the day-rates received for specific types of drilling rigs and drillships and various expenses. In addition, in depressed market conditions, our customers may no longer need a drilling unit that is currently under contract or may be able to obtain a comparable drilling unit at a

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lower day-rate. As a result, customers may seek to renegotiate the terms of their existing drilling contracts or avoid their obligations under those contracts. Should a counterparty fail to honor its obligations under an agreement with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We have significant indebtedness and payment obligations relating to four drillships under construction for Ocean Rig UDW.

Our subsidiary, Ocean Rig UDW, has contracts for construction of the four drillships, Hulls 1837, 1838, 1865 and 1866, scheduled to be delivered in December 2010, March 2011, July 2011 and September 2011, respectively. As of December 31, 2009, we owe an additional $1.0 billion in installment payments due within the next year and $0.9 billion of newbuilding installment payments due thereafter. We have entered into two separate credit facilities, each in the amount of $562.5 million, to finance the installment payments to Hulls 1865 and 1866. This indebtedness is in addition to the indebtedness we have incurred and will incur to finance our drybulk fleet and its operations, may adversely affect our ability to comply with our loan covenants and service our indebtedness and would adversely impact our profitability and cash flows. Our lenders are not required to fund certain drawdowns by us under these loan agreements and we would be required to repay all outstanding amounts in the event we do not obtain employment contracts by the earlier of April 30, 2011 or the delivery of the applicable drillship for these drillships at specified minimum day rates with charterers that are satisfactory to such lenders. If for any reason we fail to take delivery of the four newbuilding drillships, we would be prevented from realizing potential revenues from these projects and could also lose our deposit money, which as of December 31, 2009 amounted to $920.6 million, and we may incur additional liability and costs.

No financing has been arranged for the construction of our two newbuilding drillships, Hulls 1837 and 1838.

Ocean Rig UDW owns the equity interests of DrillShips Holdings Inc., or DrillShips Holdings, which owns contracts for the construction of two drillships, identified as Hull 1837 and Hull 1838, scheduled to be delivered in December 2010 and March 2011, respectively. The expected cost of construction is approximately $800 million per unit. As of December 31, 2009, $557.8 million was capitalized as construction-related expenses for these hulls, which was financed by $230.0 million in debt and $327.8 million in equity contributions. In connection with the acquisition of these drillships, we have assumed construction-related payment obligations totaling approximately $873 million as of December 31, 2009. We have not yet obtained financing for these construction-related payment obligations due during 2010 and 2011 for Hulls 1837 and 1838, which amounts to approximately 54% of the expected cost of construction of these drillships. In the current challenging financing environment, it may be difficult to obtain secured debt to finance these purchases or raise debt or equity in the capital markets. If we fail to secure financing for the two newbuilding drillships, Hulls 1837 and 1838, we could also lose our deposit money, which as of December 31, 2009 amounted to $508.7 million, and we may incur additional liability and costs.

Construction of drillships is subject to risks, including delays and cost overruns, which could have an adverse impact on our available cash resources and results of operations.

We, through our subsidiaries, have entered into contracts with Samsung Heavy Industries Co. Ltd., or Samsung Heavy Industries, for the construction of four ultra-deepwater newbuilding drillships, which we expect to take delivery of in the fourth quarter of 2010 and the first, second and third quarter of 2011. We may also undertake new construction projects and conversion projects in the future. In addition, we make significant upgrade, refurbishment, conversion and repair expenditures for our fleet from time to time, particularly as our drilling units become older. Some of these expenditures are unplanned. These projects and other efforts of this type are subject to risks of cost overruns or delays inherent in any large construction project as a result of numerous factors, including the following:

• shipyard unavailability;

• shortages of equipment, materials or skilled labor;

• unscheduled delays in the delivery of ordered materials and equipment;

• local customs strikes or related work slowdowns that could delay importation of equipment or materials;

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• engineering problems, including those relating to the commissioning of newly designed equipment;

• latent damages or deterioration to the hull, equipment and machinery in excess of engineering estimates and assumptions;

• work stoppages;

• client acceptance delays;

• weather interference or storm damage;

• disputes with shipyards and suppliers;

• shipyard failures and difficulties;

• failure or delay of third-party equipment vendors or service providers;

• unanticipated cost increases; and

• difficulty in obtaining necessary permits or approvals or in meeting permit or approval conditions.

These factors may contribute to cost variations and delays in the delivery of our ultra-deepwater newbuilding drillships. Delays in the delivery of these newbuilding drillships or the inability to complete construction in accordance with their design specifications may, in some circumstances, result in a delay in contract commencement, resulting in a loss of revenue to us, and may also cause customers to renegotiate, terminate or shorten the term of a drilling contract for the drillship pursuant to applicable late delivery clauses. In the event of termination of one of these contracts, we may not be able to secure a replacement contract on as favorable terms. Additionally, capital expenditures for drillship upgrades, refurbishment and construction projects could materially exceed our planned capital expenditures. Moreover, our drillships that may undergo upgrade, refurbishment and repair may not earn a day-rate during the periods they are out of service. In addition, in the event of a shipyard failure or other difficulty, we may be unable to enforce certain provisions under our newbuilding contracts such as our refund guarantee, to recover amounts paid as installments under such contracts. The occurrence of any of these events may have a material adverse effect on our results of operations, financial condition or cash flows.

Purchasing and operating secondhand vessels may result in increased operating costs and reduced fleet utilization.

While we have the right to inspect previously owned vessels prior to our purchase of them and we intend to inspect all secondhand vessels that we acquire in the future, such an inspection does not provide us with the same knowledge about their condition that we would have if these vessels had been built for and operated exclusively by us. A secondhand vessel may have conditions or defects that we were not aware of when we bought the vessel and which may require us to incur costly repairs to the vessel. These repairs may require us to put a vessel into dry dock which would reduce our fleet utilization. Furthermore, we usually do not receive the benefit of warranties on secondhand vessels.

New technologies may cause our current drilling methods to become obsolete, resulting in an adverse effect on our business.

The offshore contract drilling industry is subject to the introduction of new drilling techniques and services using new technologies, some of which may be subject to patent protection. As competitors and others use or develop new technologies, we may be placed at a competitive disadvantage and competitive pressures may force us to implement new technologies at substantial cost. Although we purchased the right to use the Bingo 9000 design, or the Bingo Design, for our drilling rigs, neither we nor the company from which we purchased those rights has obtained or applied for any patents or other intellectual property protection relating to the Bingo Design. As a result,

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other parties may challenge our right to use the Bingo Design or seek damages for the alleged infringement of intellectual property rights that they may claim to own. We may also lose the competitive advantage that we sought to achieve through the use of the Bingo Design if our competitors duplicate key aspects of the Bingo Design without our permission, and we may be unable to prevent our competitors from doing so.

We do not yet have employment contracts for our four newbuilding drillships and decreases in the price of crude oil may affect our ability to charter these drillships and the revenues that we are able to earn from our drilling rigs.

Changes in crude oil prices often affect oil exploration and drilling activities that, in turn, drive changes in the contract rates for oil drilling equipment, such as deep sea oil rigs and drillships, or, possibly, cause the suspension of exploration and drilling programs. Such changes and any such suspension could affect the rates which we receive for any rigs when their contracts expire, with the result that we would recognize less revenue from their operations. We have not yet secured employment contracts for any of the four newbuilding drillships. If the price of crude oil were to again fall to depressed levels, we may not be able to negotiate charter agreements for Hulls 1837, 1838, 1865 or 1866 at attractive rates or at all. On April 8, 2009, we entered into a three-year contract with Petróleo Brasileiro for the employment of the Leiv Eiriksson for exploration drilling in the Black Sea at a day-rate maximum of $583,000, including an 8% bonus based on operational performance. The contract commenced on October 27, 2009. As of December 31, 2009, the contract for the Eirik Raude was amended to an average day-rate of $639,000 per day assuming 100% utilization, effective until the expiration of the contract in October 2011.

Our earnings may be adversely affected if we are not able to take advantage of favorable charter rates.

We charter our drybulk carriers to customers primarily pursuant to long-term or short-term time charters, which generally last from several days to several weeks, and long-term time charters, which can last up to several years. As of April 6, 2010, 35 of our drybulk vessels were employed under time charters with an average duration of three years. We may in the future extend the charter periods for additional vessels in our fleet. Our vessels that are committed to longer-term charters may not be available for employment on short-term charters during periods of increasing short-term charter hire rates when these charters may be more profitable than long-term charters.

We may expand into the oil tanker, product tanker or container shipping sectors, which are currently at depressed levels and could have an adverse effect on our business, results of operation and financial condition.

We may expand into the oil tanker, product tanker or container shipping sectors if attractive vessel acquisition opportunities arise. The charter markets for crude oil carriers and product tankers have deteriorated significantly since summer 2008 and are currently at depressed levels. These markets may be further depressed in 2010 given the significant number of newbuilding vessels scheduled to be delivered that year. Attractive investment opportunities in these sectors may reflect these depressed conditions, however, the return on any such investment would be highly uncertain in this extremely challenging operating environment. Our company has not previously operated vessels in these sectors, which are intensely competitive, have unique operational risks and are highly dependent on the availability of and demand for crude oil and petroleum products as well as being significantly impacted by the availability of modern tanker capacity and the scrapping, conversion or loss of older vessels. An inability to successfully execute any expansion into these sectors could be costly, distract us from our drybulk and drill rig business and divert management resources, each of which could have an adverse effect on our business, results of operation and financial condition.

Our board of directors has determined to suspend the payment of cash dividends as a result of market conditions in the international shipping industry, and until such market conditions improve, it is unlikely that we will reinstate the payment of dividends.

In light of a lower freight rate environment and a highly challenged financing environment, our board of directors, beginning with the fourth quarter of 2008, has suspended our common share dividend. Our dividend policy will be assessed by the board of directors from time to time. The suspension allows us to preserve capital and

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use the preserved capital to capitalize on market opportunities as they may arise. Until market conditions improve, it is unlikely that we will reinstate the payment of dividends. In addition, other external factors, such as our lenders imposing restrictions on our ability to pay dividends under the terms of our loan agreements, may limit our ability to pay dividends. Further, we may not be permitted to pay dividends if we are in breach of the covenants contained in our loan agreements. The waivers of our non-compliance with the covenants in our loan agreements that we received from our lenders prohibit us from paying dividends.

Investment in derivative instruments such as freight forward agreements could result in losses.

From time to time, we may take positions in derivative instruments including freight forward agreements, or FFAs. FFAs and other derivative instruments may be used to hedge a vessel owner’s exposure to the charter market by providing for the sale of a contracted charter rate along a specified route and period of time. Upon settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and period, the seller of the FFA is required to pay the buyer an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. If we take positions in FFAs or other derivative instruments and do not correctly anticipate charter rate movements over the specified route and time period, we could suffer losses in the settling or termination of the FFA. This could adversely affect our results of operations and cash flows.

The derivative contracts we have entered into to hedge our exposure to fluctuations in interest rates could result in higher than market interest rates and charges against our income.

We have entered into 34 interest rate swaps for purposes of managing our exposure to fluctuations in interest rates applicable to indebtedness under our credit facilities, which were advanced at a floating rate based on LIBOR. Our hedging strategies, however, may not be effective and we may incur substantial losses if interest rates move materially differently from our expectations. Some of our existing interest rate swaps do not, and future derivative contracts may not, qualify for treatment as hedges for accounting purposes. We recognize fluctuations in the fair value of these contracts in our statement of operations. In addition, our financial condition could be materially adversely affected to the extent we do not hedge our exposure to interest rate fluctuations under our financing arrangements, under which loans have been advanced at a floating rate based on LIBOR and for which we have not entered into an interest rate swap or other hedging arrangement. Any hedging activities we engage in may not effectively manage our interest rate exposure or have the desired impact on our financial conditions or results of operations. At December 31, 2009, the fair value of our interest rate swaps was a liability of $168.9 million.

We depend entirely on Cardiff to manage and charter our drybulk fleet.

With respect to our operations in the drybulk shipping sector, we currently have five employees, our Chief Executive Officer, our Chief Operating Officer, our Chief Financial Officer, our Senior Vice President Head of Accounting and Reporting and our Internal Auditor. We subcontract the commercial and technical management of our drybulk fleet, including crewing, maintenance and repair to Cardiff Marine Inc. 70% of the issued and outstanding capital stock of Cardiff is owned by a foundation which is controlled by George Economou, our Chairman and Chief Executive Officer, and a director of our Company. The remaining 30% of the issued and outstanding capital stock of Cardiff is owned by a company controlled by the sister of Mr. Economou, who is also a director of our Company. The loss of Cardiff’s services or its failure to perform its obligations to us could materially and adversely affect the results of our operations. Although we may have rights against Cardiff if it defaults on its obligations to us, you will have no recourse against Cardiff. Further, we are required to seek approval from our lenders to change our manager.

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

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

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We are dependent upon key management personnel, particularly our Chairman and Chief Executive Officer Mr. George Economou.

Our continued operations depend to a significant extent upon the abilities and efforts of our Chairman and Chief Executive Officer, Mr. George Economou. The loss of Mr. Economou’s service to our Company could adversely affect our discussions with our lenders and management of our fleet during this difficult economic period and, therefore, could adversely affect our business prospects, financial condition and results of operations. We do not currently, nor do we intend to, maintain “key man” life insurance on any of our personnel, including Mr. Economou.

Our Chairman, Chief Executive Officer has affiliations with Cardiff which could create conflicts of interest.

Our majority shareholder is controlled by Mr. George Economou who controls four entities that, in aggregate, own 15.8% of us as of April 6, 2010 and a foundation that owns 70% of Cardiff. Mr. Economou is also our Chairman, Chief Executive Officer and a director of our Company. These responsibilities and relationships could create conflicts of interest between us, on the one hand, and Cardiff, on the other hand. These conflicts may arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus drybulk carriers managed by other companies affiliated with Cardiff and Mr. Economou.

In particular, Cardiff may give preferential treatment to vessels that are beneficially owned by related parties because Mr. Economou and members of his family may receive greater economic benefits.

We may have difficulty managing our planned growth properly.

We intend to continue to grow our fleet. Our future growth will primarily depend on our ability to:

• locate and acquire suitable vessels;

• identify and consummate acquisitions or joint ventures;

• enhance our customer base;

• manage our expansion; and

• obtain required financing on acceptable terms.

Growing any business by acquisition presents numerous risks, such as undisclosed liabilities and obligations, the possibility that indemnification agreements will be unenforceable or insufficient to cover potential losses and difficulties associated with imposing common standards, controls, procedures and policies, obtaining additional qualified personnel, managing relationships with customers and integrating newly acquired assets and operations into existing infrastructure. We may be unable to successfully execute our growth plans or we may incur significant expenses and losses in connection with our future growth which would have an adverse impact on our financial condition and results of operations.

If our vessels fail to maintain their class certification and/or fail any annual survey, intermediate survey, dry docking or special survey, that vessel would be unable to carry cargo, thereby reducing our revenues and profitability and violating certain covenants under our credit facilities.

The hull and machinery of every commercial drybulk vessel and rig must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention, or SOLAS. All of our drybulk vessels are certified as being “in class” by all the major Classification Societies (e.g., American Bureau of Shipping, Lloyd’s Register of Shipping). Both our drilling rigs are certified as being “in class” by De Norske Veritas (DNV). The Leiv Eiriksson completed the 5-year class in 2006 and the Eirik Raude in 2007.

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A drybulk vessel must undergo annual surveys, intermediate surveys, dry dockings and special surveys. In lieu of a special survey, a vessel’s machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be dry docked every two to three years for inspection of the underwater parts of such vessel.

If any drybulk vessel does not maintain its class and/or fails any annual survey, intermediate survey, dry docking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our credit facilities. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations. That status could cause us to be in violation of certain covenants in our credit facility.

The aging of our drybulk carrier fleet may result in increased operating costs or loss of hire in the future, which could adversely affect our earnings.

In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As of April 6, 2010, the 37 vessels in our drybulk carrier fleet had an average age of 8.3 years. As our fleet ages we will incur increased costs. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of vessels may also require expenditures for alterations or the addition of new equipment to our vessels and may restrict the type of activities in which our vessels may engage. As our vessels age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.

In addition, charterers actively discriminate against hiring older vessels. For example, Rightship, the ship vetting service founded by Rio Tinto and BHP-Billiton which has become the major vetting service in the drybulk shipping industry, ranks the suitability of vessels based on a scale of one to five stars. Most major carriers will not charter a vessel that Rightship has vetted with fewer than three stars. Rightship automatically downgrades any vessel over 18 years of age to two stars, which significantly decreases its chances of entering into a charter. Therefore, as our vessels approach and exceed 18 years of age, we may not be able to operate these vessels profitably during the remainder of their useful lives.

Our vessels may suffer damage and we may face unexpected dry docking costs, which could adversely affect our cash flow and financial condition.

If our vessels suffer damage, they may need to be repaired at a dry docking facility. The costs of dry dock repairs are unpredictable and can be substantial. The loss of earnings while our vessels are being repaired and repositioned, as well as the actual cost of these repairs, would decrease our earnings and reduce the amount of dividends, if any, in the future. We may not have insurance that is sufficient to cover all or any of these costs or losses and may have to pay dry docking costs not covered by our insurance.

If our drilling rigs suffer damage, they may need to be repaired at a yard facility. The costs of discontinued operations due to repairs are unpredictable and can be substantial. The loss of earnings while our rigs are being repaired and repositioned, as well as the actual cost of these repairs, would decrease our earnings and reduce the amount of dividends, if any, in the future. We may not have insurance that is sufficient to cover all or any of these costs or losses and may have to pay repair costs not covered by our insurance.

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Currently, our revenues from the offshore drilling segment depend on two drilling rigs, which are designed to operate in harsh environments. The damage or loss of either of these drilling rigs could have a material adverse effect on our results of operations and financial condition.

Our revenues from the offshore drilling segment are dependent on two drilling rigs, the Eirik Raude, which is currently operating offshore Ghana and the Leiv Eiriksson, which is currently operating in the Black Sea. Both drilling rigs may be exposed to risks inherent in deepwater drilling and operating in harsh environments that may cause damage or loss. The drilling of oil and gas wells, particularly exploratory wells where little is known of the subsurface formations involves risks, such as extreme pressure and temperature, blowouts, reservoir damage, loss of production, loss of well control, lost or stuck drill strings, equipment defects, punch-throughs, craterings, fires, explosions, pollution and natural disasters such as hurricanes and tropical storms. In addition, offshore drilling operations are subject to perils peculiar to marine operations, either while on-site or during mobilization, including capsizing, sinking, grounding, collision, marine life infestations, and loss or damage from severe weather. The replacement or repair of a rig could take a significant amount of time, and we may not have any right to compensation for lost revenues during that time, despite our comprehensive loss of hire insurance policy. As long as we have only two drilling rigs in operation, loss of or serious damage to one of the drilling rigs could materially reduce our revenues in our offshore drilling segment for the time that a rig is out of operation. In view of the sophisticated design of the drilling rigs, we may be unable to obtain a replacement rig that could perform under the conditions that our drilling rigs are expected to operate, which could have a material adverse effect on our results of operations and financial condition.

We are exposed to U.S. Dollar and foreign currency fluctuations and devaluations that could harm our reported revenue and results of operations.

We generate all of our revenues in U.S. Dollars but currently incur approximately 50% of our operating expenses and the majority of our general and administrative expenses in currencies other than the U.S. Dollar, primarily the Euro. Our principal currency for our operations and financing for the offshore drilling sector is the U.S. Dollar. The day-rates for the drilling rigs, our principal source of revenues in the offshore drilling sector, are quoted and received in U.S. Dollars. The principal currency for operating expenses in the offshore drilling sector is also the U.S. Dollar; however, a significant portion of employee salaries and administration expenses, as well as parts of the consumables and repair and maintenance expenses for the drilling rigs, are paid in Norwegian Kroner (NOK), Great British Pound (GBP), Canadian dollar (CAD) and Euro (EUR). Because a significant portion of our expenses are incurred in currencies other than the U.S. Dollar, our expenses may from time to time increase relative to our revenues as a result of fluctuations in exchange rates, particularly between the U.S. Dollar and the Euro, which could affect the amount of net income that we report in future periods. We use financial derivatives to operationally hedge some of our currency exposure. Our use of financial derivatives involves certain risks, including the risk that losses on a hedged position could exceed the nominal amount invested in the instrument and the risk that the counterparty to the derivative transaction may be unable or unwilling to satisfy its contractual obligations, which could have an adverse effect on our results.

If the recent volatility in LIBOR continues, it could affect our profitability, earnings and cash flow.

LIBOR has recently been volatile, with the spread between LIBOR and the prime lending rate widening significantly at times. These conditions are the result of the recent disruptions in the international credit markets. Because the interest rates borne by our outstanding indebtedness fluctuate with changes in LIBOR, if this volatility were to continue, it would affect the amount of interest payable on our debt, which in turn, could have an adverse effect on our profitability, earnings and cash flow.

Furthermore, interest in most loan agreements in our industry has been based on published LIBOR rates. Recently, however, lenders have insisted on provisions that entitle the lenders, in their discretion, to replace published LIBOR as the base for the interest calculation with their cost-of-funds rate. If we are required to agree to such a provision in future loan agreements, our lending costs could increase significantly, which would have an adverse effect on our profitability, earnings and cash flow.

We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations or pay dividends, if any, in the future.

We are a holding company and our subsidiaries, which are all wholly-owned by us either directly or indirectly, conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to make dividend payments, if any, in the future

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depends on our subsidiaries and their ability to distribute funds to us. Under the waivers of our non-compliance with covenants in our loan agreements, we are prohibited from paying dividends during the waiver period. Furthermore, certain of our subsidiaries are obligated to use their surplus cash to prepay the balance on their long-term loans. If we are unable to obtain funds from our subsidiaries, our board of directors may not exercise its discretion to pay dividends in the future. We do not intend to obtain funds from other sources to pay dividends, if any, in the future. In addition, the declaration and payment of dividends, if any, in the future will depend on the provisions of Marshall Islands law affecting the payment of dividends. Marshall Islands law generally prohibits the payment of dividends if the company is insolvent or would be rendered insolvent upon payment of such dividend and dividends may be declared and paid out of our operating surplus; but in this case, there is no such surplus. Dividends may be declared or paid out of net profits for the fiscal year in which the dividend is declared and for the preceding fiscal year. Our ability to pay dividends, if any, in the future will also be subject to our satisfaction of certain financial covenants contained in our credit facilities and certain waivers related thereto. We may be unable to pay dividends in the anticipated amounts or at all.

As we expand our business, we may need to improve our operating and financial systems and will need to recruit suitable employees and crew for our vessels.

Our current operating and financial systems may not be adequate as we expand the size of our fleet and our attempts to improve those systems may be ineffective. In addition, as we expand our fleet, we will need to recruit suitable additional seafarers and shoreside administrative and management personnel. We may be unable to hire suitable employees as we expand our fleet. If we or our crewing agent encounters business or financial difficulties, we may not be able to adequately staff our vessels. If we are unable to grow our financial and operating systems or to recruit suitable employees as we expand our fleet, our financial performance and our ability to pay dividends, if any, in the future may be adversely affected.

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

A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.” U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

Based on our method of operation, we do not believe that we are, have been or will be a PFIC with respect to any taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time and voyage chartering activities as services income, rather than rental income. Accordingly, we believe that our income from our time and voyage chartering activities does not constitute passive income, and the assets that we own and operate in connection with the production of that income do not constitute assets that produce or are held for production of passive income.

There is substantial legal authority supporting this position consisting of case law and U.S. Internal Revenue Service, or IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, it should be noted that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will accept this position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if the nature and extent of our operations changed.

If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders will face adverse U.S. federal income tax consequences. Under the PFIC rules, unless those shareholders make an election

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available under the Code (which election could itself have adverse consequences for such shareholders, as discussed below under “Additional Information – Taxation”), such shareholders would be subject to U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common shares, as if the excess distribution or gain had been recognized ratably over the U.S. shareholder’s holding period of our common shares. See “Additional Information – Taxation” for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders if we are treated as a PFIC.

We may have to pay tax on United States source shipping income, which would reduce our earnings.

Under the U.S. Internal Revenue Code of 1986, or the Code, 50% of the gross shipping income of a vessel-owning or -chartering corporation, such as ourselves and certain of our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States may be subject to a 4% U.S. federal income tax without allowance for any deductions, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder.

We expect that we and each of our vessel-owning subsidiaries qualify for this statutory tax exemption and we have taken and intend to continue to take this position for U.S. federal income tax return reporting purposes. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption and thereby become subject to U.S. federal income tax on our U.S. source shipping income. For example, we would no longer qualify for exemption under Section 883 of the Code for a particular taxable year if shareholders with a five percent or greater interest in our common stock owned, in the aggregate, 50% or more of our outstanding common stock for more than half of the days during the taxable year. Due to the factual nature of the issues involved, it is possible that our tax-exempt status or that of any of our subsidiaries may change.

If we or our vessel-owning subsidiaries are not entitled to this exemption under Section 883 for any taxable year, we or our subsidiaries could be subject for those years to an effective 2% (i.e., 50% of 4%) U.S. federal income tax on our gross shipping income attributable to transportation that begins or ends, but that does not both begin and end, in the United States. The imposition of this taxation could have a negative effect on our business and would result in decreased earnings available for distribution to our shareholders.

The preferential tax rates applicable to qualified dividend income are temporary, and the enactment of proposed legislation could affect whether dividends paid by us constitute qualified dividend income eligible for the preferential rate.

Certain of our distributions may be treated as qualified dividend income eligible for preferential rates of U.S. federal income tax to non-corporate U.S. shareholders. In the absence of legislation extending the term for these preferential tax rates, all dividends received by such U.S. taxpayers in tax years beginning on January 1, 2011 or later will be taxed at graduated tax rates applicable to ordinary income.

In addition, legislation has been proposed in the U.S. Congress that would, if enacted, deny the preferential rate of U.S. federal income tax currently imposed on qualified dividend income with respect to dividends received from a non-U.S. corporation if the non-U.S. corporation is created or organized under the laws of a jurisdiction that does not have a comprehensive income tax system. Because the Marshall Islands imposes only limited taxes on entities organized under its laws, it is likely that if this legislation were enacted, the preferential tax rates of federal income tax may no longer be applicable to distributions received from us. As of the date of this prospectus, it is not possible to predict with certainty whether this proposed legislation will be enacted.

A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate our drilling rigs could result in a high tax rate on our worldwide earnings, which could result in a significant negative impact on our earnings and cash flows from operations.

We conduct our worldwide drilling operations through various subsidiaries. Tax laws and regulations are highly complex and subject to interpretation. Consequently, we are subject to changing tax laws, treaties and regulations in and between countries in which we operate. Our income tax expense is based upon our interpretation

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of tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, treaties or regulations, or in the interpretation thereof, or in the valuation of our deferred tax assets, could result in a materially higher tax expense or a higher effective tax rate on our worldwide earnings in our offshore drilling segment, and such change could be significant to our financial results. If any tax authority successfully challenges our operational structure, inter-company pricing policies or the taxable presence of our key subsidiaries in certain countries; or if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure; or if we lose a material tax dispute in any country, particularly in the United States, Canada, the United Kingdom, or Norway, our effective tax rate on our worldwide earnings from our offshore drilling operations could increase substantially and our earnings and cash flows from these operations could be materially adversely affected.

Our subsidiaries that provide services relating to drilling may be subject to taxation in the jurisdictions in which such activities are conducted. Such taxation would result in decreased earnings available to our shareholders. Ocean Rig ASA has transferred the domicile of its subsidiaries that own, directly or indirectly, the Leiv Eiriksson and the Eirik Raude to the Republic of the Marshall Islands. The Leiv Eiriksson and the Eirik Raude were transferred to the Marshall Island entities in December 2008 and the remainder of the rig-owning structure has been reorganized under Marshall Island entities during 2009.

Investors are encouraged to consult their own tax advisors concerning the overall tax consequences of the ownership of our common stock arising in an investor’s particular situation under U.S. federal, state, local and foreign law.

A spin-off of our subsidiary, Ocean Rig UDW, may have adverse tax consequences to shareholders.

We may distribute, or spin-off, a majority voting and economic interest in our subsidiary, Ocean Rig UDW Inc., or Ocean Rig UDW, formerly known as Primelead Shareholders Inc., sometime in 2010. A spin-off of Ocean Rig UDW may be a taxable transaction to our shareholders depending upon their country of residence. A shareholder may recognize taxable gain and be subject to tax as a result of receiving shares of Ocean Rig UDW in the spin-off, notwithstanding that cash had not been received. In addition, after the spin-off, Ocean Rig UDW may be treated as a PFIC, which would have adverse U.S. federal income tax consequences to a U.S. share holder of Ocean Rig UDW. Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse consequences for such shareholders), such U.S. shareholders would be subject to U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of shares of Ocean Rig UDW, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period in such shares.

Our insurance may not be adequate to cover our losses that may result from our operations due to the inherent operational risks of the offshore drilling contract industry.

We maintain insurance in accordance with industry standards. Our insurance is intended to cover normal risks in our current operations, including insurance against property damage, loss of hire, war risk and third-party liability, including pollution liability.

Although we have obtained insurance for the full assessed market value of our drilling units, insurance coverage may not, under certain circumstances, be available, and if available, may not provide sufficient funds to protect us from all losses and liabilities that could result from our operations. We have also obtained loss of hire insurance which becomes effective after 45 days of downtime and coverage extends for approximately one year. The principal risks which may not be insurable are various environmental liabilities and liabilities resulting from reservoir damage caused by our negligence. Moreover, our insurance provides for premium adjustments based on claims and is subject to deductibles and aggregate recovery limits. In the case of pollution liabilities, our deductible is $25,000 per event and $10,000 in the case of other claims, our deductible is $1.5 million per hull and machinery event and our aggregate recovery limits are $624 million under our protection and indemnity insurance which is provided by mutual protection and indemnity associations. Our insurance coverage may not protect fully against losses resulting from a required cessation of rig operations for environmental or other reasons. The occurrence of a casualty, loss or liability against which we may not be fully insured could significantly reduce our revenues, make it financially impossible for us to obtain a replacement rig or to repair a damaged rig, cause us to pay fines or damages which are generally not insurable and that may have priority over the payment obligations under our indebtedness or otherwise impair our ability to meet our obligations under our indebtedness and to operate profitably. Insurance may not be available to us at all or on terms acceptable to us, we may not maintain insurance or, if we are so insured, our policy may not be adequate to cover our loss or liability in all cases.

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Our customers may be involved in the handling of environmentally hazardous substances and if discharged into the ocean may subject us to pollution liability which could have a negative impact on our cash flows, results of operations and ability to pay dividends, if any, in the future.

Our operations may involve the use or handling of materials that may be classified as environmentally hazardous substances. Environmental laws and regulations applicable in the countries in which we conduct operations have generally become more stringent. Such laws and regulations may expose us to liability for the conduct of or for conditions caused by others, or for our acts that were in compliance with all applicable laws at the time such actions were taken.

During our drilling operations in the past, we, through our subsidiary Ocean Rig ASA, have caused the release of oil, waste and other pollutants into the sea and into protected areas, such as the Barents Sea where on April 12, 2005, we discharged less than one cubic meter of hydraulic oil. While we conduct maintenance on our drilling rigs in an effort to prevent such releases, future releases could occur, especially as our rigs age. Such releases may be large in quantity, above our permitted limits or in protected or other areas in which public interest groups or governmental authorities have an interest. These releases could result in fines and other costs to us, such as costs to upgrade our drilling rigs, costs to clean up the pollution, and costs to comply with more stringent requirements in our discharge permits. Moreover, these releases may result in our customers or governmental authorities suspending or terminating our operations in the affected area, which could have a material adverse effect on our business, results of operation and financial condition.

We expect that we will be able to obtain some degree of contractual indemnification from our customers in most of our drilling contracts against pollution and environmental damages. But such indemnification may not be enforceable in all instances, the customer may not be financially capable in all cases of complying with its indemnity obligations or we may not be able to obtain such indemnification agreements in the future.

Failure to attract or retain key personnel, labor disruptions or an increase in labor costs could hurt our operations in the offshore drilling sector.

We require highly skilled personnel to operate and provide technical services and support for our business in the offshore drilling sector worldwide. We had at December 31, 2009 approximately 432 skilled employees in our offshore drilling sector, the majority of whom are employed on the Leiv Eiriksson and the Eirik Raude. Competition for the labor required for drilling operations has intensified as the number of rigs activated, added to worldwide fleets or under construction has increased, leading to shortages of qualified personnel in the industry and creating upward pressure on wages and higher turnover. If turnover increases, we could see a reduction in the experience level of our personnel, which could lead to higher downtime, more operating incidents and personal injury and other claims, which in turn could decrease revenues and increase costs. In addition, labor disruptions could hinder our operations from being carried out normally and if not resolved in a timely cost-effective manner, could have a material impact our business. In response to these labor market conditions, we are increasing efforts in our recruitment, training, development and retention programs as required to meet our anticipated personnel needs for offshore drilling. If these labor trends continue, we may experience further increases in costs or limits on operations in the offshore drilling sector. Some of our employees are covered by collective bargaining agreements. If we choose to cease operations in one of those countries or if market conditions reduce the demand for our drilling services in such a country, we would incur costs, which may be material, associated with workforce reductions. In addition, upon their expiration, these agreements may be renegotiated, and as a result, we could experience higher personnel expenses, other increased costs and increased operating restrictions, which may be material to our business in the offshore drilling sector.

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Our operating and maintenance costs with respect to our offshore drilling rigs will not necessarily fluctuate in proportion to changes in operating revenues, which may have a material adverse effect on our results of operations, financial condition and cash flows.

Our operating and maintenance costs with respect to our offshore drilling rigs will not necessarily fluctuate in proportion to changes in operating revenues. Operating revenues may fluctuate as a function of changes in day-rate. However, costs for operating a rig are generally fixed or only semi-variable regardless of the day-rate being earned. In addition, should our drilling units incur idle time between contracts, we typically will not de-man those drilling units because we will use the crew to prepare the rig for its next contract. During times of reduced activity, reductions in costs may not be immediate as portions of the crew may be required to prepare rigs for stacking, after which time the crew members are assigned to active rigs or dismissed. In addition, as our drilling units are mobilized from one geographic location to another, the labor and other operating and maintenance costs can vary significantly. In general, labor costs increase primarily due to higher salary levels and inflation. Equipment maintenance expenses fluctuate depending upon the type of activity the unit is performing and the age and condition of the equipment. Contract preparation expenses vary based on the scope and length of contract preparation required and the duration of the firm contractual period over which such expenditures are incurred. If we experience increased operating costs without a corresponding increase in earnings, this may have a material adverse effect on our results of operations, financial condition and cash flows.

We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.

We may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, asbestos and other toxic tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. Although we intend to defend these matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on us. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent which may have a material adverse effect on our financial condition.

Risks Relating to Our Common Stock

We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law, and as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.

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

A small number of our stockholders effectively control the outcome of matters on which our stockholders are entitled to vote.

Entities affiliated with Mr. Economou, our Chairman and Chief Executive Officer currently own, directly or indirectly, approximately 15.8% of our outstanding common stock as of April 6, 2010. While those stockholders have no agreement, arrangement or understanding relating to the voting of their shares of our common stock, they will effectively control the outcome of matters on which our stockholders are entitled to vote, including the election of directors and other significant corporate actions. The interests of these stockholders may be different from your interests.

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Future sales of our common stock could cause the market price of our common stock to decline.

The market price of our common stock could decline due to sales, or the announcements of proposed sales, of a large number of common stock in the market, including sales of common stock by our large shareholders, or the perception that these sales could occur. These sales, or the perception that these sales could occur, could also make it more difficult or impossible for us to sell equity securities in the future at a time and price that we deem appropriate to raise funds through future offerings of common stock.

Our amended and restated articles of incorporation authorize our board of directors to, among other things, issue additional shares of common or preferred stock or securities convertible or exchangeable into equity securities, without shareholder approval. We may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional shares of common or preferred stock or convertible securities could be substantially dilutive to our shareholders. Moreover, to the extent that we issue restricted stock units, stock appreciation rights, options or warrants to purchase our common shares in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution. Holders of shares of our common stock have no preemptive rights that entitle such holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.

Anti-takeover provisions in our organizational documents could make it difficult for our stockholders to replace or remove our current board of directors or have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common stock.

Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our stockholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable.

These provisions include:

• prior to the date of the transaction that resulted in the shareholder becoming an interested shareholder, our board of directors approved either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;

• authorizing our board of directors to issue “blank check” preferred stock without stockholder approval;

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

• prohibiting cumulative voting in the election of directors;

• authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote for the directors;

• prohibiting stockholder action by written consent;

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

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

In addition, we have adopted a stockholders’ rights agreement pursuant to which our board of directors may cause the substantial dilution of the holdings of any person that attempts to acquire us without the approval of our board of directors. Under our stockholders’ rights plan adopted in 2008 and amended in 2009, our board of directors

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declared a dividend of one preferred share purchase right, or a right, to purchase one one-thousandth of a share of our Series A Participating Preferred Stock for each outstanding common share. Each right entitles the registered holder, upon the occurrence of certain events, to purchase from us one one-thousandth of a share of Series A Participating Preferred Stock. The rights may have anti-takeover effects. The rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our board of directors. As a result, the overall effect of the rights may be to render more difficult or discourage any attempt to acquire us. Because our board of directors can approve a redemption of the rights or a permitted offer, the rights should not interfere with a merger or other business combination approved by our board of directors. The adoption of the rights agreement was approved by our existing stockholders prior to the offering.

Although the Marshall Islands Business Corporation Act does not contain specific provisions regarding “business combinations” between corporations organized under the laws of the Republic of Marshall Islands and “interested shareholders,” we have included provisions regarding such combinations in our articles of incorporation.

Our articles of incorporation contain provisions which prohibit us from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the person became an interested shareholder, unless:

• authorizing our board of directors to issue “blank check” preferred stock without stockholder approval;

• upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our voting stock outstanding at the time the transaction commenced;

• at or subsequent to the date of the transaction that resulted in the shareholder becoming an interested shareholder, the business combination is approved by the board of directors and authorized at an annual or special meeting of shareholders by the affirmative vote of at least 66 ²/3% of the outstanding voting stock that is not owned by the interested shareholder; or

• the shareholder became an interested shareholder prior to the consummation of the Initial Public Offering.

For purposes of these provisions, a “business combination” includes mergers, consolidations, exchanges, asset sales, leases and other transactions resulting in a financial benefit to the interested shareholder and an “interested shareholder” is any person or entity that beneficially owns 15% or more of our outstanding voting stock and any person or entity affiliated with or controlling or controlled by that person or entity. Further, the term “business combination”, when used in reference to us and any “interested shareholder” does not include any transactions for which definitive agreements were entered into prior to the date the articles were filed with the Republic of the Marshall Islands.

Item 4. Information on the Company

A. History and development of the Company

DryShips Inc., a company organized under the laws of the Republic of the Marshall Islands, was formed in September 2004. Prior to our initial public offering we issued 15,400,000 shares of our common stock to our shareholders in October 2004. In February 2005, we completed our initial public offering and issued an additional 14,950,000 common shares with a par value of $0.01 at a price of $18.00 per share. The net proceeds of the initial public offering amounted to $251.3 million.

On May 10, 2006, we filed our universal shelf registration statement and related prospectus for the issuance of up to 5,000,000 common shares. From May 2006 through August 2006, 4,650,000 shares of common stock with a par value $0.01 were issued. The net proceeds after underwriting commissions of 2.5% and other issuance fees were $56.5 million.

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Our shareholders voted to adopt a resolution at our annual general shareholders’ meeting on July 11, 2006, which increased the aggregate number of shares of common stock that we are authorized to issue from 45,000,000 registered shares with par value of $0.01 to 75,000,000 registered shares with par value $0.01.

On October 24, 2006, our board of directors agreed to the request of our major shareholders (Elios Investments Inc., Advice Investments S.A. and Magic Management Inc.) following the declaration of our $0.20 quarterly dividend per share in September 2006, to receive their dividend payment in the form of our common shares in lieu of cash. One of these shareholders, Elios Investments Inc., is controlled by our Chairman and Chief Executive Officer, Mr. George Economou. In addition, the board of directors also agreed on that date to the request of a company related to Mr. Economou to accept repayment of the outstanding balance of a seller’s credit in respect of a vessel purchased by us (as discussed in Note 6 of our consolidated financial statements) in our common shares. As a result of the agreement, an aggregate of $3.08 million in dividends and the seller’s credit together with interest amounting to approximately $3.33 million were settled with 235,585 and 254,512 of our common shares, respectively. The price used as consideration for issuance of the above common shares was equal to the average closing price of our common stock on the Nasdaq Global Select Market over the 8 trading days ended October 24, 2006, which was $13.07 per share.

In December 2006, we filed a registration statement on Form F-3 on behalf of our major shareholders registering for resale an aggregate of 15,890,097 of our common shares.

In October 2007, we filed a registration statement on Form F-3ASR (Registration No. 333-1446540) and a prospectus supplement pursuant to Rule 424(b) relating to the offer and sale of up to 6,000,000 shares of common stock, par value $0.01 per share, pursuant to a controlled equity offering sales agreement that we entered into with Cantor Fitzgerald & Co. From October 2007 through December 2007, we issued an aggregate of 1,191,000 common shares with par value $0.01 per share. The net proceeds, after underwriting commissions ranging between 2% to 2.5% and other issuance fees, amounted to $127.1 million. From January 2008 through March 2008, we issued an aggregate of 4,759,000 common shares with par value $0.01 per share. The net proceeds, after underwriting commissions ranging between 1.5% to 2% and other issuance fees, amounted to $352.8 million.

In January 2008, following a special shareholders meeting, we increased the aggregate number of authorized shares of common stock of the Company from 75,000,000 registered shares with par value of $0.01 to 1,000,000,000 registered shares with a par value of $0.01 and increased the aggregate number of authorized shares of preferred stock from 30,000,000 registered shares, par value $0.01 per share, to 500,000,000 registered preferred shares with a par value of $0.01 per share.

In March 2008, we filed a prospectus supplement relating to the offer and sale of up to 6,000,000 common shares, par value $0.01 per share pursuant to our controlled equity offering. In May 2008, we issued 1,109,903 common shares pursuant to this prospectus supplement. The net proceeds, after underwriting commissions and other issuance fees, amounted to $101.6 million.

On October 21, 2008, we filed a prospectus supplement pursuant to our controlled equity offering for the sale of up to 4,940,097 common shares, pursuant to which we sold 2,069,700 shares. The net proceeds of this offering amounted to $41.9 million.

On November 6, 2008, we filed a prospectus supplement pursuant to our controlled equity offering for the sale of up to 25,000,000 common shares, pursuant to which we sold 24,980,300 shares. The net proceeds of this offering amounted to $167.1 million.

On January 28, 2009, we entered into an ATM Equity Sales Agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated relating to the offer and sale of up to $500,000,000 of our common shares.

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On March 19, 2009, we issued a total of 11,990,405 common shares to the nominees of Central Mare Inc. in connection with the disposal of three newbuilding Capesize vessels. See “Item 4. Information on the Company – Business Overview – Recent Developments in Our Drybulk Carrier Operations – Disposal of Three Capesize Newbuildings.”

On January 28, 2009 and on April 2, 2009, we filed two prospectus supplements pursuant to our controlled equity offering and issued 71,265,000 and 24,404,595 common shares, respectively. The net proceeds of these offerings amounted to $487.5 million after commissions.

On May 7, 2009, we entered into another ATM Equity Sales Agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated and filed a prospectus supplement for the sale of up to $475 million of common shares, pursuant to which we sold 69,385,000 shares. The net proceeds of this offering amounted to $464.9 million after commissions.

On July 9, 2009, we entered into an agreement with entities affiliated with our Chairman and Chief Executive Officer to acquire the remaining 25% of the total issued and outstanding capital stock of Ocean Rig UDW. The consideration paid for the 25% interest in Ocean Rig UDW consisted of a one-time $50 million cash payment upon the closing of the transaction, and the issuance of 52,238,806 shares of Series A Convertible Preferred Stock with an aggregate face value of $280 million. The holders of our Series A Convertible Preferred Stock have demand Registration Rights exercisable at any time.

In November 2009, we also offered $460 million aggregate principal amount of our 5% Convertible Senior Notes due December 1, 2014, or the Notes, resulting in net proceeds of $447.8 million. Concurrently with the offering of the Notes, we offered up to 26,100,000 common shares to loan the bank pursuant to a share lending agreement.

As of April 6, 2010, we had 284,826,871 common shares and 52,238,806 Series A Convertible Preferred Shares issued and outstanding.

Prior to our initial public offering in February 2005, our initial fleet was comprised of one Capesize drybulk carrier and five Panamax drybulk carriers. As of the year ended December 31, 2005, our fleet consisted of 27 drybulk carriers. During the year ended December 31, 2006, we purchased a total of eight drybulk carriers for an aggregate purchase price of $274.2 million, entered into two newbuilding purchase contracts and sold one vessel for an aggregate sale price of $11.7 million. During the year ended December 31, 2007, we purchased a total of 15 drybulk carriers for an aggregate purchase price of $851 million, entered into six newbuilding purchase contracts and sold eleven vessels for an aggregate sale price of $362.9 million. During the year ended December 31, 2008, we purchased a total of seven drybulk carriers for an aggregate purchase price of $779.4 million, and sold seven vessels for an aggregate sale price of $401.5 million. In addition, as discussed further below, we, through our acquisition of Ocean Rig ASA, acquired two ultra-deep water semi-submersible drilling rigs. We also exercised a purchase option to acquire two newbuilding ultra-deep water advanced capability drillships and we acquired the contracts for the construction of two additional newbuilding ultra-deep water advanced capability drillships.

During 2009 we: (a) took delivery of two newbuildings, through newly established wholly owned subsidiaries; (b) concluded the sale of one drybulk carrier vessel, which was contracted during 2008; (c) contracted for the sale of two vessels during 2009, delivered in 2010; (d) cancelled the remaining of the fourteen contracts which we had entered into in 2008, including the construction of five Capesize newbuildings; (e) acquired two newbuildings ultra deep water drilling rigs identified as Hulls 1837 and 1838, which had entered into construction contracts in 2007; (f) concluded the sale of three Capesize newbuildings, which were contracted in 2007 and 2008; (g) concluded the sale of the subsidiary that had previously contracted for the purchase of newbuilding drybulk carrier H2089; and (h) cancelled the acquisition of two newbuildings hulls, which we had entered into in 2007.

The Company is engaged in the ocean transportation services of drybulk cargoes worldwide through the ownership and operation of the drybulk carrier vessels and deepwater drilling rig services through the ownership of ultra-deep water drilling rigs.

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As of the year ended December 31, 2009, our fleet consisted of 39 drybulk carriers comprised of seven Capesize, 30 Panamax, two Supramax, as well as two ultra-deep-water semi-submersible drilling rigs and four ultra-deep-water newbuilding drillships.

Our executive offices are located at Omega Building, 80 Kifissias Avenue, Amaroussion GR 151 25 Greece. Our telephone number is 011-30-210-809-0570.

B. Business Overview

We are a Marshall Islands corporation with our principal executive offices in Athens, Greece. We were incorporated in September 2004. As of April 6, 2010, we own, through our subsidiaries, a fleet of 39 drybulk carriers comprised of seven Capesize, 28 Panamax, two Supramax vessels and two Panamax newbuilding vessels, which have a combined deadweight tonnage of approximately 3.3 million dwt. Our drybulk fleet principally carries a variety of drybulk commodities including major bulk items such as coal, iron ore, and grains, and minor bulk items such as bauxite, phosphate, fertilizers and steel products. The average age of the vessels in our drybulk fleet is 8.3 years. We are also an owner and operator of two ultra-deep water semi-submersible drilling rigs and four ultra deep-water newbuilding drillships, which are further discussed below.

We employ our drybulk vessels under period time charters and on bareboat charters. 35 of our vessels are currently employed on time charter, with an average remaining duration of three years, and two of our vessels are currently employed on bareboat charters.

All of our drybulk carriers are managed by Cardiff Marine Inc., or Cardiff, under separate ship management agreements. Mr. George Economou, our Chairman and Chief Executive Officer, has been active in shipping since 1976 and formed Cardiff in 1991. We are affiliated with Cardiff, a Liberian corporation with offices in Greece, which is responsible for all technical and commercial management functions of our drybulk fleet. We believe that Cardiff has established a reputation in the international shipping industry for operating and maintaining a fleet with high standards of performance, reliability and safety. Seventy percent of the issued and outstanding capital stock of Cardiff is owned by a foundation which is controlled by Mr. Economou. The remaining 30% of the issued and outstanding capital stock of Cardiff is owned by a company controlled by Mr. Economou’s sister, who is also a member of our board of directors.

Cardiff provides comprehensive ship management services including technical supervision, such as repairs, maintenance and inspections, safety and quality, crewing and training, as well as supply provisioning. Cardiff’s commercial management services include operations, chartering, sale and purchase, post-fixture administration, accounting, freight invoicing and insurance. Cardiff completed early implementation of the International Maritime Organization’s, or IMO, International Management Code for the Safe Operation of Ships and Pollution Prevention, or ISM Code, in 1996. Cardiff has obtained documents of compliance for its office and safety management certificates for its vessels as required by the ISM Code and has been ISO 14001 certified since 2003, in recognition of its commitment to overall quality.

In addition, through our acquisition of Ocean Rig ASA, or Ocean Rig, a Norwegian offshore drilling services company whose shares were listed on the Oslo Stock Exchange, we own and operate two ultra-deep water, harsh environment, semi-submersible drilling rigs, the Leiv Eiriksson and the Eirik Raude. In April 2008, we, through our subsidiary, DrillShips Investment Inc., or DrillShips Investment, exercised an option to acquire two newbuilding advanced capability drillships for use in ultra-deep water locations, identified as Hull 1865 and Hull 1866, for an expected cost of approximately $800 million per drillship. We expect to take delivery of Hulls 1865 and 1866 in July 2011 and September 2011, respectively. Our subsidiary Ocean Rig UDW, acquired Drillships Holdings, Inc., or Drillships Holdings, which has contracts for construction of two newbuilding ultra-deep water drillships, identified as Hulls 1837 and 1838, to be delivered in December 2010 and March 2011, respectively.

We may sell a minority voting and economic interest in our wholly-owned subsidiary, Ocean Rig UDW, in a public offering sometime in 2010. Alternatively, we may distribute, or spin-off, a minority voting and economic interest in Ocean Rig UDW to holders of our voting stock (including holders of our preferred shares), or complete some combination of a public offering and distribution to holders of our voting stock. Ocean Rig UDW comprises our entire offshore drilling segment, which represented approximately 53.8% of our total assets as of December 31, 2009 and over 45% of our total revenues for the year ended December 31, 2009. There can be no assurance, however, that we will complete any such transaction, which, among other things, will be subject to market conditions.

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The Leiv Eiriksson, one of our two drilling rigs, was under contract with Shell U.K. Limited, A/S Norske Shell and Shell E&P Ireland Limited until October 27, 2009 for drilling operations in Irish, UK and Norwegian waters, which we refer to as the Shell contract. The rig operated in Irish waters in the second quarter of 2008 and relocated to Norwegian waters in the third quarter of 2008. On July 11, 2008, we obtained the requisite approvals from the Norwegian authorities and commenced operations in Norwegian waters. From January 1 through March 31, 2008, a maximum day-rate of $476,000 applied while the rig was operating in Ireland and in the UK, and a day-rate of $511,000 applied while the rig was operating in Norwegian waters. Since April 1, 2008, a maximum day-rate of $511,000 applies regardless of where the rig was operating. In October 2009, the Leiv Eiriksson commenced a three-year contract with Petróleo Brasileiro S.A. for exploration drilling in the Black Sea at a maximum day-rate of $583,000 including an 8% bonus and, assuming 100% utilization, expiring in October 2012, which we refer to as the Petróleo Brasileiro contract.

In October 2008, our other drilling rig, the Eirik Raude, commenced a three-year term contract with Tullow Oil PLC, or Tullow Oil, for development drilling in offshore Ghana at an average day-rate of $637,000, based upon 100% utilization, expiring in October 2011, which we refer to as the Tullow Oil contract.

Various subsidiaries of Ocean Rig directly manage the Eirik Raude and the Leiv Eiriksson. The supervision of the construction of the two newbuilding drillships identified as Hulls 1865 and 1866 is performed by our subsidiary, Ocean Rig AS, pursuant to two separate management agreements. On August 1, 2008, the owning companies of the two newbuilding drillships identified as Hulls 1837 and 1838, which on October 3, 2008 we entered into a share purchase agreement to acquire, each entered into a separate management agreement with Ocean Rig AS for the supervision of the construction of these drillships on the same terms as the agreements by and between the owning companies of drillship Hulls 1865 and 1866 and Ocean Rig AS. The transaction was completed on May 15, 2009. We have entered into a management agreement with Cardiff for supervisory services in connection with the newbuilding drillships, Hulls 1837 and 1838.

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Our Fleet

As of April 6, 2010, our fleet was comprised of the following vessels:

	Year Built	DWT	Type	Current employment	Gross rate per day		Redelivery
							Earliest	Latest
Capesize:
Mystic	2008	170,500	Capesize	T/C	$	52,310	Aug-2018	Dec-2018
Manasota	2004	171,061	Capesize	T/C	$	67,000	Feb-2013	Apr-2013
Flecha	2004	170,012	Capesize	T/C	$	55,000	Jul-2018	Nov-2018
Capri	2001	172,579	Capesize	T/C	$	61,000	Apr-2018	Jun-2018
Alameda	2001	170,269	Capesize	T/C	$	21,000	Feb-2011	May-2011
Samsara	1996	150,393	Capesize	T/C	$	57,000	Dec-2011	Apr-2012
Brisbane	1995	151,066	Capesize	T/C	$	25,000	Dec-2011	Apr-2012
	8.7
	years	1,155,880	7
Panamax:
Oliva	2009	75,000	Panamax	T/C	$	17,850	Oct-2011	Dec-2011
Rapallo	2009	75,000	Panamax	T/C	$	15,400	Aug-2011	Oct-2011
Catalina	2005	74,432	Panamax	T/C	$	40,000	Jun-2013	Aug-2013
Majorca	2005	74,364	Panamax	T/C	$	43,750	Jun-2012	Aug-2012
Sorrento	2004	76,633	Panamax	T/C	$	17,300	Sep-2011	Dec-2011
Avoca	2004	76,500	Panamax	T/C	$	45,500	Sept-2013	Dec-2013
Ligari	2004	75,583	Panamax	T/C	$	55,500	Jun-2012	Aug-2012
Saldanha	2004	75,500	Panamax	T/C	$	52,500	Jun-2012	Sep-2012
Padre	2004	73,601	Panamax	T/C	$	46,500	Sept-2012	Dec-2012
Mendocino	2002	76,623	Panamax	T/C	$	56,500	Jun-2012	Sep-2012
Bargara	2002	74,832	Panamax	T/C	$	43,750	May-2012	Jul-2012
Oregon	2002	74,204	Panamax	T/C	$	16,350	Aug-2011	Oct-2011
Maganari	2001	75,941	Panamax	T/C	$	14,500	Jul-2011	Sep-2011
Conquistador	2001	75,607	Panamax	T/C	$	17,750	Aug-2011	Nov-2011
Capitola	2001	74,832	Panamax	T/C	$	39,500	Jun-2013	Aug-2013
Samatan	2001	74,823	Panamax	T/C	$	39,500	May-2013	Jul-2013
Sonoma	2001	74,786	Panamax	T/C	$	19,300	Sept-2011	Nov-2011
Ecola	2001	73,931	Panamax	T/C	$	43,500	Jun-2012	Aug-2012
Levanto	2001	73,931	Panamax	T/C	$	16,800	Sep-2011	Nov-2011
Coronado	2000	75,706	Panamax	T/C	$	18,250	Sep-2011	Nov-2011
Redondo	2000	74,716	Panamax	T/C	$	34,500	Apr-2013	Jun-2013
Positano	2000	73,288	Panamax	T/C	$	42,500	Sept-2013	Dec-2013
Marbella	2000	72,561	Panamax	T/C	$	14,750	Aug-2011	Nov-2011
Ocean Crystal	1999	73,688	Panamax	T/C	$	15,000	Aug-2011	Nov-2011
Xanadu	1999	72,270	Panamax	T/C	$	39,750	Jul-2013	Sep-2013
Primera*	1998	72,495	Panamax	T/C	$	18,250	Aug-2011	Dec-2011
La Jolla	1997	72,126	Panamax	T/C	$	14,750	Aug-2011	Nov-2011
Toro	1995	73,034	Panamax	T/C	$	16,750	May-2011	Jul-2011
	8.3
	years	2,086,007	28

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Supramax:
Paros 1 ex Clipper Gemini**	2003	51,201	Supramax	BB	$27,135	Oct-2011	May-2012
Pachino ex VOC Galaxy**	2002	51,201	Supramax	BB	$20,250	Sept-2010	Feb-2011
	7.5
	years	102,402	2
Totals	8.3
	years	3,344,289	37
Newbuildings
Panamax 1	2011	76,000	Panamax
Panamax 2	2012	76,000	Panamax
Rig:
Leiv Eiriksson	2001	Fifth-generation drilling unit***		semi-submersible	Contract with Petroleo Brasiliero S.A. for a three-year term ending Q4 2012 beginning at a maximum day-rate of $583,000, including an 8% bonus.
Eirik Raude	2002	Fifth-generation drilling unit***		semi-submersible	Contract with Tullow Oil PLC for a three-year term ending Q4 2011 at an average day-rate of $639,000.
N/B Drillships:
N/B-Hull No: 1865	Q3 2011		UDW Drillship****
N/B-Hull No: 1866	Q3 2011		UDW Drillship****
N/B-Hull No: 1837	Q4 2010		UDW Drillship****
N/B-Hull No: 1838	Q1 2011		UDW Drillship****

* Based on a synthetic time charter.

** The MV Paros I and MV Pachino are employed under a bareboat charter.

*** Fifth-generation drilling units have the capability to drill wells in 7,500 feet of water to a total depth of 35,000 feet.

**** UDW Drillships have the capability to drill wells in 10,000 feet of water to a total depth of 35,000 feet.

We actively manage the deployment of our drybulk fleet between long-term and short-term time charters, which generally last from several days to several weeks, and long-term time charters and bareboat charters, which can last up to several years. A time charter is generally a contract to charter a vessel for a fixed period of time at a set daily rate. Under time charters, the charterer pays voyage expenses such as port, canal and fuel costs. A voyage charter is generally a contract to carry a specific cargo from a load port to a discharge port for a specified total price. Under spot market voyage charters, we pay voyage expenses such as port, canal and fuel costs. Under both types of charters, we pay for vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, as well as for commissions. We are also responsible for the drydocking costs relating to each vessel. Under a bareboat charter, the vessel is chartered for a stipulated period of time which gives the charterer possession and control of the vessel, including the right to appoint the master and the crew. Under bareboat charters, all voyage costs are paid by the Company’s customers.

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We deploy our drilling rigs on long-term charters, or drilling contracts that provide for a day rate to be paid to us by the charterer. Under the drilling contracts, the customer typically pays us a fixed daily rate, depending on the activity and up-time of the rig. The customer bears all fuel costs and logistics costs related to transport to/from the rig. We remain responsible for paying the operating expenses for the rigs, including the cost of crewing, catering, insuring, repairing and maintaining the rig, the costs of spares and consumable stores and other miscellaneous expenses. The lease element of revenue is recognized to the statement of operations on a straight line basis. The drilling services element of mobilization revenues, contributions from customers and the direct incremental expenses of mobilization are deferred and recognized over the estimated duration of the drilling contracts. To the extent that deferred expenses exceed revenue to be recognized, it is expensed as incurred. Demobilization fees and expenses are recognized over the demobilization period.

Our drybulk vessels and drilling rigs operate worldwide within the trading limits imposed by our insurance terms and do not operate in areas where United States, European Union or United Nations sanctions have been imposed.

Our Drybulk Operations

Competition

Demand for drybulk carriers fluctuates in line with the main patterns of trade of the major drybulk cargoes and varies according to changes in the supply and demand for these items. We compete with other owners of drybulk carriers in the Capesize, Panamax and Supramax size sectors. Ownership of drybulk carriers is highly fragmented and is divided among approximately 1,500 independent drybulk carrier owners. We compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation as an owner and operator.

Customers

During the year ended December 31, 2009, four of our customers accounted for more than ten percent of our voyage revenue: Customer A (17%), Customer B (15%), Customer C (11%) and Customer D (10%). During the year ended December 31, 2008, two of our customers accounted for more than ten percent of our voyage revenue: Customer E (20%) and Customer F (11%). During the year ended December 31, 2007, one of our customers accounted for more than ten percent of our voyage revenue: Customer G (12%). Customer G is a pool operator and therefore we do not consider Customer G as representative of any single “customer” that charters vessels in the vessel charter markets. Given our exposure to, and focus on, the long-term and short-term, or spot, time charter markets, we do not foresee any one client providing a significant percentage of our income over an extended period of time.

Management of the Drybulk Fleet

We do not employ personnel to run our vessel operating and chartering business on a day-to-day basis. All of our vessels are managed by Cardiff. The Entrepreneurial Spirit Foundation, a family foundation of Vaduz Liechtenstein, of which our Chief Executive Officer, Mr. George Economou, and members of his family are beneficiaries, owns 70% of the issued and outstanding capital stock of Cardiff. The remaining 30% of the issued and outstanding capital stock of Cardiff is held by Prestige Finance S.A., a Liberian corporation which is wholly owned by the sister of Mr. Economou, Ms. Chryssoula Kandylidis, who serves on our board of directors. Cardiff performs all of our technical and commercial functions relating to the operation and employment of our vessels pursuant to management agreements concluded between Cardiff and our vessel-owning subsidiaries which have an initial term of five years and will automatically be extended to successive five year terms, unless at least 30 days’ advance notice of termination is given by either party. Mr. Economou, under the guidance of our board of directors, manages our business as a holding company, including our own administrative functions, and we monitor Cardiff’s performance under the fleet management agreement.

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Cardiff Marine Inc.

The operations of the Company’s drybulk carrier vessels are managed by Cardiff Marine Inc., or the Manager or Cardiff, a related-party entity incorporated in Liberia. Cardiff also acts as the Company’s charter, sales, and purchase broker. Cardiff is beneficially majority-owned by the Company’s Chief Executive Officer, Mr. Economou, and members of his immediate family.

The Company pays a management fee of Euro 600 per day, per vessel to Cardiff. In addition, the management agreements provide for payment by the Company to Cardiff of: (i) a fee of Euro 105 per day per vessel for services in connection with compliance with Section 404 of the Sarbanes-Oxley Act of 2002; (ii) Euro 500 for superintendent visits on board vessels in excess of five days per annum, per vessel, for each additional day, per superintendent; (iii) chartering commission of 1.25% on all freight, hire and demurrage revenues; (iv) a commission of 1.00% on all gross sale proceeds or purchase price paid for vessels; (v) a quarterly fee of $250,000 for services in relation to the financial reporting requirements of the Company under Securities and Exchange Commission rules and the establishment and monitoring of internal controls over financial reporting; and (vi) a commission of 0.2% on derivative agreements and loan financing or refinancing.

Cardiff also provides commercial operations and freight collection services in exchange for a fee of Euro 90 per day, per vessel. Cardiff provides insurance services and obtains insurance policies for the vessels for a fee of 5.00% on the total insurance premiums, per vessel. Furthermore, if required, Cardiff will also handle and settle all claims arising out of its duties under the management agreements (other than insurance and salvage claims) in exchange for a fee of Euro 150 per person, per day of eight hours.

Cardiff provides the Company with financial accounts services in exchange for a fee of Euro 120 per day, per vessel. The Company also pays Cardiff a quarterly fee of Euro 260,500 for services rendered by Cardiff in connection with the Company’s financial accounting services. Pursuant to the terms of the management agreements, all fees payable to Cardiff are adjusted upwards or downwards based on the year-on-year increase in the Greek consumer price index.

Transactions with the Manager in Euros are settled on the basis of the EUR/USD on the invoice date.

Additionally the Company pays a management fee of $40,000 per month per drillship Hull 1837 and Hull 1838. The management agreements also provide for: (i) chartering commission of 1.25% on all freight, hire and demurrage revenues; (ii) a commission of 1.00% on all gross sale proceeds or purchase price paid for drillships; (iii) a commission of 1% on loan financing or refinancing; and (iv) commission of 2% on insurance premiums.

Consultancy Agreements

Under two consultancy agreements concluded on February 3, 2005, between the Company and Fabiana Services S.A., or Fabiana, a related party entity incorporated in the Marshall Islands, Fabiana provides the services of the individual who serves in the position of Chief Executive Officer of the Company.

On January 21, 2009, the Compensation Committee approved a Euro 5 million bonus payable to Mr. George Economou for services rendered during 2008.

On January 25, 2010, the Compensation Committee approved that a bonus in the form of 4,500,000 shares of the Company’s common stock, with par value $0.01, be granted to Fabiana for the contribution during 2009 as well as for the anticipated services of the Company’s Chief Executive Officer during the years 2010, 2011 and 2012. The shares will vest over a period of four years, with 1,000,000 shares to vest on the grant date; 1,000,000 shares to vest on each of December 31, 2010 and 2011; 1,500,000 shares to vest on December 31, 2012, respectively.

On January 25, 2010, the Company’s 2008 Equity Incentive Plan was amended to provide that a total of 21,834,055 common shares be reserved for issuance under the Plan.

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Crewing and Employees

Cardiff employs approximately 250 people, all of whom are shore-based. In addition, Cardiff is responsible for recruiting, either directly or through a crewing agent, the senior officers and all other crew members for our vessels. We believe the streamlining of crewing arrangements will ensure that all our vessels will be crewed with experienced seamen that have the qualifications and licenses required by international regulations and shipping conventions.

Charterhire Rates

Charterhire rates paid for drybulk carriers are primarily a function of the underlying balance between vessel supply and demand, although at times other factors may play a role. Furthermore, the pattern seen in charter rates is broadly mirrored across the different charter types and between the different drybulk carrier categories. However, because demand for larger drybulk carriers is affected by the volume and pattern of trade in a relatively small number of commodities, charterhire rates (and vessel values) of larger ships tend to be more volatile than those for smaller vessels.

In the time charter market, rates vary depending on the length of the charter period and vessel specific factors such as age, speed and fuel consumption. In the voyage charter market, rates are influenced by cargo size, commodity, port dues and canal transit fees, as well as delivery and redelivery regions. In general, a larger cargo size is quoted at a lower rate per ton than a smaller cargo size. Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit.

Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates, because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.

Within the drybulk shipping industry, the charterhire rate references most likely to be monitored are the freight rate indices issued by the Baltic Exchange. These references are based on actual charterhire rates under charter entered into by market participants as well as daily assessments provided to the Baltic Exchange by a panel of major shipbrokers. The Baltic Panamax Index is the index with the longest history. The Baltic Capesize Index and Baltic Handymax Index are of more recent origin. In 2008, the Baltic Drybulk Index, or BDI, declined from a high of 11,793 in May 2008 to a low of 663 in December 2008, which represents a decline of 94%. The BDI fell over 70% during the month of October 2008 alone. Over the comparable period of May through December 2008, the high and low of the Baltic Panamax Index and the Baltic Capesize Index represent a decline of 96% and 99%, respectively. In 2009, BDI increased from the low of 773 in January 2009 to 3,005 in December 2009, reaching its high of 4,661 in November 2009. In 2010, the BDI decreased from a high of 3,235 in January 2010 to 2,911 in March 2010, reaching its high of 3,299 in January 2010. On April 1, 2010, the BDI was 2,991.

Vessel Prices

Drybulk vessel prices, both for new-buildings and secondhand vessels, have decreased significantly since the year ended 2008 as a result of the weakening of the drybulk shipping industry. The vessel values have also declined as a result of a slowdown in the availability of global credit. The lack of credit has resulted in the restriction to fund both vessel purchases and purchases of commodities carried by sea. There can be no assurance as to how long charterhire rates and vessel values will remain depressed or whether they will drop any further. Should the charterhire rates remain at these depressed levels for some time our revenue and profitability will be adversely affected.

The International Drybulk Shipping Industry

Drybulk cargo is cargo that is shipped in quantities and can be easily stowed in a single hold with little risk of cargo damage. According to industry sources, in 2009, approximately 2,230 million tons of drybulk cargo was transported by sea, including iron ore, coal and grains representing 41.4%, 36.8% and 9.1% of the total drybulk trade, respectively.

The demand for drybulk carrier capacity is determined by the underlying demand for commodities transported in drybulk carriers, which in turn is influenced by trends in the global economy. Between 2001 and

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2007, trade in all drybulk commodities increased from 2,108 million tons to 2,961 million tons, an increase of 40.46%. One of the main reasons for that increase in drybulk trade was the growth in imports by China of iron ore, coal and steel products during the last eight years. Chinese imports of iron ore alone increased from 92.2 million tons in 2001 to approximately 382 million tons in 2007. In 2009, seaborne trade in all drybulk commodities increased to 2,202 million tons. However, demand for drybullk shipping decreased dramatically in the second quarter of 2008 evidenced by the decrease in Chinese iron ore imports which decreased from a high of 119.5 million tons in the second quarter of 2008 to a low of 96.2 million tons during the fourth quarter of 2008 representing a decrease of 19.5%. In 2009, seaborne trade in all drybulk commodities increased to 2,229.6 million tons as demand for drybulk shipping picked up following mainly an increase in Chinese iron ore imports from 443.7 million in 2008 to 628.1 million tons in 2009. At the current time, seaborne trade is expected to increase by 7.4% in 2010 while Chinese iron ore imports are expected to rise by 7.5%.

The global drybulk carrier fleet may be divided into four categories based on a vessel’s carrying capacity. These categories consist of:

• Capesize vessels, which have carrying capacities of more than 85,000 dwt. These vessels generally operate along long-haul iron ore and coal trade routes. There are relatively few ports around the world with the infrastructure to accommodate vessels of this size.

• Panamax vessels, which have a carrying capacity of between 60,000 and 85,000 dwt. These vessels carry coal, grains, and, to a lesser extent, minor bulks, including steel products, forest products and fertilizers. Panamax vessels are able to pass through the Panama Canal making them more versatile than larger vessels.

• Handymax vessels, which have a carrying capacity of between 35,000 and 60,000 dwt. The subcategory of vessels that have a carrying capacity of between 45,000 and 60,000 dwt called Supramax. These vessels operate along a large number of geographically dispersed global trade routes mainly carrying grains and minor bulks. Vessels below 60,000 dwt are sometimes built with on-board cranes enabling them to load and discharge cargo in countries and ports with limited infrastructure.

• Handysize vessels, which have a carrying capacity of up to 35,000 dwt. These vessels carry exclusively minor bulk cargo. Increasingly, these vessels have operated along regional trading routes. Handysize vessels are well suited for small ports with length and draft restrictions that may lack the infrastructure for cargo loading and unloading.

The supply of drybulk carriers is dependent on the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or loss. The orderbook of new drybulk vessels scheduled to be delivered in 2010 represents approximately 19.2% of the world drybulk fleet. The level of scrapping activity is generally a function of scrapping prices in relation to current and prospective charter market conditions, as well as operating, repair and survey costs. Drybulk carriers at or over 25 years old are considered to be scrapping candidate vessels.

The Effect of Recent Developments In The International Drybulk Shipping Industry On Our Business

The BDI, a daily average of charter rates in 26 shipping routes measured on a time charter and voyage basis and covering Supramax, Panamax and Capesize drybulk carriers, declined from a high of 11,793 in May 2008 to a low of 663 in December 2008, which represents a decline of 94%. The BDI fell over 70% during the month of October alone. Over the comparable period of May through December 2008, the high and low of the Baltic Panamax Index and the Baltic Capesize Index represent a decline of 96% and 99%, respectively. In 2009, the BDI increased from the low of 773 in January 2009 to 3,005 in December 2009, reaching its high of 4,661 in November 2009. In 2010, the BDI decreased from a high of 3,235 in January 2010 to 2,911 in March 2010 reaching its high of 3,299 in January 2010.

The general decline in the drybulk carrier charter market is due to various factors, including the lack of trade financing for purchases of commodities carried by sea, which has resulted in a significant decline in cargo shipments, and the excess supply of iron ore in China, which has resulted in falling iron ore prices and increased stockpiles in Chinese ports.

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The general decline in the drybulk carrier charter market has resulted in lower charter rates for some of our vessels exposed to the spot market and our time charters and bareboat charter linked to the BDI.

In addition, the general decline in the drybulk carrier charter market has resulted in lower drybulk vessel values. We previously entered into contracts for the sale of MV La Jolla, MV Delray, MV Paragon and MV Toro for an aggregate purchase price of $245.4 million. As further discussed below, (i) we agreed with the buyers of the MV La Jolla to retain the vessel in exchange for aggregate compensation of $9.0 million and we employ the vessel under time charter employment; (ii) the sale of MV Delray will not close due to the buyer’s repudiation of its obligations under the memorandum of agreement. A deposit on the vessel in the amount of $5.6 million was made by the buyer. We are pursuing all legal remedies against the buyer; (iii) we reached an agreement with the buyers of the MV Paragon to sell the vessel for a reduced price of $30.8 million; and (iv) we entered into an agreement with Samsun, the buyers of the MV Toro, to sell the vessel at a reduced price of $36 million. As part of the agreement, the buyers released the deposit of $6,300 to the Company immediately and were required to make a new deposit of $1,500 towards the revised purchase price. On February 19, 2009, the Company proceeded with the cancellation of the sale agreement due to the buyers’s failure to pay the new deposit of $1,500. In February 2009, Samsun was placed in corporate rehabilitation.

In February 2010 Samsun’s plan of reorganization was approved by its creditors. As part of this plan the Company will recoup a certain percentage of the agreed-upon purchase price. As this is contingent on the successful implementation of the plan of reorganization, the Company is unable to estimate the impact on the Company’s financial statements.

Recent Developments

Iguana Sale

On November 11, 2009, we entered into a memorandum of agreement for the sale of the vessel MV Iguana for $23.35 million. The vessel was delivered to its new owners on January 19, 2010.

Delray Sale

On November 26, 2009, we entered into a memorandum of agreement for the sale of the vessel MV Delray ex Lacerta for $20.15 million. The vessel was delivered to its new owners on February 5, 2010.

Vessel Acquisition

On February 17, 2010, we placed an order for two 76,000 dwt Panamax dry bulk vessels, with a quality Chinese shipyard, for a price of $33.05 million per vessel. Delivery of the two vessels is expected to take place in the fourth quarter of 2011 and the first quarter of 2012, respectively.

Payment for the construction of the Drillship Hulls in 2010

During 2010, the Company made payments amounting to $313.4 million towards the yard installments for the construction of its three newbuilding drillship Hulls 1865, 1866 and 1837, which were financed by cash on hand.

Our Offshore Drilling Operations

Through most of 2009, the ultra-deepwater drilling market reversed some of its late improvements with a relatively low number of drilling contracts providing for day rates mostly around $500,000 and forward start, term contracts extending out to 2013 and beyond. The deep water and ultra deepwater exploration demand will longer term be supported by the thesis that deepwater drilling is a viable source of new supply. Large discoveries made in the lower Tertiary in the Gulf of Mexico, Brazil and Angola similarly confirmed new discoveries in the sub salt regions and substantial discoveries were also made in the emerging areas of India, South East Asia and West Africa. This unprecedented demand supported a massive new construction phase where more than 80 newbuilding drill ships and semi submersible drilling rigs were ordered in various shipyards around the world.

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Early in the fourth quarter of 2008, the ultra-deepwater market began to show signs of slowing, with less bid and general inquiry activity. The near-term market conditions have been adversely impacted by depressed commodity prices, the ongoing financial turmoil and economic recession. New fixtures have been relatively few. However, day rates in the ultra-deepwater market remain relatively robust, although clearly lower than the highs that existed in the middle of 2008. The economic uncertainty has prompted a number of international and independent energy and petroleum operators to postpone some near term activity and or delay making commitments on forward start contracts. The national oil companies, in contrast, remain active and have appeared to see the current economic downturn as an opportune period to lock up drilling capacity, especially near term capacity. The financial turmoil will also impact the supply of newbuild rig capacity. During the period from the fourth quarter of 2009 to mid March 2010, we believe a total of two newbuilding contracts have been cancelled in the ultra deepwater market. We expect this trend to continue as many of the new entrants may struggle to secure the necessary financing for their newbuild programs.

Longer-term, we believe the fundamentals are strong, growth in demand will likely return once the economic woes recede and the supply of oil and gas will remain constrained, with deepwater basins being the primary source of incremental supply.

In October 2009, the Leiv Eiriksson, one of our two drilling rigs, commenced a three-year contract with Petroleo Brasileiro S.A. for exploration drilling in the Black Sea at a day-rate, maximum of $583,000 including an 8% bonus and assuming 100% utilization, expiring in October 2012, which we refer to as the Petroleo Brasileiro contract.

In October 2008, our other drilling rig, the Eirik Raude, commenced a three-year contract with Tullow Oil PLC for development drilling in offshore Ghana expiring in October 2011, which we refer to as the Tullow Oil contract. Tullow Oil did not exercise an option that expired March 31, 2009 to extend the contract for an additional one or two years. As of December 31, 2009, the average day-rate, assuming 100% utilization, was $639,000.

Competition

Our competition in the contract drilling industry ranges from large multinational companies to smaller, locally-owned companies. We believe we are competitive in terms of safety, pricing, performance, equipment, availability of equipment to meet customer needs and availability of experienced, skilled personnel. However, industry-wide shortages of supplies, services, skilled personnel and equipment necessary to conduct our business can occur. Competition for offshore drilling rigs and drillships is usually on a global basis, as these drilling rigs and drillships are highly mobile and may be moved, at a cost that may sometimes be substantial, from one region to another in response to customers’ drilling programs and demand.

Customers

Our drilling customers generally fall within three categories: national oil companies, large integrated major oil companies and medium to smaller independent exploration and production companies. The customers that have contracted our rigs are predominantly the large integrated major oil companies. During 2009, our contract with Customer A accounted for 38% of our total drilling revenues, and our contract with Customer B accounted for 62% of our total drilling revenues.

Management of Our Offshore Drilling Operations, Including Crewing and Employees

Our subsidiary, Ocean Rig, directly manages its two drill rigs, the Eirik Raude and the Leiv Eiriksson. At year end 2009, the Ocean Rig group had 432 employees, compared to 401 at year end 2008, with 360 employees directly employed by Ocean Rig and the balance of 72 short-term substitute employees and employees representing permanent crew engaged through agencies. The increase in the number of employees is due to the build up of the Drillship project team in South Korea and more local employees in Ghana. 144 persons are employed on Eirik Raude and 154 persons on Leiv Eiriksson. Ocean Rig also has a Crew Resource Team serving both rigs with 32 employees. 88 employees are shore based support and management positions. 47 employees are based at Forus, Norway and London, UK and a total of 41 employees are located at Ocean Rig’s shore and yard bases in Ankara, Turkey, Geoje, South Korea and Accra, Ghana.

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The supervision of the construction of our two newbuilding drillships identified as Hulls 1865 and 1866 is performed by our subsidiary Ocean Rig AS pursuant to separate management agreements.

On August 1, 2008, the owning companies of the two newbuilding drillships identified as Hulls 1837 and 1838, which we subsequently acquired, each entered into a separate management agreement with Ocean Rig AS for the supervision of the construction of these drillships on the same terms as previous agreements with Ocean Rig AS. We have entered into a management agreement with Cardiff for supervisory services in connection with the newbuilding drillships, Hull 1837 and Hull 1838.

Under the terms and conditions of these agreements, Ocean Rig AS, among other things, is responsible for (i) assisting in construction contract technical negotiations, (ii) securing contracts for the future employment the drillships, and (iii) providing commercial, technical and operational management for the drillships.

Pursuant to each of these agreements, Ocean Rig AS is entitled to: (i) a fee of $250 per day until steel cutting; (ii) a fee of $2,500 per day from the date of steel cutting until the date of delivery of the applicable drillship to its owner; and (iii) $8,000 per day thereafter. The management fees are subject to an increase based on the U.S. Consumer Price Index for the preceding 12 months. Ocean Rig AS is also entitled to a commission fee equal to 0.75% of gross hire and charter hire for contracts or charter parties entered into during the term of the management agreement, payable on the date that the gross or charter hire money is collected.

The agreements each terminate on December 31, 2020, unless earlier terminated by Ocean Rig AS for non-payment within fifteen working days of request.

Various subsidiaries of Ocean Rig UDW directly manage the Eirik Raude and the Leiv Eiriksson.

Insurance for Our Offshore Drilling Rigs

We maintain insurance for our drilling units in accordance with industry standards. Our insurance is intended to cover normal risks in our current operations, including insurance against property damage, loss of hire, war risk and third-party liability, including pollution liability.

We have obtained insurance for the full assessed market value of our drilling units, as assessed by rig brokers. Our insurance provides for premium adjustments based on claims and is subject to deductibles and aggregate recovery limits. In the case of pollution liabilities, our deductible is $10,000 per event and in the case of other hull and machinery claims, our deductible is $1.5 million per event. Our insurance coverage may not protect fully against losses resulting from a required cessation of rig operations for environmental or other reasons.

We also have loss of hire insurance which becomes effective after 45 days of off-hire and coverage extends for approximately one year.

The principal risks which may not be insurable are various environmental liabilities and liabilities resulting from reservoir damage caused by our negligence. In addition, insurance may not be available to us at all or on terms acceptable to us, and there is no guarantee that even if we are insured, our policy will be adequate to cover our loss or liability in all cases.

Environmental and Other Regulations in the Drybulk Shipping Industry

Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the

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countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.

A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States Coast Guard, harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of our vessels.

We believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations are frequently changed and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability.

International Maritime Organization

The IMO, the United Nations agency for maritime safety and the prevention of pollution by ships has adopted the International Convention for the Prevention of Marine Pollution, 1973, as modified by the related Protocol of 1978 relating thereto, which has been updated through various amendments, or the MARPOL Convention. The MARPOL Convention establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms. The IMO adopted regulations that set forth pollution prevention requirements applicable to drybulk carriers. These regulations have been adopted by over 150 nations, including many of the jurisdictions in which our vessels operate.

In September 1997, the IMO adopted Annex VI to the MARPOL Convention, Regulations for the Prevention of Pollution from Ships, to address air pollution from ships. Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits deliberate emissions of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks, and the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. We believe that all our vessels are currently compliant in all material respects with these regulations. In October 2008, the IMO adopted amendments to Annex VI regarding nitrogen oxide and sulfur oxide emissions standards which will enter into force on July 1, 2010. The amended Annex VI would reduce air pollution from vessels by, among other things, (i) implementing a progressive reduction of sulfur oxide emissions from ships, with the global sulfur cap reduced initially to 3.50% (from the current cap of 4.50%), effective from January 1, 2012, then progressively to 0.50%, effective from January 1, 2020, subject to a feasibility review to be completed no later than 2018; and (ii) establishing new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation. Additionally, more stringent emission standards could apply in coastal areas designated as Emission Control Areas, such as the United States and Canadian coastal areas recently designated by the IMO’s Marine Environment Protection Committee. U.S. air emissions standards are now equivalent to these amended Annex VI requirements, and once these amendments become effective, we may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.

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Safety Management System Requirements

IMO also adopted the International Convention for the Safety of Life at Sea, or SOLAS, and the International Convention on Load Lines, or the LL Convention, which impose a variety of standards that regulate the design and operational features of ships. The IMO periodically revises the SOLAS and LL Convention standards. We believe that all our vessels are in substantial compliance with SOLAS and LL Convention standards.

Under Chapter IX of SOLAS, the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, our operations are also subject to environmental standards and requirements contained in the ISM Code promulgated by the IMO. The ISM Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that we and our technical manager have developed for compliance with the ISM Code. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. As of the date of this filing, each of our vessels is ISM Code-certified.

The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We will obtain documents of compliance for our offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance, or the DOC, and safety management certificate, or the SMC, are renewed every five years but the DOC is subject to audit verification annually and the SMC at least every 2.5 years.

Pollution Control and Liability Requirements

The IMO has negotiated international conventions that impose liability for oil pollution in international waters and the territorial waters of the signatory to such conventions. For example, the IMO adopted an International Convention for the Control and Management of Ships’ Ballast Water and Sediments, or the BWM Convention, in February 2004. The BWM Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements (beginning in 2009), to be replaced in time with mandatory concentration limits. The BWM Convention will not become effective until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world’s merchant shipping. The convention has not yet entered into force because a sufficient number of states has failed to adopt it.

Although the United States is not a party to these conventions, many countries have ratified and follow the liability plan adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended in 2000, or the CLC. Under this convention and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain defenses. The limits on liability outlined in the 1992 Protocol use the International Monetary Fund currency unit of Special Drawing Rights, or SDR. Under an amendment to the 1992 Protocol that became effective on November 1, 2003, for vessels between 5,000 and 140,000 gross tons (a unit of measurement for the total enclosed spaces within a vessel), liability is limited to approximately $6.85 million (4.51 million SDR) plus $959 (631 SDR) for each additional gross ton over 5,000. For vessels of over 140,000 gross tons, liability is limited to $136.43 million (89.77 million SDR). As the convention calculates liability in terms of a basket of currencies, these figures are based on currency exchange rates of 0.658729 SDR per U.S. dollar on April 5, 2010. The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner’s actual fault and under the 1992 Protocol where the spill is caused by the shipowner’s intentional or reckless conduct. Vessels trading with states that are parties to these conventions must provide evidence of insurance covering the liability of the owner. In jurisdictions where the CLC has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that of the convention. We believe that our protection and indemnity insurance will cover the liability under the plan adopted by the IMO.

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In March 2006, the IMO amended Annex I to MARPOL, including a new regulation relating to oil fuel tank protection, which became effective August 1, 2007. The new regulation will apply to various ships delivered on or after August 1, 2010. It includes requirements for the protected location of the fuel tanks, performance standards for accidental oil fuel outflow, a tank capacity limit and certain other maintenance, inspection and engineering standards.

The IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability on shipowners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention, which became effective on November 21, 2008, requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in a vessel’s bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.

IMO regulations also require owners and operators of vessels to adopt Ship Oil Pollution Emergency Plans. Periodic training and drills for response personnel and for vessels and their crews are required.

Compliance Enforcement

The flag state, as defined by the United Nations Convention on Law of the Sea, has overall responsibility for the implementation and enforcement of international maritime regulations for all ships granted the right to fly its flag. The “Shipping Industry Guidelines on Flag State Performance” evaluates flag states based on factors such as sufficiency of infrastructure, ratification of international maritime treaties, implementation and enforcement of international maritime regulations, supervision of surveys, casualty investigations and participation at IMO meetings. Our vessels are flagged in Malta, except for two vessels which are flagged in Antigua and Barbuda. Malta flagged vessels have historically received a good assessment in the shipping industry. We recognize the importance of a credible flag state and do not intend to use flags of convenience or flag states with poor performance indicators.

Noncompliance with the ISM Code or other IMO regulations may subject the shipowner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The U.S. Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code by the applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively. As of the date of this report, each of our vessels is ISM Code certified. However, there can be no assurance that such certificates will be maintained in the future.

The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.

The U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act

The U.S. Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States’ territorial sea and its 200 nautical mile exclusive economic zone. The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, whether on land or at sea. Both OPA and CERCLA impact our operations.

Under OPA, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include:

• natural resources damage and the costs of assessment thereof;

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• real and personal property damage;

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

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

• net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards; and

• loss of subsistence use of natural resources.

Effective July 31, 2009, the U.S. Coast Guard adjusted the limits of OPA liability for non-tank vessels to the greater of $1,000 per gross ton or $0.85 million per non-tank (e.g. drybulk) vessel that is over 3,000 gross tons (subject to periodic adjustment for inflation). CERCLA, which applies to owners and operators of vessels, contains a similar liability regime and provides for cleanup, removal and natural resource damages. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $0.5 million for any other vessel. These OPA and CERCLA limits of liability do not apply if an incident was directly caused by violation of applicable U.S. federal safety, construction or operating regulations or by a responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.

OPA and the U.S. Coast Guard also require owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet the limit of their potential liability under OPA and CERCLA. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, self-insurance or a guaranty. We plan to comply with the U.S. Coast Guard’s financial responsibility regulations by providing a certificate of responsibility evidencing sufficient self-insurance.

We currently maintain pollution liability coverage insurance in the amount of $625 million per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage it could have an adverse effect on our business and results of operation.

OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining vessels owners’ responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call. We believe that we are in substantial compliance with all applicable existing state requirements. In addition, we intend to comply with all future applicable state regulations in the ports where our vessels call.

Other Environmental Initiatives

The U.S. Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. In addition, most U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law.

The U.S. Environmental Protection Agency, or the EPA, regulates the discharge of ballast water and other substances in U.S. waters under the CWA. Effective February 6, 2009, EPA regulations require vessels 79 feet in length or longer (other than commercial fishing and recreational vessels) to comply with a Vessel General Permit authorizing ballast water discharges and other discharges incidental to the operation of vessels. The Vessel General Permit imposes technology and water-quality based effluent limits for certain types of discharges and establishes specific inspection, monitoring, recordkeeping and reporting requirements to ensure the effluent limits are met. U.S. Coast Guard regulations adopted under the U.S. National Invasive Species Act, or NISA, also impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering or operating in U.S.

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waters, and the Coast Guard recently proposed new ballast water management standards and practices, including limits regarding ballast water releases. Compliance with the EPA and the U.S. Coast Guard regulations could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, and/or otherwise restrict our vessels from entering U.S. waters.

The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our vessels that operate in such port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these requirements. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. As indicated above, our vessels operating in covered port areas are already equipped with vapor recovery systems that satisfy these existing requirements.

European Union Regulations

In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims.

Greenhouse Gas Regulation

In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change, or UNFCCC, which we refer to as the Kyoto Protocol, entered into force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programs to reduce emissions of certain gases, generally referred to as greenhouse gases, which are suspected of contributing to global warming. Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol. However, international negotiations are continuing with respect to a successor to the Kyoto Protocol, which sets emission reduction targets through 2012, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the United States and China, signed the Copenhagen Accord, which includes a non-binding commitment to reduce greenhouse gas emissions. The European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from vessels, if such emissions are not regulated through the IMO or the UNFCCC by December 31, 2010. In the United States, the EPA has issued a final finding that greenhouse gases threaten public health and safety, and has proposed regulations governing the emission of greenhouse gases from motor vehicles and stationary sources. The EPA may decide in the future to regulate greenhouse gas emissions from ships and has already been petitioned by the California Attorney General to regulate greenhouse gas emissions from ocean-going vessels. Other federal and state regulations relating to the control of greenhouse gas emissions may follow, including the climate change initiatives that are being considered in the U.S. Congress. In addition, the IMO is evaluating various mandatory measures to reduce greenhouse gas emissions from international shipping, including market-based instruments. Any passage of climate control legislation or other regulatory initiatives by the EU, U.S., IMO or other countries where we operate that restrict emissions of greenhouse gases could require us to make significant financial expenditures that we cannot predict with certainty at this time.

Environmental and Other Regulations in the Offshore Drilling Industry

Our operations in the offshore drilling sector include activities that are subject to numerous international, federal, state and local laws and regulations, including MARPOL, OPA and CERCLA, each of which is discussed above, and the U.S. Outer Continental Shelf Lands Act. These laws govern the discharge of materials into the environment or otherwise relate to environmental protection.

For example, the IMO adopted MARPOL and Annex VI to MARPOL to regulate the discharge of harmful air emissions from ships, which include rigs and drillships. Rigs and drillships must comply with MARPOL limits on sulfur oxide and nitrogen oxide emissions, chlorofluorocarbons, and the discharge of other air pollutants, except that the MARPOL limits do not apply to emissions that are directly related to drilling, production, or processing activities. Our drilling units are subject not only to MARPOL regulation of air emissions, but also to the Bunker Convention’s strict liability for pollution damage caused by discharges of bunker fuel in ratifying states. We believe that all of our drill units are currently compliant in all material respects with these regulations. As described above, in October 2008, MEPC adopted amendments to the Annex VI regulations that require a progressive reduction of sulfur oxide levels in heavy bunker fuels and create more stringent nitrogen oxide emissions standards for marine engines. We may incur costs to comply with these revised standards.

Furthermore, any drilling units we operate in the waters of the U.S., including the U.S. territorial sea and the 200 nautical mile exclusive economic zone around the U.S., would have to comply with OPA and CERCLA regulations, as described above, that impose liability (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges of oil or other hazardous substances, other than discharges related to drilling.

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Numerous governmental agencies issue such regulations to implement and enforce the laws of the applicable jurisdiction, which often involve lengthy permitting procedures, impose difficult and costly compliance measures particularly in ecologically sensitive areas, and subject operators to substantial administrative, civil and criminal penalties or injunctive relief for failure to comply. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent and costly compliance could adversely affect our consolidated financial statements. While we believe that we are in substantial compliance with the current laws and regulations, there is no assurance that compliance can be maintained in the future.

Implementation of new environmental laws or regulations that may apply to ultra-deepwater drilling units may subject us to increased costs or limit the operational capabilities of our drilling units and could materially and adversely affect our operations and financial condition. See “Risk Factors—Governmental laws and regulations, including environmental laws and regulations, may add to our costs or limit our drilling activity”.

In addition to the MARPOL, OPA, and CERCLA requirements described above, our international operations in the offshore drilling segment are subject to various laws and regulations in countries in which we operate, including laws and regulations relating to the importation of and operation of drilling units and equipment, currency conversions and repatriation, oil and natural gas exploration and development, environmental protection, taxation of offshore earnings and earnings of expatriate personnel, the use of local employees and suppliers by foreign contractors and duties on the importation and exportation of drilling units and other equipment. New environmental or safety laws and regulations could be enacted, which could adversely affect our ability to operate in certain jurisdictions. Governments in some foreign countries have become increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration for oil and natural gas and other aspects of the oil and natural gas industries in their countries. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work done by major oil and natural gas companies and may continue to do so. Operations in less developed countries can be subject to legal systems that are not as mature or predictable as those in more developed countries, which can lead to greater uncertainty in legal matters and proceedings.

Vessel Security Regulations

Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the U.S. Maritime Transportation Security Act of 2002, or the MTSA came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new chapter became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created International Ship and Port Facility Security Code, or the ISPS Code. The ISPS Code is designed to protect ports and international shipping against terrorism. After July 1, 2004, to trade internationally, a vessel must attain an International Ship Security Certificate from a recognized security organization approved by the vessel’s flag state. Among the various requirements are:

• on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship’s identity, position, course, speed and navigational status;

• on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore;

• the development of a ship security plan;

• ship identification number to be permanently marked on a vessel’s hull;

• a continuous synopsis record kept onboard showing a vessel’s history including the name of the ship and of the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship’s identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and

• compliance with flag state security certification requirements, which are reviewed every five years and are subject to intermediate verification every 2.5 years.

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The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt from MTSA vessel security measures non-U.S. vessels that have on board, as of July 1, 2004, a valid International Ship Security Certificate attesting to the vessel’s compliance with SOLAS security requirements and the ISPS Code. Our managers intend to implement the various security measures addressed by MTSA, SOLAS and the ISPS Code, and we intend that our fleet will comply with applicable security requirements. We have implemented the various security measures addressed by the MTSA, SOLAS and the ISPS Code.

Inspection by Classification Societies

Every oceangoing vessel must be “classed” by a classification society. The classification society certifies that the vessel is “in class,” signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel’s country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.

The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the country concerned.

For maintenance of the class certification, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classed are required to be performed as follows:

Annual Surveys. For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant and where applicable for special equipment classed, at intervals of 12 months from the date of commencement of the class period indicated in the certificate.

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

Class Renewal Surveys. Class renewal surveys, also known as special surveys, are carried out for the ship’s hull, machinery, including the electrical plant, and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a shipowner has the option of arranging with the classification society for the vessel’s hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. Upon a shipowner’s request, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal.

All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years. Vessels under five years of age can waive drydocking in order to increase available days and decrease capital expenditures, provided the vessel is inspected underwater.

Most vessels are also drydocked every 30 to 36 months for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a “recommendation” which must be rectified by the shipowner within prescribed time limits.

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Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as “in class” by a classification society which is a member of the International Association of Classification Societies. All our vessels are certified as being “in class” by all the major Classification Societies (e.g., American Bureau of Shipping, Lloyd’s Register of Shipping). All new and secondhand vessels that we purchase must be certified prior to their delivery under our standard purchase contracts and memorandum of agreement. If the vessel is not certified on the date of closing, we have no obligation to take delivery of the vessel.

Class Surveys — drilling rigs. Class renewal surveys, also known as special surveys or class work, are carried out for the rig’s hull, machinery, drilling equipment, and for any special equipment classed, at the intervals indicated by the character of classification, normally every five years. At the special survey the rig is thoroughly examined. The classification society may grant a grace period for completion of the entire or parts of the special survey.

Substantial amounts of money have to be spent for renewals and repairs to pass a special survey, as several spares and components have a defined life-time of 5-15 years. This is accelerated if the rig experiences excessive wear and tear.

All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years.

Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as “in class” by a classification society which is a member of the International Association of Classification Societies. Both our drilling rigs are certified as being “in class” by De Norske Veritas (DNV). The Leiv Eiriksson completed the 5-year class in 2006 and the Eirik Raude in 2007.

Risk of Loss and Liability Insurance

The operation of any drybulk vessel includes risks such as mechanical failure, hull damage, collision, property loss and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental incidents, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon owners, operators and demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and operators trading in the United States market.

We maintain hull and machinery insurance, war risks insurance, protection and indemnity cover, and freight, demurrage and defense cover for our fleet in amounts that we believe to be prudent to cover normal risks in our operations. However, we may not be able to achieve or maintain this level of coverage throughout a vessel’s useful life. Furthermore, while we believe that the insurance coverage that we will obtain is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.

Hull & Machinery and War Risks Insurance

We maintain marine hull and machinery and war risks insurance, which includes the risk of actual or constructive total loss, for all of our vessels. Our vessels are each covered up to at least fair market value with deductibles of $100,000—$150,000 per vessel per incident. We also maintain increased value coverage for most of our vessels. Under this increased value coverage, in the event of total loss of a vessel, we will be able to recover the sum insured under the increased value policy in addition to the sum insured under the hull and machinery policy. Increased value insurance also covers excess liabilities which are not recoverable under our hull and machinery policy by reason of under insurance.

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Protection and Indemnity Insurance

Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, which insure liabilities to third parties in connection with our shipping activities. This includes third-party liability and other related expenses resulting from the injury or death of crew, passengers and other third parties, the loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal. Our P&I coverage is subject to and in accordance with the rules of the P&I Association in which the vessel is entered. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or “clubs.” Our coverage is limited to approximately $4.25 billion, except for pollution which is limited to $1 billion and passenger and crew which is limited to $3 billion.

Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The fourteen P&I Associations that comprise the International Group insure approximately 90% of the world’s commercial tonnage and have entered into a pooling agreement to reinsure each association’s liabilities. Each P&I Association has capped its exposure to this pooling agreement at $4.25 billion. As a member of a P&I Association which is a member of the International Group, we are subject to calls payable to the associations based on the group’s claim records as well as the claim records of all other members of the individual associations and members of the pool of P&I Associations comprising the International Group.

Permits and Authorizations

We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required depend upon several factors, including the commodity transported, the waters in which the vessel operates, the nationality of the vessel’s crew and the age of a vessel. We have been able to obtain all permits, licenses and certificates currently required to permit our vessels to operate. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of us doing business.

C. Organizational Structure

As of December 31, 2009, the Company is the sole owner of all of the outstanding shares of the Company’s subsidiaries, as listed on Exhibit 8.1 to this document.

D. Property, Plant and Equipment

We do not own any real property. We lease office space in Athens, Greece from our Chief Executive Officer. Through our subsidiaries, we lease office space in Nicosia, Cyprus; Stavanger, Norway; London, UK; Taccoradi, Ghana and Accra, Ghana. Our interests in the drybulk vessels and drilling units in our fleet are our only material properties. See “Our Fleet” in this section.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

A. Operating Results

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical consolidated financial statements and accompanying notes included elsewhere in this report. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in the section entitled “Risk Factors” and elsewhere in this report.

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Our Drybulk Carrier Segment

Factors Affecting Our Results of Operations – Drybulk Carrier Segment

We charter our drybulk carriers to customers primarily pursuant to time charters. Under our time charters, the charterer typically pays us a fixed daily charter hire rate and bears all voyage expenses, including the cost of bunkers (fuel oil) and port and canal charges. We remain responsible for paying the chartered vessel’s operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, and we also pay commissions to one or more unaffiliated ship brokers and to in-house brokers associated with the charterer for the arrangement of the relevant charter. Although the vessels in our fleet are primarily employed on short-term time charters ranging from two to twelve months, we may employ additional vessels on longer-term time charters in the future. We also charter three of our vessels on bareboat charters. Under a bareboat charter, the vessel is chartered for a stipulated period of time which gives the charterer possession and control of the vessel, including the right to appoint the master and the crew. Under bareboat charters all voyage costs are paid by the Company’s customers.

We believe that the important measures for analyzing trends in the results of our operations consist of the following:

• Calendar days. We define calendar days as the total number of days in a period during which each vessel in our fleet was in our possession including off-hire days associated with major repairs, drydockings or special or intermediate surveys. Calendar days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during that period.

• Voyage days. We define voyage days as the total number of days in a period during which each vessel in our fleet was in our possession net of off-hire days associated with major repairs, drydockings or special or intermediate surveys. The shipping industry uses voyage days (also referred to as available days) to measure the number of days in a period during which vessels actually generate revenues.

• Fleet utilization. We calculate fleet utilization by dividing the number of our voyage days during a period by the number of our calendar days during that period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons such as scheduled repairs, vessel upgrades, drydockings or special or intermediate surveys.

• Spot charter rates. Spot charter rates are volatile and fluctuate on a seasonal and year to year basis. Fluctuations are caused by imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes.

• TCE rates. We define TCE rates as our voyage and time charter revenues less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. TCE rate, a non-GAAP measure, provides additional meaningful information in conjunction with revenues from our drybulk carriers, the most directly comparable GAAP measure, because it assists Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. TCE rate is also a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per day amounts while charter hire rates for vessels on time charters generally are expressed in such amounts.

The following table reflects our voyage days, calendar days, fleet utilization and TCE rates for our drybulk carrier segment for the periods indicated.

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(Dollars in thousands except

Average number of vessels)

	Year Ended December 31,
	2005		2006		2007		2008		2009
Average number of vessels	21.6		29.76		33.67		38.56		38.12
Total voyage days for fleet	7,710		10,606		12,130		13,896		13,660
Total calendar days for fleet	7,866		10,859		12,288		14,114		13,914
Fleet Utilization	98.00	%	97.70	%	98.71	%	98.45	%	98.17	%
Time charter equivalent	28,446		21,918		45,417		58,155		30,425

Voyage Revenues

Our voyage revenues are driven primarily by the number of vessels in our fleet, the number of voyage days during which our vessels generate revenues and the amount of daily charterhire that our vessels earn under charters, which, in turn, are affected by a number of factors, including our decisions relating to vessel acquisitions and disposals, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in drydock undergoing repairs, maintenance and upgrade work, the age, condition and specifications of our vessels, levels of supply and demand in the drybulk transportation market and other factors affecting spot market charter rates for drybulk carriers.

Vessels operating on period time charters provide more predictable cash flows, but can yield lower profit margins than vessels operating in the short-term, or spot, charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market generate revenues that are less predictable but may enable us to capture increased profit margins during periods of improvements in charter rates although we are exposed to the risk of declining charter rates, which may have a materially adverse impact on our financial performance. If we employ vessels on period time charters, future spot market rates may be higher or lower than the rates at which we have employed our vessels on period time charters.

In 2009, we had one of our vessels in the Baumarine pool, which remained in the pool as of December 31, 2009. We are paid a percentage of revenues generated by the pool calculated in accordance with a “pool point formula,” which is determined by points awarded to each vessel based on the vessel’s age, dwt, speed, fuel consumption and certain other factors. For example, a younger vessel with higher carrying capacity and greater fuel efficiency would earn higher pool points than an older vessel with lower carrying capacity and lesser fuel efficiency. Revenues are paid every 15 days in arrears based on the points earned by each vessel. We believe that by placing our vessels in a pool of similar vessels, we benefit from certain economies of scale available to the pool relating to negotiations with major charterers and flexibility in positioning vessels to obtain maximum utilization.

Revenue from these pooling arrangements is accounted for on the accrual basis and is recognized when the collectability has been reasonably assured. Revenue from the pooling arrangements for the years ended December 31, 2007, 2008 and 2009 accounted for 12%, 6% and 1% of our voyage revenues, respectively.

Voyage Expenses and Voyage Expenses – Related Party

Voyage expenses and voyage expenses—related party primarily consists of commissions paid.

Vessel Operating Expenses

Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Our vessel operating expenses, which generally represent fixed costs, have historically increased as a result of the increase in the size of our fleet. Other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for insurance, may also cause these expenses to increase.

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Depreciation

We depreciate our vessels on a straight-line basis over their estimated useful lives determined to be 25 years from the date of their initial delivery from the shipyard. Depreciation is based on cost less the estimated residual value.

Management Fees – Related Party

We outsource all of our technical and commercial functions relating to the operation and employment of our drybulk carrier vessels to Cardiff pursuant to new management agreements effective July 1, 2008, with an initial term of five years that will automatically be extended to successive five year terms. In the case of a vessel having been sold, notice to terminate the relevant management agreement is not effective until 90 days following the date of the protocol of delivery, unless otherwise mutually agreed in writing.

General and Administrative Expenses

Our general and administrative expenses mainly include executive compensation and the fees paid to Fabiana, a related party entity incorporated in the Marshall Islands. Fabiana provides the services of the individuals who serve in the position of Chief Executive Officer. Fabiana is beneficially owned by our Chief Executive Officer.

Interest and Finance Costs

We have historically incurred interest expense and financing costs in connection with vessel-specific debt of our subsidiaries. We used a portion of the proceeds of our initial public offering in February 2005 to repay all of our then-outstanding debt. We used a portion of the proceeds of our controlled equity offering through Cantor Fitzgerald as sales agent in 2006, 2007 and 2008 as well as a portion of the proceeds of our at the market offering through Merrill Lynch & Co. as sales agent in 2009 to repay existing indebtedness. We have incurred financing costs and we also expect to incur interest expenses under our credit facilities and convertible notes facility in connection with debt incurred to finance future acquisitions. However, we intend to limit the amount of these expenses and costs by repaying our outstanding indebtedness from time to time with the net proceeds of future equity issuances.

Inflation

Inflation has not had a material effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, administrative and financing costs.

Lack of Historical Operating Data for Vessels Before Their Acquisition

Although vessels are generally acquired free of charter, we have acquired (and may in the future acquire) some vessels with time charters. Where a vessel has been under a voyage charter, the vessel is usually delivered to the buyer free of charter. It is rare in the shipping industry for the last charterer of the vessel in the hands of the seller to continue as the first charterer of the vessel in the hands of the buyer. In most cases, when a vessel is under time charter and the buyer wishes to assume that charter, the vessel cannot be acquired without the charterer’s consent and the buyer entering into a separate direct agreement (called a “novation agreement”) with the charterer to assume the charter. The purchase of a vessel itself does not transfer the charter because it is a separate service agreement between the vessel owner and the charterer.

Where we identify any intangible assets or liabilities associated with the acquisition of a vessel, we record all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. Where we have assumed an existing charter obligation or entered into a time charter with the existing charterer in connection with the purchase of a vessel at charter rates that are less than market charter rates, we record a liability, based on the difference between the assumed charter rate and the market charter rate for an equivalent vessel to the extent the vessel’s capitalized cost would not exceed its fair value without a time charter. Conversely, where we assume an existing charter obligation or enter into a time charter with the existing charterer in connection with the purchase of a vessel at charter rates that

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are above market charter rates, we record an asset, based on the difference between the market charter rate for an equivalent vessel and the contracted charter rate. This determination is made at the time the vessel is delivered to us, and such assets and liabilities are amortized to revenue over the remaining period of the charter.

During 2007, the Company acquired three drybulk carrier vessels for $193.1 million which were under existing bareboat time charter contracts which the Company agreed to assume through arrangements with the respective charterers. The Company upon delivery of the above vessels evaluated the charter contracts assumed and recognized a liability of $38.7 million representing the fair value of below market acquired time charters, which is an equivalent of a present value of the excess of market rates of equivalent time charters prevailing at the time the foregoing vessels were delivered over existing rates of time charters assumed.

During 2008 and 2009, the Company did not acquire any vessels which were under existing bareboat or time charter contracts.

When we purchase a vessel and assume or renegotiate a related time charter, we must take the following steps before the vessel will be ready to commence operations:

• obtain the charterer’s consent to us as the new owner;

• obtain the charterer’s consent to a new technical manager;

• in some cases, obtain the charterer’s consent to a new flag for the vessel;

• arrange for a new crew for the vessel, and where the vessel is on charter, in some cases, the crew must be approved by the charterer;

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

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

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

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

• ensure that the new technical manager obtains new certificates for compliance with the safety and vessel security regulations of the flag state.

The following discussion is intended to help you understand how acquisitions of vessels affect our business and results of operations.

Our business is comprised of the following main elements:

• employment and operation of our drybulk vessels;

• drilling rigs; and

• management of the financial, general and administrative elements involved in the conduct of our business and ownership of our drybulk vessels and drilling rigs.

The employment and operation of our vessels require the following main components:

• vessel maintenance and repair;

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• crew selection and training;

• vessel spares and stores supply;

• contingency response planning;

• onboard safety procedures auditing;

• accounting;

• vessel insurance arrangement;

• vessel chartering;

• vessel security training and security response plans (ISPS);

• obtain ISM certification and audit for each vessel within the six months of taking over a vessel;

• vessel hire management;

• vessel surveying; and

• vessel performance monitoring.

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

• management of our financial resources, including banking relationships, i.e., administration of bank loans and bank accounts;

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

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

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

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

• Charter rates and periods of charter hire for our drybulk vessels;

• day rates and duration of drilling contracts;

• utilization of rigs (earnings efficiency);

• levels of drybulk carrier and rig operating expenses;

• depreciation and amortization expenses;

• financing costs; and

• fluctuations in foreign exchange rates.

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Our Offshore Drilling Segment

Factors Affecting Our Results of Operations – Offshore Drilling Segment

We charter our drilling rigs to customers primarily pursuant to long-term drilling contracts. Under the drilling contracts, the customer typically pays us a fixed daily rate, depending on the activity and up-time of the rig. The customer bears all fuel costs and logistics costs related to transport to/from the rig. We remain responsible for paying the rigs operating expenses, including the cost of crewing, catering, insuring, repairing and maintaining the rig, the costs of spares and consumable stores and other miscellaneous expenses.

We believe that the most important measures for analyzing trends in the results of our operations consist of the following:

• Employment Days – We define employment days as the total number of days the drilling vessels are employed on a drilling contract.

• Day rates. We define drilling day rates as the maximum rate in Dollars possible to earn for drilling services for one day, under the drilling contract. Such day rate may be measured by quarter-hour, half-hour or hourly basis, and may be reduced depending on the activity performed according to the drilling contract.

• Earning efficiency on hire. Earning efficiency measures the effective earnings ratio reduced by certain operations paid at reduced rate, non-productive time at zero rate, or off hire without day rates, as a percentage of full earnings rate. Earning efficiency on hire measures the earning efficiency only for the period being on contract, not including off-hire periods.

• Mobilization / demobilization fees: In connection with drilling contracts the Company may receive revenues for preparation and mobilization of equipment and personnel or for capital improvements to the drilling vessels, day rate or fixed price mobilization and demobilization fees. For each contract, the Company determines whether the contract, for accounting purposes, is a multiple element arrangement and, if so, identifies all deliverables (elements). For each element the Company determines how and when to recognize revenue.

• Term contracts: These are contracts where the assignment is to operate the unit for a specified period of time. For these types of contracts, the Company determines whether the arrangement is a multi element arrangement, containing both a lease element and drilling services element.

• Lease accounting: For revenues derived from contracts that contain a lease, the lease elements are recognized to the statement of operations on a straight line basis, taking into consideration the different day rates, utilization and transit between locations that are anticipated to take place in the lease period. The drilling services element of mobilization and contributions from customers is recognized in the period in which the services are rendered. The Company will make a best effort estimate to split the contractual day rate into a lease element and a drilling services element in order to conduct such accounting. Direct incremental expenses of mobilization are deferred and recognized over the estimated duration of the drilling contracts. To the extent that deferred expenses exceed revenue to be recognized, they are expensed as incurred. Capital improvements to the rig are depreciated over the estimated useful lives of the asset. Demobilization fees and expenses are recognized over the demobilization period. Other operating expenses are expensed when incurred.

Revenue from Drilling Contracts

Our drilling revenues are driven primarily by the number of rigs in our fleet, the contractual day rates and the utilization of the rigs. This, in turn, is affected by a number of factors, including our decisions relating to rig acquisitions and disposals, the amount of time that our rigs spend on planned off-hire class work, unplanned off-hire

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maintenance and repair, off-hire upgrade and modification work, the age, condition and specifications of our rigs, levels of supply and demand in the rig market, the price of oil, and other factors affecting the market day rates for drilling rigs.

Rig Operating Expenses

Rig operating expenses include crew wages and related costs, catering, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, shore based costs and other miscellaneous expenses. Our rig operating expenses, which generally represent fixed costs, have historically increased as a result of the business climate in the offshore drilling sector. Specifically, wages and vendor supplied spares, parts and services have experienced a significant price increase over the last two to three years. Other factors beyond our control, some of which may affect the offshore drilling industry in general, including, but not limited to, developments relating to market prices for insurance, may also cause these expenses to increase.

Depreciation

We depreciate our rigs on a straight-line basis over their estimated useful lives. Bare-decks are depreciated over 30 years and other asset parts over 5-15 years. We expense the costs associated with a five year periodic class work.

Management Fees to Related Party

The owning companies of Hulls 1837 and 1838 pay a management fee of $40,000 per month per drillship Hull to Cardiff. The management agreements also provide for: (i) chartering commission of 1.25% on all freight, hire and demurrage revenues; (ii) a commission of 1% on all gross sale proceeds or purchase price paid for drillships; (iii) a commission of 1% on loan financing or refinancing; and (iv) a commission of 2% on insurance premiums.

Management Fees from Related Party

In August 2008, Ocean Rig AS entered into management agreements with the entities that own newbuilding Hulls 1837 and 1838 and with the Company in respect of newbuilding Hulls 1865 and 1866 for both the construction and operations period until the end of 2020. The owner entities cover all designated costs of the manager. In addition, the manager receives in the pre steel-cutting construction period a fee of $250 per day per vessel, increasing to $2,500 after the steel-cutting in the construction period. The fee increases to $8,000 per day in the operations period.

General and Administrative Expenses

Our general and administrative expenses mainly include the costs of our offices, including approximately 47 senior management and employees and related costs.

Interest and Finance Costs

Ocean Rig completed a global refinancing in 2008, replacing secured bank debt and two bond issuances with secured bank debt only. See below under “Current Credit Facilities – $1.04 billion revolving credit and term loan facility, dated September 17, 2008.” Historically, we have incurred interest expense and financing costs in connection with debt covering the fleet and not with rig-specific debt.

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Results of Operations

Selected Financial Data

Following our acquisition of Ocean Rig ASA, or Ocean Rig, and entrance into the drillship construction contracts, we have two reportable segments, the Drybulk Carrier segment and the offshore Drilling Rig segment. We commenced consolidation of Ocean Rig on May 15, 2008.

The following table reflects our voyage days, calendar days, fleet utilization and TCE rates for our drybulk vessels for the periods indicated.

Drybulk Carrier segment

	2007		2008		2009
Average number of vessels		33.67		38.56		38.12
Total voyage days for fleet		12,130		13,896		13,660
Total calendar days for fleet		12,288		14,114		13,914
Fleet Utilization		98.71%		98.45%		98.17%
Time charter equivalent	$	45,417	$	58,155	$	30,425

Drilling Rig segment

The following table reflects our day rates and earning efficiencies for the year ended December 31, 2009.

(Day rates in thousands of Dollars, earning efficiency in percent)

	2008	2009
Average day rates	476	572
Average earning efficiency on hire	89%	95%

Please see “Item 3. Key Information—A. Selected Financial Data” for information concerning the calculation of TCE rates.

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Year ended December 31, 2009 compared to the year ended December 31, 2008

	Year ended December 31,
	2008			2009			Change
REVENUES:
Revenues	$	1,080,702		$	819,834		$	(260,868	)	(24.1	)%
EXPENSES:
Voyage expenses		53,172			28,779			(24,393	)	(45.9	)%
Vessels and drilling rigs operating expenses		165,891			201,887			35,996		21.7	%
Depreciation and amortization		157,979			196,309			38,330		24.3	%
Gain on sale of assets, net		(223,022	)		(2,045	)		220,977		99.1	%
Gain on contract cancellation		(9,098	)		(15,270	)		(6,172	)	(67.8	)%
Contract termination fees and forfeiture of vessels deposits		160,000			259,459			99,459		62.2	%
Vessel impairment charge		—			1,578			1,578		100	%
Goodwill impairment charge		700,457			—			(700,457	)	(100	)%
General and administrative expenses		89,358			90,823			1,465		1.6	%
Operating income/(loss)		(14,035	)		58,314			72,349		515.5	%
OTHER INCOME /(EXPENSES):
Interest and finance costs		(113,194	)		(97,599	)		15,595		13.8	%
Interest income		13,085			10,414			(2,671	)	(20.4	)%
Gain/(loss) on interest rate swaps		(207,936	)		23,160			231,096		111.1	%
Other, net		(12,640	)		(6,692	)		5,948		47.1	%
Total other expenses, net		(320,685	)		(70,717	)		249,968		77.9	%
INCOME/(LOSS) BEFORE INCOME TAXES AND EQUITY IN LOSS OF INVESTEE		(334,720	)		(12,403	)		322,317		96.3	%
Income taxes		(2,844	)		(12,797	)		(9,953	)	(350	)%
Equity in loss of investee		(6,893	)		—			6,893		100	%
NET LOSS		(344,457	)		(25,200	)		319,257		92.7	%
Less: Net income attributable to non controlling interests		(16,825	)		(7,178	)		9,647		57.3	%
NET LOSS ATTRIBUTABLE TO DRYSHIPS INC.	$	(361,282	)	$	(32,378	)	$	328,904		91	%

Revenues

Drybulk Carrier segment

Voyage Revenues decreased by $416.9 million, or 48.4%, to $444.4 million for the year ended December 31, 2009, as compared to $861.3 million for the year ended December 31, 2008. The decrease is attributable to the substantially decreased hire rates earned during in 2009 as compared to 2008. TCE (time charter equivalent) decreased from $58,155 in 2008 to $30,425 in 2009.

Drilling Rig segment

Revenues from drilling contracts increased by $156 million, or 71.1%, to $375.4 million for the year ended December 31, 2009, as compared to $219.4 million for the year ended December 31, 2008. The increase is mainly

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due to the 12 months earnings contribution of our drilling rig segment in 2009 compared to a 7.5 month contribution in 2008. The increase is also attributable to a higher contracted day rate for the drilling rig Eirik Raude, as well as increased earnings efficiency for both the Leiv Eiriksson and the Eirik Raude, which is partly offset due to the mobilization of the Leiv Eriksson to the Black Sea.

Voyage expenses

Drybulk Carrier segment

Voyage expenses decreased by $24.4 million, or 45.9%, to $28.8 million for the year ended December 31, 2009, as compared to $53.2 million for the year ended December 31, 2008. The decrease is mainly attributable to the decrease in voyage revenues earned in 2009 compared to 2008.

Drilling Rig segment

The Drilling Rig segment did not incur any voyage expenses during the relevant periods.

Operating expenses

Drybulk Carrier segment

Vessel operating expenses decreased slightly by $4.1million, or 5.1%, to $75.6 million for the year ended December 31, 2009, as compared to $79.7 million for the year ended December 31, 2008. The decrease is mainly attributable to the decreased repairs, stores and spares expenses incurred in 2008 compared to 2009.

Drilling Rig segment

Drilling rig operating expenses increased by $40.1 million, or 46.5%, to $126.3 million for the year ended December 31, 2009, as compared to $86.2 million for the year ended December 31, 2008. The increase was mainly due to the 12 months of expenses in 2009 compared to the 7.5 months in 2008.

Depreciation and amortization expense

Drybulk Carrier segment

Depreciation and Amortization expense for the vessels increased by $7.0 million, or 6.3%, to $117.5 million for the year ended December 31, 2009, as compared to $110.5 million for the year ended December 31, 2008. The increase is due to the depreciation charge for a full year for the fleet in 2009 as opposed to the partial year for 2008 due to the various acquisitions made at higher vessel costs which is slightly offset by the disposal of vessels in 2008.

Drilling Rig segment

Depreciation and Amortization expense for the drilling rigs increased by $31.3 million, or 65.9%, to $78.8 million for the year ended December 31, 2009, as compared to $47.5 million for the year ended December 31, 2008. The increase was mainly due to the increased period of operations of our drilling rigs segment in 2009.

Gain on sale of assets, net

Drybulk Carrier segment

Gain on sale of vessels decreased by $220.6 million, or 98.9%, to $2.4 million for the year ended December 31, 2009, compared to $223 million for the year ended December 31, 2008. During 2009, we disposed of one vessel (MV Paragon) compared to seven vessels (MV Matira, MV Menorca, MV Lanzarote, MV Netadola, MV Waikiki, MV Tonga and MV Solana) for the same period in 2008.

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Drilling Rig segment

The Drilling Rig segment disposed assets and realized a loss of $0.4 million for the year ended December 31, 2009.

Gain on contract cancellation

Drybulk Carrier segment

We recorded a gain on contract cancellation of $15.3 million, which represents the deposits we retained in connection with the cancellation of the sales of the vessels MV La Jolla and MV Toro during the year ended December 31, 2009. For the year ended December 31, 2008 a gain on contract cancellation of $9.1 million, was recorded representing the deposit we retained in connection with the cancellation of the sale of the vessel MV Primera.

Drilling Rig segment

The Drilling Rig segment did not undergo any asset cancellations during the relevant periods.

Contract termination fees and forfeiture of vessel deposits

Drybulk Carrier segment

An amount of $259.5 million was recognized as contract termination fees and forfeiture of vessel deposits during the year ended December 31, 2009, of which $118.7 million is attributable to the transfer of our interests in the owning companies of three Capesize newbuildings to an unrelated party, $49.2 million represents the value of the shares, warrants awarded to related and third parties and George Economou’s deemed shareholders contribution in connection with the cancellation of the acquisition of nine Capesize vessels, $14.1 million is attributable to the cancellation of the memorandum of agreement to acquire a vessel, $44.7 million is attributable to the sale of our interests in the owning company that contracted for the purchase of a newbuilding drybulk carrier and $30.8 million is attributable to the cancellation of the construction of the two newbuildings Drybulk carriers (SS058 and SS059). An amount of $160 million was paid as a loss on contract termination fees and forfeiture of vessel deposits for four Panamax drybulk carriers in 2008.

Drilling Rig segment

The Drilling Rig segment did not incur any such fees.

Vessel impairment charge

An amount of $1.6 million was recognized in 2009, as a result of the impairment testing performed due to the sale of the MV Iguana as the sales price indicated that there were changes in circumstances that suggested the carrying amount of the asset may not be recoverable.

Goodwill impairment

An amount of $700.5 million was recognized in 2008, as a result of the impairment testing performed on goodwill at December 31, 2008 which arose as a result of the acquisition of Ocean Rig during 2008.

General and administrative expenses

Drybulk Carrier segment

General and Administrative expenses for vessels decreased by $2.1 million, or 2.8%, to $72.9 million for the year ended December 31, 2009, as compared to $75.0 million for the year ended December 31, 2008.The decrease is mainly attributable to the decrease in management fees due to commissions for financing services charged in 2008. General and administrative expenses for the year ended December 31, 2009 included cash expenses of $34.8 million and non-cash expenses of $38.1 million.

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Drilling Rig segment

General and Administrative expenses for drilling rigs increased by $3.6 million, or 25%, to $18 million for the year ended December 31, 2009, as compared to $14.4 million for the year ended December 31, 2008. The increase is mainly due to the fact that we consolidated Ocean Rig for 7.5 months in 2008.

Interest and finance costs

Drybulk Carrier segment

Interest and finance costs for vessels decreased by $9.2 million, or 18.5%, to $40.5 million for the year ended December 31, 2009, compared to $49.7 million for the year ended December 31, 2008. This decrease was mainly due to lower average interest rates in 2009, as compared to 2008.

Drilling Rig segment

Interest and Finance Costs for drilling rigs decreased by $6.4 million, or 10.1%, to $57.1 million for the year ended December 31, 2009, compared to $63.5 million for the year ended December 31, 2008. The increase is mainly due to interest expense being borne for 12 months in 2009 as compared to 7.5 months in 2008.

Interest Income

Drybulk Carrier segment

For the Drybulk Carrier segment, interest income decreased by $4.4 million, or 59.5%, to $3.0 million for the year ended December 31, 2009, compared to $7.4 million for the year ended December 31, 2008, due to lower interest rates during 2009.

Drilling Rig segment

For the Drilling Rig segment, interest income amounted to $7.4 million for the year ended December 31, 2009 compared to $5.7 million for the year ended December 31, 2008, due to interest income for 12 months in 2009 compared to 7.5 months in 2008.

Gain/(Loss) On Interest Rate Swaps

Drybulk Carrier segment

For the Drybulk Carrier segment, loss on interest rate swaps decreased by $146.1 million from a loss on the mark-to–market interest rate swaps amounting to $145.0 million for 2008 to a gain of $1.1 million for 2009. The change is attributable to the movement in interest rates during 2009 since the number of contracts remained unchanged in 2008 and 2009. Even though the Company considers these instruments as economic hedges, none of the interest rate swaps for the Drybulk Carrier segment qualify for hedge accounting.

Drilling Rig segment

The Drilling Rig segment realized a gain on interest rate swaps which did not qualify for hedge accounting of $22.1 million during 2009 compared a loss of $62.9 million in 2008.

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Other, net

Drybulk Carrier segment

For the Drybulk Carrier segment, a loss of $8.7 million was realized during 2009 compared to a loss of $0.2 million during 2008. The increase is mainly attributable to the loss on FFA trading, which commenced during 2009, amounting to $10.0 million.

Drilling Rig segment

For the Drilling Rig segment, a gain of $2 million was realized during 2009 compared to a loss of $12.4 million during 2008. The loss in 2008 is mainly attributable to the commission of $9.9 million paid to Cardiff in connection with the acquisition of the remaining shares in Ocean Rig and the loss on the foreign currency contracts of $2.5 million. During 2009 the foreign currency contracts realized a gain of $2 million.

Income taxes

Drybulk Carrier segment

No income taxes were incurred on the international shipping income in the Drybulk Carrier segment for the relevant periods.

Drilling Rig segment

Income taxes increased by $10 million to $12.8 million for the year ended December 31, 2009, compared to $2.8 million for the period from May 15, 2008 to December 31, 2008. These taxes primarily represent taxes for the operations of the Eirik Raude in Ghana.

Equity in Loss of Investees

Equity in loss of investees amounted to $6.9 million in the year ended December 31, 2008. This represents the amount of loss that is attributable to the shareholding of DryShips Inc. prior to obtaining control of Ocean Rig for the period from January 1, 2008 to May 14, 2008. There is no such income/loss for the year ended December 31, 2009.

Non controlling Interest

Net income allocated to non controlling interest amounted to an expense of $16.8 million in the year ended December 31, 2008 and $7.2 million in the year ended December 31, 2009. This represents the amount of consolidated income that is not attributable to Dryships Inc.

Year ended December 31, 2008 compared to the year ended December 31, 2007

Following our acquisition and consolidation of Ocean Rig at May 14, 2008, we have two reportable segments, the Drybulk Carrier segment and the Drilling Rig segment.

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Results of Operations

Year ended December 31, 2008, compared to the year ended December 31, 2007.

	Year ended December 31,
	2007			2008			Change
REVENUES:
Revenues	$	582,561		$	1,080,702		$	498,141		85.5	%
EXPENSES:
Voyage expenses		31,647			53,172			21,525		68.0	%
Vessels and drilling rigs operating expenses		63,225			165,891			102,666		162.4	%
Depreciation and amortization		76,511			157,979			81,468		106.5	%
Gain on sale of vessels		(137,694	)		(223,022	)		(85,328	)	(62.0	)%
Gain on contract cancellation		—			(9,098	)		(9,098	)	(100.0)	%
Contract termination fees and forfeiture of vessels deposits		—			160,000			160,000		100	%
Goodwill impairment charge		—			700,457			700,457		100	%
General and administrative expenses		17,072			89,358			72,286		423.4	%
Operating income/(loss)		531,800			(14,035	)		(545,835	)	(102.6)%
OTHER INCOME /(EXPENSES):
Interest and finance costs		(51,231	)		(113,194	)		(61,963	)	(120.9	)%
Interest income		5,073			13,085			8,012		157.9	%
Gain/(loss) on interest rate swaps		(3,981	)		(207,936	)		(203,955	)	(5,123.2	)%
Other, net		(3,037	)		(12,640	)		(9,603	)	(316.2	)%
Total other expenses, net		(53,176	)		(320,685	)		(267,509	)	503.1	%
INCOME/(LOSS) BEFORE INCOME TAXES AND EQUITY IN LOSS OF INVESTEE		478,624			(334,720	)		(813,344	)	(169.9)%
Income taxes		—			(2,844	)		(2,844	)	(100)%
Equity in loss of investee		(299	)		(6,893	)		(6,594	)	(2,205.4	)%
NET INCOME/ (LOSS)		478,325			(344,457	)		(822,782	)	(172)%
Less: Net income attributable to non controlling interests		—			(16,825	)		(16,825	)	(100)%
NET INCOME/ (LOSS) ATTRIBUTABLE TO DRYSHIPS INC.	$	478,325		$	(361,282	)	$	(839,607	)	(175.5)%

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Revenues

Drybulk Carrier segment

Voyage Revenues increased by $278.7 million, or 47.8%, to $861.3 million for the year ended December 31, 2008, as compared to $582.6 million for the year ended December 31, 2007. The increase is attributable to the substantially increased hire rates we earned over this period as a result of charter rates contracted for during the second quarter of 2008, and the increase in the average number of vessels operated from 33.7 during the year ended December 31, 2007 to 38.6 during the year ended December 31, 2008. Towards the end of the second quarter of 2008 drybulk rates began to steadily decline. In 2008, we had total voyage days of 13,896 compared to 12,130 in 2007. The average fleet time charter equivalent rate increased from $45,417 in 2007 to $58,155 in 2008.

Drilling Rig segment

Revenue from drilling rig contracts amounted to $219.4 million for 2008. We did not earn any revenues from drilling contracts for 2007.

Voyage expenses

Drybulk Carrier segment

Voyage expenses increased by $21.6 million, or 68.4%, to $53.2 million for the year ended December 31, 2008, as compared to $31.6 million for the year ended December 31, 2007. The increase is mainly attributable to the increase in commissions incurred by $18.1 million as a result of increased voyage revenues.

Drilling Rig segment

The Drilling Rig segment did not incur any voyage expenses during the relevant periods.

Vessels and drilling rigs operating expenses

Drybulk Carrier segment

Vessel operating expenses increased by $16.5 million, or 26.1.%, to $79.7 million for the year ended December 31, 2008, as compared to $63.2 million for the year ended December 31, 2007. This increase is primarily attributable to an increase in the number of calendar days from 12,288 in 2007 to 14,114 in 2008. The increase in calendar days during 2008 resulted from the enlargement of our fleet from an average of 33.7 vessels for the year ended December 31, 2007 to 38.6 vessels for the year ended December 31, 2008. Daily vessel operating expenses per vessel increased by $499, or 9.7%, to $5,644 for 2008 compared to $5,145 for 2007. This increase was mainly attributable to increased stores, spares and repairs.

Drilling Rig segment

Drilling rig operating expenses amounted to $86.2 million during the year ended December 31, 2008. Daily rig operating expenses amounted to $181,821 per rig. The Drilling Rig segment did not have any drilling rig operations expenses for 2007.

Depreciation and amortization expense

Drybulk Carrier segment

Depreciation and amortization expenses for the vessels increased by $34 million, or 44.4%, to $110.5 million for the year ended December 31, 2008, as compared to $76.5 million for the year ended December 31, 2007. The increase from the Drybulk Carrier segment is due to the increase in the number of vessels operated from an average of 33.7 vessels for the year ended December 31, 2007 to 38.6 vessels for the year ended December 31, 2008, and the fact that we renewed our fleet with younger and more expensive vessels.

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Drilling Rig segment

Depreciation and amortization expenses for the drilling rigs amounted to $47.5 million for the year ended December 31, 2008. For the year ended December 31, 2007, we did not account for any depreciation and amortization. The depreciation attributable to the Drilling Rig segment reflects the depreciation on the two drilling rigs for the year ended December 31, 2008. Amortization relates to intangible assets attributable to the Drilling Rig segment.

Gain on sale of vessels

Drybulk Carrier segment

Gain on sale of vessels increased by $85.3 million, or 61.9%, to $223 million for the year ended December 31, 2008, compared to $137.7 million for the year ended December 31, 2007. This gain is attributable to the disposal of seven vessels at higher rates during the year ended December 31, 2008, compared to eleven vessels at lower rates during the year ended December 31, 2007.

Drilling Rig segment

The Drilling Rig segment did not undergo any asset sales during 2008.

Gain on contract cancellation

Drybulk Carrier segment

We recorded a gain on contract cancellation of $9.1 million, which represents the deposit we retained in connection with the cancellation of the sale of MV Primera. There were no such gains in 2007.

Drilling Rig segment

The Drilling Rig segment did not undergo any asset cancellations during 2008.

Contract termination fees and forfeiture of vessel deposits

Drybulk Carrier segment

An amount of $160 million was paid as a loss on contract termination fees and forfeiture of vessel deposits for four Panamax drybulk carriers in 2008. There were no such losses for 2007.

Drilling Rig segment

The Drilling Rig segment did not undergo any asset cancellations during 2008.

Goodwill impairment

A charge of $700.5 million was recognized in 2008, as a result of the impairment testing performed on goodwill at December 31, 2008. The goodwill arose as a result of the acquisition of Ocean Rig during 2008. No impairment charge was recorded in 2009.

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General and administrative expenses

Drybulk Carrier segment

General and Administrative expenses for vessels increased by $57.9 million, or 338.6%, to $75.0 million for the year ended December 31, 2008, as compared to $17.1 million for the year ended December 31, 2007. The increase is mainly due to the amortization of non-cash stock based compensation amounting $31.5 million, the increase in management fees pursuant to the new management agreements signed on July 1, 2008 and the increase in the number of fleet calendar days from 12,288 for the year ended December 31, 2007 to 14,114 for the year ended December 31, 2008, due to the growth of the fleet, the significant increase in the exchange rate between the Dollar and the Euro. General and administrative expenses for the year ended December 31, 2008 include cash expenses of $43.5 million and non-cash expenses of $ 31.5 million.

Drilling Rig segment

General and administrative expenses amounted to $14.4 million for the year ended December 31, 2008. There was no such expense for the year ended December 31, 2007.

Interest and finance costs

Drybulk Carrier segment

Interest and finance costs for vessels decreased by $0.9 million, or 1.8%, to $49.7 million for the year ended December 31, 2008, compared to $50.6 million for the year ended December 31, 2007.

Drilling Rig segment

Interest and Finance Costs for drilling rigs increased by $62.8 million, or 8,971.4%, to $63.5 million for the year ended December 31, 2008, compared to $0.7 million for the year ended December 31, 2007. The increase is due to a yearly interest bearing period in 2008 compared to a 0.5 month period in 2007.

Interest income

Drybulk Carrier segment

For the Drybulk Carrier segment, interest income increased by $2.4 million, or 48%, to $7.4 million for the year ended December 31, 2008, compared to $5.0 million for the year ended December 31, 2007, primarily due to increased liquidity and increased interest rates in the first half of 2008.

Drilling Rig segment

For the Drilling Rig segment, interest income amounted to $5.7 million for the year ended December 31, 2008 while interest income for the year ended December 31, 2007 amounted to $0.1 million due to a 0.5 month interest period.

Other, net

Drybulk Carrier segment

For the Drybulk Carrier segment, a loss of $0.2 million was realized during 2008 compared to a gain of $1.0 million during 2007.

Drilling Rig segment

For the Drilling Rig segment a loss of $12.4 million was realized during 2008 compared to a loss of $4.1 million during 2007.

The loss in 2008 is mainly attributable to the commission of $9.9 million paid to Cardiff in connection with the acquisition of 69.6% of the issued and outstanding shares of Ocean Rig.

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Gain/(loss) on interest rate swaps

Drybulk Carrier segment

For the Drybulk Carrier segment, loss on interest rate swaps increased by $141.0 million from a loss on the calculation at interest rate swaps amounting to $4.0 million for 2007 to a loss of $145.0 million for 2008. The change is attributable to the increased notional amount of the 23 swaps that were outstanding in 2008, compared to eight in 2007, and the adverse movement in interest rates during 2008. Even though the Company considers these instruments as economic hedges, none of the interest rate swaps for the Drybulk Carrier segment qualifies for hedge accounting.

Drilling Rig segment

The Drilling Rig segment realized a loss on interest rate swaps which did not qualify for hedge accounting of $62.9 million during 2008. There is no such expense for the year ended December 31, 2007.

Income taxes

Drybulk Carrier segment

We did not incur income taxes on international shipping income in our Drybulk Carrier segment for the relevant periods.

Drilling Rig segment

Income taxes for the year ended December 31, 2008 were $2.8 million. These taxes primarily represent withholdings taxes for the operations of the Erik Raude in Ghana. There was no such amount in 2007.

Equity in Loss of Investee

Equity in loss of investees amounted to $6.9 million in the year ended December 31, 2008. This represents the amount of loss that is attributable to the shareholding of DryShips Inc. prior to obtaining control of Ocean Rig for the period from December 21, 2007 to May 14, 2008.

Non controlling Interest

Non controlling interest amounted to an expense of $16.8 million for the year ended December 31, 2008. This represents the amount of consolidated income that is not attributable to the shareholding of DryShips Inc. There was no such expense for the year ended December 31, 2007.

Critical Accounting Policies

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

Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. On an ongoing basis, we evaluate our estimates, including those related to bad debts, materials and supplies obsolescence, investments, property and equipment, intangible assets and goodwill, income taxes, pensions and share based compensation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have described below what we believe are our most critical accounting policies that involve a high degree of judgment and the methods of their application. For a description of all of the company’s significant accounting policies, see Note 2 to the Company’s consolidated financial statements.

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Convertible Senior Notes: In accordance with Financial Accounting Standards guidance for convertible debt instruments that contain cash settlement option upon conversion at an option of an issuer, the Company determines the carrying amounts of the liability and equity components of its convertible notes issued in November 2009 that contain cash settlement provisions by first determining the carrying amount of the liability component of the convertible notes by measuring the fair value of a similar liability that does not have an associated equity component. The carrying amount of the equity component representing embedded conversion option is then determined by deducting the fair value of the liability component from the total proceeds.

Resulting debt discount is amortized to interest cost using the effective interest method over the period the debt is expected to be outstanding as an additional non-cash interest expense. Transaction costs associated with the instrument are allocated pro-rata between the debt and equity components.

The fair value of the liability component was determined assuming a 12% interest rate, representing assumed rate that the company would have to pay for the comparable debt without the conversion feature. The fair value of the share lending agreement component was determined assuming a 5.5% interest rate representing hypothetical interest rate of equivalent Convertible Senior Notes without the share lending agreement.

Vessels’ Depreciation: We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation. Depreciation begins when the vessel is ready for its intended use, on a straight-line basis over the vessel’s remaining economic useful life, after considering the estimated residual value (vessel’s residual value is equal to the product of its lightweight tonnage and estimated scrap rate). Second hand vessels are depreciated from the date of their acquisition through their remaining estimated useful life. We estimate the useful life of our vessels to be 25 years from the date of initial delivery from the shipyard and the residual value of our vessels to be $120 per lightweight ton. A decrease in the useful life of a dry bulk vessel or in its residual value would have the effect of increasing the annual depreciation charge. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted at the date such regulations become effective.

Impairment of Long-Lived Assets: The Company reviews for impairment long-lived assets held and used whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In this respect, the Company reviews its assets for impairment on a vessel by vessel or drilling rig by drilling rig basis. When the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount, the Company evaluates the asset for impairment loss. The impairment loss is determined by the difference between the carrying amount of the asset and the fair value of the asset.

No impairment indicators were present and therefore no impairment losses were recorded in the year ended December 31, 2007.

As at December 31, 2008 and 2009, as well as at the end of each quarterly reporting period ended during 2009, the Company performed an impairment review of the Company’s long-lived assets due to the global economic downturn, the significant decline in charter rates in the drybulk shipping industry and the outlook of the oil services industry. The Company compared undiscounted cash flows with the carrying values of the Company’s long-lived assets to determine if the assets were impaired. In developing estimates of future cash flows, the Company relied upon assumptions made by management with regard to the Company’s vessels and drilling rigs, including future charter rates, utilization rates, operating expenses, future dry docking costs and the estimated remaining useful lives of the vessels and drilling rigs. These assumptions are based on historical trends as well as future expectations in line with the Company’s historical performance and the Company’s expectations for future fleet utilization under its current fleet deployment strategy, and are consistent with the plans and forecasts used by management to conduct its

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business. The variability of these factors depends on a number of conditions, including uncertainty about future events and general economic conditions; therefore, the Company’s accounting estimates might change from period to period. As a result of the impairment review, the Company determined that the carrying amount of the vessels was recoverable, with the exception of the MV Iguana, and therefore, concluded that an impairment loss was necessary.

Goodwill and intangible assets: Goodwill represents the excess of the purchase price over the estimated fair value of net assets acquired within the Drilling Rigs reporting unit. Goodwill is reviewed for impairment whenever events or circumstances indicate possible impairment in accordance with guidance regarding goodwill and other intangible assets. This guidance requires at least the annual testing for impairment, and not the amortization, of goodwill and other intangible assets with an indefinite life.

The Company tests for impairment each year on December 31. The Company tests goodwill for impairment by first comparing the carrying value of the Drilling Rigs reporting unit, which is defined as an operating segment or a component of an operating segment that constitutes a business for which financial information is available and is regularly reviewed by management, to its fair value. The Company estimates the fair value of the Drilling Rigs reporting unit by weighting the combination of generally accepted valuation methodologies, including both income and market approaches.

For the income approach, the Company discounts projected cash flows using a long-term weighted average cost of capital (“WACC”) rate, which is based on the Company’s estimate of the investment returns that market participants would require. To develop the projected net cash flows from the Company’s Drilling Rigs reporting unit, which are based on estimated future utilization, day rates, projected demand for its services, and rig availability, the Company considers key factors that include assumptions regarding future commodity prices, credit market uncertainties and the effect these factors may have on the Company’s contract drilling operations and the capital expenditure budgets of its customers. The estimates and assumptions regarding expected cash flows and the appropriate discount rates require considerable judgment and are based upon existing contracts, historical experience, financial forecasts and industry trends and conditions.

For the market approach, the Company derives publicly traded company multiples from companies with operations similar to the Company’s reporting units by using information publicly disclosed by other publicly traded companies and, when available, analyses of recent acquisitions in the marketplace.

If the fair value of a reporting unit exceeds its carrying value, then no further testing is required. This is referred to as Step 1. If the fair value is determined to be less than the carrying value, a second step, or Step 2, is performed to compute the amount of the impairment, if any. In this process, an implied fair value for goodwill is estimated, based in part on the fair value of the operations, and is compared to its carrying value. The shortfall of the implied fair value of goodwill below its carrying value represents the amount of goodwill impairment.

From the date the Company acquired Ocean Rig ASA in May 2008 through the annual goodwill impairment test performed on December 31, 2008, the market declined significantly and various factors negatively affected industry trends and conditions, which resulted in the revision of certain key assumptions used in determining the fair value of the Company’s Drilling Rigs reporting unit and therefore the implied fair value of goodwill. During the second half of 2008, the credit markets tightened, driving up the cost of capital and therefore the Company increased the WACC rate. In addition, the economic downturn and the volatile oil prices resulted in a downward revision of projected cash flows from the Company’s Drilling Rigs reporting unit in the Company’s forecasted-discounted cash flows analysis for its 2008 impairment testing. Furthermore, the decline in the global economy negatively impacted publicly traded company multiples used when estimating fair value under the market approach. Based on results of the Company’s annual goodwill impairment analysis and subsequent reconciliation to its market capitalization, the Company determined that the carrying value of the Company’s goodwill was impaired. A total impairment charge of $700.5 million was recorded for the year ended December 31, 2008, which represents the write-off of all recorded goodwill in the Drilling Rigs reporting unit.

The Company’s finite-lived acquired intangible assets are amortized on a straight-line basis over their estimated useful lives as follows: Trade Names, 10 years; Software, 10 years; and fair value of below and above market acquired time charters, over the life of the associated contract. In accordance with guidance regarding the accounting for the Impairment or Disposal of Long-Lived Assets, the Company evaluates the potential impairment

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of finite-lived acquired intangible assets when there are indicators of impairment. The Company’s finite-lived intangibles are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable based on estimates of future undiscounted cash flows. In the event of impairment, the asset is written down to its fair value. An impairment loss, if any, is measured as the amount by which the carrying amount of the asset exceeds its fair value.

Further downward pressure on the Company’s operating results and/or further deterioration of economic conditions could result in additional future impairments of the Company’s intangible assets. See “Significant Accounting Policies”, Note (7) “Acquisition of Ocean Rig ASA” and Note 8 “Intangible Assets and Liabilities” to the Notes to Consolidated Financial Statements for additional information.

Accounting for Revenue and Related Expenses:

(i) Drybulk Carrier vessels:

Time and bareboat charters: The Company generates its revenues from charterers for the charter hire of its vessels, which are considered to be operating lease arrangements. Vessels are chartered using time and bareboat charters and where a contract exists, the price is fixed, service is provided and collection of the related revenue is reasonably assured, revenue is recognized as it is earned ratably on a straight-line basis over the duration of the period of each time charter as adjusted for the off-hire days that the vessel spends undergoing repairs, maintenance and upgrade work depending on the condition and specification of the vessel.

Pooling Arrangement: For vessels operating in pooling arrangements, the Company earns a portion of total revenues generated by the pool, net of expenses incurred by the pool. The amount allocated to each pool participant vessel, including the Company’s vessels, is determined in accordance with an agreed-upon formula, which is determined by points awarded to each vessel in the pool based on the vessel’s age, design and other performance characteristics. Revenue under pooling arrangements is accounted for on the accrual basis and is recognized when an agreement with the pool exists, price is fixed, service is provided and the collectability is reasonably assured.

The allocation of such net revenue may be subject to future adjustments by the pool however, historically, such changes have not been material.

Voyage related and vessel operating costs: Voyage related and vessel operating costs are expensed as incurred. Under a time charter, specified voyage costs, such as fuel and port charges are paid by the charterer and other non-specified voyage expenses, such as commissions, are paid by the Company. Vessel operating costs including crews, maintenance and insurance are paid by the Company. Under a bareboat charter, the charterer assumes responsibility for all voyage and vessel operating expenses and risk of operation.

Deferred Voyage Revenue: Deferred voyage revenue primarily relates to cash advances received from charterers. These amounts are recognized as revenue over the voyage or charter period.

(ii) Drilling Rigs:

Revenues: The majority of revenues are derived from contracts including day rate based compensation for drilling services. In connection with drilling contracts the Company may receive revenues for preparation and mobilization of equipment and personnel or for capital improvements to the drilling rigs and day rate or fixed price mobilization and demobilization fees. For each contract the Company determines whether the contract, for accounting purposes, is a multiple element arrangement and, if so, identifies all deliverables as elements.

For each element the Company determines how and when to recognize revenue. There are two types of drilling contracts: well contracts and term contracts.

Well contracts: These are contracts where the assignment is to drill a certain number of wells. Revenue from day rate based compensation for drilling operations is recognized in the period during which the services are rendered at the rates established in the contracts. Mobilization fees, expenses and contributions from customers for capital improvements are recognized over the estimated duration of the drilling period. Demobilization fees and expenses are recognized over the demobilization period.

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Term contracts: These are contracts where the assignment is to operate the unit for a specified period of time. For these types of contracts the Company determines whether the arrangement is a multiple element arrangement containing both a lease element and drilling services element. For revenues derived from contracts that contain a lease, the lease elements are recognized in the statement of operations on a straight line basis, taking into consideration the different day rates, utilization and transit between locations that are anticipated to take place in the lease period. The drilling services element is recognized in the period in which the services are rendered at rates at fair value. Revenues related to mobilization and direct incremental expenses of mobilization are deferred and recognized over the estimated duration of the drilling contracts. To the extent that expenses exceed revenue to be recognized, they are expensed as incurred. Demobilization fees and expenses are recognized over the demobilization period

Fair value of above/below market acquired time charter: Where the Company identifies any assets or liabilities associated with the acquisition of a vessel or drilling rigs the Company records all such identified assets or liabilities at fair value. Fair value is determined by reference to market data. The Company values any asset or liability arising from the market value of the time charters assumed when a vessel and/or rig is acquired. The amount to be recorded as an asset or liability at the date of delivery of a vessel or drilling rig is based on the difference between the current fair values of a charter with similar characteristics as the time charter assumed and the net present value of future contractual cash flows from the time charter contract assumed. When the present value of the time charter assumed is greater than the current fair value of such charter, the difference is recorded as “Fair value of above market acquired time charter.” When the opposite situation occurs, the difference is recorded as “Fair value of below market acquired time charter.” Such assets and liabilities are amortized as a reduction of, or an increase in revenue, respectively over the period of the time charter assumed.

Financial Instruments: The Company designates its derivatives based upon guidance on accounting for derivative instruments and hedging activities which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The guidance on accounting for certain derivative instruments and certain hedging activities requires all derivative instruments to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings unless specific hedge accounting criteria are met.

(i) Hedge Accounting: At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy undertaken for the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting exposure to changes in the hedged item’s cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine whether they actually have been highly effective throughout the financial reporting periods for which they were designated.

The Company is party to interest swap agreements where it receives a floating interest rate and pays a fixed interest rate for a certain period in exchange. Contracts which meet the strict criteria for hedge accounting are accounted for as cash flow hedges. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability, or a highly probable forecasted transaction that could affect profit or loss.

The effective portion of the gain or loss on the hedging instrument is recognized directly as a component of other comprehensive income in equity, while the ineffective portion, if any, is recognized immediately in current period earnings.

The Company discontinues cash flow hedge accounting if the hedging instrument expires and it no longer meets the criteria for hedge accounting or the designation is revoked by the Company. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is kept in equity until the forecasted transaction occurs. When the forecasted transaction occurs, any cumulative gain or loss on the hedging instrument is recognized as profit or loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to net profit or loss for the year as financial income or expense.

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(ii) Other Derivatives: Changes in the fair value of derivative instruments that have not been designated as hedging instruments are reported in current period earnings.

Stock-based compensation: Stock-based compensation represents restricted common stock granted to employees and directors, for their services. The Company calculates total compensation expenses for the award based on its fair value on the grant date and amortizes the total compensation on a straight-line basis over the vesting period of the award or service period. Expense concerning restricted common stock granted to employees and directors is included in “General and administrative expenses” in the consolidated statements of operations

Recent accounting pronouncements:

In December 2007, new guidance established accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The new guidance also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The above-mentioned guidance was effective for fiscal years beginning after December 15, 2008, and was adopted by the Company in the first quarter of 2009. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements. The new guidance was retroactively applied to the consolidated statement of stockholders equity for the year ended December 31, 2008.

In March 2008, new guidance was issued with the intent to provide users of financial statements with an enhanced understanding of derivative instruments and hedging activities. The new guidance requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This guidance was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. This guidance does not require comparative disclosures for earlier periods at initial adoption. The Company adopted this guidance in the first quarter of 2009.

In June 2008, new guidance clarified that all outstanding unvested share-based payment awards that contain rights to non forfeitable dividends participate in undistributed earnings with common shareholders. Awards of this nature are considered participating securities, and the two-class method of computing basic and diluted earnings per share must be applied. The Company determined that non-vested shares granted under its equity incentive plan are participating securities because the non-vested shares participate in dividends. The guidance was effective for fiscal years beginning after December 15, 2008. The Company adopted this new guidance in 2009, which was retroactively applied to the years ended December 31, 2008 and 2007 and did not have a material impact on the earnings per share.

In December 2008, new guidance was issued which requires more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. The guidance was effective for fiscal years ending after December 15, 2009. Adoption of this guidance in 2009 did not have a significant impact on the Company’s financial statements.

In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance establishing the FASB Accounting Standards Codification as the single source of authoritative US GAAP recognized by the FASB to be applied by nongovernmental entities. The Codification’s content effectively supersedes previous guidance and includes only two levels of GAAP: authoritative and non authoritative. The guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the new guidance in the third quarter of 2009 and revised references to US GAAP in these consolidated financial statements to reflect the guidance in the Codification.

In June 2009, new guidance was issued with regard to the consolidation of variable interest entities (“VIE”). This guidance responds to concerns about the application of certain key provisions of the FASB

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interpretation, including those regarding the transparency of the involvement with VIEs. The new guidance revises the approach to determining the primary beneficiary of a VIE to be more qualitative in nature and requires companies to more frequently reassess whether they must consolidate a VIE. Specifically, the new guidance requires a qualitative approach to identifying a controlling financial interest in a VIE and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. In addition, the standard requires additional disclosures about the involvement with a VIE and any significant changes in risk exposure due to that involvement. The guidance is effective as of the beginning of the first fiscal year that begins after November 15, 2009 and early adoption is prohibited. The Company is evaluating the impact of this guidance on its consolidated financial statements.

In September 2009, clarifying guidance was issued on multiple-element revenue arrangements. The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. The new guidance will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. The Company is currently assessing the future impact of this new accounting pronouncement to its consolidated financial statements.

In October 2009, new guidance was issued with regard to accounting and reporting for own-share lending arrangements issued in contemplation of a convertible debt issuance. This guidance requires that a share-lending arrangement entered into on an entity’s own shares should be measured at fair value and recognized as an issuance cost, with an offset to additional paid-in capital. Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs. The amendments also require several disclosures including a description and the terms of the arrangement and the reason for entering into the arrangement. The Company applied the new guidance to the own-share lending agreement entered into in association with the Convertible Senior Notes issued in November 2009.

B. Liquidity and Capital Resources

Historically our principal source of funds has been equity provided by our shareholders, operating cash flow, secured bank borrowings and other forms of hybrid instruments such as convertible preferred stock and convertible bonds. Our principal use of funds has been capital expenditures to establish and grow our fleet, maintain the quality of our fleet, comply with international shipping standards and environmental laws and regulations, fund working capital requirements, make principal repayments and interest payments on outstanding loan facilities, and pay dividends. Our board of directors determined to suspend the payment of cash dividends beginning in the fourth quarter of 2008.

Our practice has been to acquire drybulk carriers and drilling rigs/drillships using a combination of funds received from equity investors and bank debt secured by mortgages on our assets. Our business is capital intensive and its future success will depend on our ability to maintain a high-quality fleet through the acquisition of newer vessels and the selective sale of older vessels. These acquisitions will be principally subject to management’s expectation of future market conditions as well as our ability to acquire vessels on favorable terms.

We believe that internally generated cash flow will be sufficient to fund the operations (operating costs, working capital requirements and debt service) of our drybulk segment as well as the operations of our operating drilling units for the next twelve months. As of December 31, 2009, our drybulk segment did not have any capital expenditure requirements and our drilling rig segment was a party to four shipbuilding contracts for the construction of four ultra-deepwater drillships. The aggregate shipyard commitments for these contracts for 2010 and 2011 are outlined in Section F, Tabular Disclosure of Contractual Obligations. We do not expect that internally generated cash flow will be sufficient to fund the aggregate shipyard commitments for these drillships which amount to $1.0 billion and $0.9 billion for 2010 and 2011, respectively. We currently do not have any facilities in place for the financing of the remaining construction costs of Hulls 1837 and 1838. Regarding Hulls 1865 and 1866, while we have loan facilities in place for the financing of the construction costs of these hulls, additional draw downs will be fully cash collateralized until we find suitable employment, as defined in the loan facilities, for both vessels. Accordingly, we anticipate that capital expenditures will be funded with cash on hand, secured term bank loans and other forms of debt and equity financing.

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Covenants under Secured Credit Facilities

Our secured credit facilities impose operating and financial restrictions on us. These restrictions generally limit our subsidiaries’ ability to, among other things, (i) pay dividends without the lenders prior consent, (ii) incur additional indebtedness, (iii) change the flag, class or management of the vessel mortgaged under such facility (iv) create liens on their assets, (v) make loans, (vi) make investments or capital expenditures and (vii) undergo a change in ownership or control and (viii) undergo a change in the manager of the vessel.

Furthermore, our existing secured credit facilities require certain of our subsidiaries to maintain specified financial ratios and satisfy financial covenants, mainly to ensure that the market value of the vessel mortgaged under the applicable credit facility, determined in accordance with the terms of that facility, does not fall below a certain percentage of the outstanding amount of the loan, or value maintenance clause.

Our secured credit facilities also subject us to certain financial covenants, as guarantor under the facilities. In general, these financial covenants require us to maintain (i) minimum liquidity, (ii) a minimum market adjusted equity ratio, (iii) a minimum interest coverage ratio, (iv) a minimum market adjusted net worth and (v) a maximum debt service coverage ratio.

A violation of these covenants constitutes an event of default under our credit facilities, which would, unless waived by our lenders, provide our lenders with the right to require us to post additional collateral, enhance our equity and liquidity, increase our interest payments, pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet, reclassify our indebtedness as current liabilities and accelerate our indebtedness, which would impair our ability to continue to conduct our business.

Breach of Financial Covenants under Secured Credit Facilities

As of December 31, 2008, the Company was in breach of certain financial covenants in its various loan facilities, mainly the value maintenance clause (also known as loan-to-value ratio), the market adjusted net worth clause and the market adjusted equity ratio clause. Even though none of the lenders declared an event of default under the loan agreements, these breaches constituted defaults and potential events of default and, together with the cross default provisions in the various loan agreements, could have resulted in the lenders requiring immediate repayment of all of the loans. As of December 31, 2009, the Company had obtained waivers from all of its lenders covering the above-mentioned breaches. These waiver agreements expire in 2010 and 2011. In addition, on December 31, 2009, the Company was in breach of a financial covenant in its $230 million loan facilities dated September 10, 2007, as amended. The Company is in process of resolving this breach.

The market adjusted net worth is broadly calculated as the Company’s stockholders equity as adjusted for the fair market values of the Company’s operational fleet. The market adjusted equity ratio is broadly calculated as the Company’s stockholders equity divided by the Company’s total capitalization (total debt plus stockholders equity) with the equity components adjusted for the fair market values of the Company’s operational fleet. As a result of the Company’s equity offerings in 2009, which netted approximately $952.4 million in proceeds, as of December 31, 2009, the Company was in compliance with the minimum market adjusted net worth and the minimum market adjusted equity ratio clauses stipulated in certain of its credit facilities. In other words, in respect of these two ratios, even if the waiver agreements were not in force as of December 31, 2009, the Company would have been in compliance with the covenants containing such ratios in the original agreements.

The value maintenance clause requirements in the Company’s loan agreements are broadly calculated as the fair market value of the mortgaged vessels under a particular loan facility divided by the outstanding amount of the loan facility. The waiver agreements in effect as of December 31, 2009 generally waived the Company’s obligation to comply with this clause or lowered the minimum requirements under this clause considerably, over the duration of the waiver agreement. Accordingly, no new breaches of these clauses existed as of December 31, 2009. Had the waiver agreements not been in force as of December 31, 2009, the Company would not have been in compliance with the value maintenance clauses in the original loan agreements.

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For those waivers that have already expired in 2010 or are scheduled to expire in 2010, the Company is currently in negotiations with its lenders to obtain waiver extensions or to restructure the affected debt. We may not be successful in obtaining additional waivers and amendments to our credit facilities. If our indebtedness is accelerated, it will be very difficult in the current financing environment for us to refinance our debt or obtain additional financing and we could lose our vessels if our lenders foreclose their liens. If the value of our vessels deteriorates significantly from their currently depressed levels, we may have to record an impairment adjustment to our financial statements, which would adversely affect our financial results and further hinder our ability to raise capital. Moreover, in connection with any waivers and/or amendments to our loan agreements, our lenders may impose additional operating and financial restrictions on us and/or modify the terms of our existing loan agreements. These restrictions may limit our ability to, among other things, pay dividends, make capital expenditures and/or incur additional indebtedness, including through the issuance of guarantees. In addition, our lenders may require the payment of additional fees, require prepayment of a portion of our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge us on our outstanding indebtedness.

Our management does not expect that cash on hand, including cash representing a portion of the net proceeds from debt and equity issuances in 2009, and cash generated from operations will be sufficient to repay those loans with cross- default provisions which aggregated approximately $1.6 billion as of December 31, 2009, if such debt is accelerated by the lenders. In such a scenario, the Company would have to seek to access the capital markets to fund the mandatory payments.

As stated above, as of December 31, 2009, the Company had agreements waiving its obligation to comply with the value maintenance clauses, or reducing the requirements of such clauses to a level at which the Company was in compliance, contained in its loan agreements. Some of these waiver agreements have already expired in 2010 or are scheduled to expire during 2010 when the original covenants come back in force. For those waiver agreements expiring in 2010, the Company does not, and does not expect to meet as applicable, the value maintenance clauses contained in the original covenants based on the current fair market values of its vessels at the time of waiver expiry. In addition, the Company was not in compliance with a financial covenant in its $230 million credit facilities as of December 31, 2009 and is in discussions with the lenders thereunder for a waiver. As a result of the cross default provisions in the Company’s loan agreements, defaults existing under these credit facilities, as well as those expected to exist after expiration of other waiver agreements, could result in defaults on all of its outstanding debt and the acceleration of such debt by its lenders. As such, the Company has classified all of the Company’s affected debt as current liabilities. Our independent registered public accounting firm has issued their opinion with an explanatory paragraph in connection with our financial statements included in this annual report that expresses substantial doubt about our ability to continue as a going concern. We believe that we will generate sufficient cash from operations and financing activities to satisfy our liquidity needs for the next 12 months based on the assumption that lenders will not demand payment of the loans before their maturity and enable us to continue as a going concern. However, there is a material uncertainty related to events or conditions that raises significant doubt about our ability to continue as a going concern and, therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of business. See Note 3 to our audited consolidated financial statements included in this annual report.

Convertible Senior Notes and Related Borrow Facility

In November 2009, the Company issued $460 million aggregate principal amount of 5% convertible unsecured senior notes, or the Notes, due December 1, 2014, resulting in aggregate net proceeds of approximately $448 million after the underwriter commissions.

The holders may convert their notes at any time on or after June 1, 2014 but prior to maturity. However, holders may also convert their notes prior to June 1, 2014 under the following circumstances: (1) if the closing price of the common stock reaches and remains at or above 130% of the conversion price of $7.19 per share of common stock or 139.0821 shares of common stock per $1,000 aggregate principal amount of notes, in effect on that last trading day for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs; (2) during the ten consecutive trading-day period after any five consecutive trading-day period in which the trading price per $1,000 principal amount of the Notes for each day of that period was less than 98% of the closing price of our common stock multiplied by then applicable conversion rate; or (3) if specified distributions to holders of our common stock are made or specified corporate transactions occur. The Notes are unsecured and pay interest semi-annually at a rate of 5% per annum commencing June 1, 2010.

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Existing Credit Facilities

$1.04 billion revolving credit and term loan facility, dated September 17, 2008, as amended

We entered into this facility to refinance certain debt and for general corporate purposes. This credit facility consists of a guarantee facility which provides us with a letter of credit in the amount of up to $20 million, three revolving credit facilities in the amounts of up to $350 million, $250 million and $20 million, respectively, and a term loan facility in the amount of up to $400 million. This loan bears interest at LIBOR plus a margin, and is repayable in 20 quarterly installments plus a balloon payment of $400 million, payable together with the last installment on September 17, 2013. As of December 31, 2009, we had outstanding borrowings in the amount of $808.6 million under this facility.

Two $562.5 million credit facilities, each dated July 18, 2008, as amended

We entered into this facility to partially finance the construction costs of Drillship Hulls 1865 and 1866. Both of these loans bear interest at LIBOR plus a margin and are repayable in 18 semi-annual installments through November 2020. The first installment is payable six months after delivery of the vessels, which is expected to be in the third quarter of 2011. As of December 31, 2009, we had outstanding borrowings in the aggregate amount of $186.3 million under these credit facilities.

On June 5, 2009, we entered into agreements on waiver and amendment terms with respect to each of these credit facilities providing for a waiver of certain financial covenants through January 31, 2010. These agreements provide for, among other things, (i) a waiver of the required market adjusted equity ratio, (ii) a waiver of the required market value adjusted net worth; and (iii) a required payment from us to each lender and the facility agent. These agreements were terminated by supplemental agreement dated January 28, 2010, which superceded the waiver agreement and extended the deadline for obtaining employment contracts for Hulls 1865 and 1866 are required for the continued availability of these credit facilities.

$126.4 million term loan facility, dated July 23, 2008, as amended

We entered into this facility to partially finance the acquisition of the vessel MV Flecha. This loan bears interest at LIBOR plus a margin, and is repayable in 40 quarterly installments, plus a balloon payment payable with the last installment in July 2018. As of December 31, 2009, we had outstanding borrowings in the amount of $113.2 million under this term loan facility.

On October 12, 2009, we entered into a supplemental agreement with respect to this loan facility providing for a waiver of certain covenants, including the security cover value maintenance provisions, through October 9, 2011.

$103.2 million loan facility, dated June 20, 2008, as amended

We entered into this facility to partially finance the acquisition costs of the MV Sorrento and MV Iguana. This loan bears interest at LIBOR plus a margin, and is repayable in 32 quarterly installments, plus a balloon payment payable with the last installment in July 2016 for the MV Sorrento, and 20 quarterly installments, with the last installment in June 2013 for the MV Iguana. As of December 31, 2009, we had outstanding borrowings in the amount of $63.4 million under this loan facility.

On October 8, 2009, we entered into a supplemental agreement with respect to this loan facility providing for, among other things, waivers of the (i) value maintenance provisions; (ii) market adjusted equity ratio; (iii) market value adjusted net worth; and (iv) certain other financial covenants as through April 8, 2011.

$125 million loan facility, dated May 13, 2008, as amended

We entered into this facility to partially finance the acquisition cost of the MV Capri and MV Positano. The loan bears interest at LIBOR plus a margin and is repayable in thirty-two quarterly installments, plus a balloon payment, through June 2016. As of December 31, 2009, we had outstanding borrowings in the amount of $86.0 million under this loan facility.

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On February 25, 2010, the Company entered into a supplemental agreement which, among other things: (i) increases the applicable margin on the facilities from January 1, 2009 until December 31, 2010; (ii) amends the minimum security cover; and (iii) amends our financial covenants as guarantor until midnight of December 31, 2010.

$90 million loan facility, dated May 5, 2008, as amended

We entered into this facility to partially finance the acquisition cost of the MV Mystic. The loan bears interest at LIBOR plus a margin, and is repayable in 15 semi-annual installments, with a balloon payment, payable together with the last installment in December 2015. As of December 31, 2009, we had outstanding borrowings in the amount of $60.0 million under this loan facility.

On October 22, 2009, the Company reached an agreement, providing for a waiver of certain covenants through September 30, 2010. This agreement, among other things: (i) revises the security cover for the duration of the waiver period and further; and (ii) amends the minimum requirements for the market adjusted equity ratio, market value adjusted net worth of the group and the interest leverage ratio. Furthermore, the waiver agreement increases the interest margin for the duration of the waiver period and includes various dividend and capital expenditure restrictions by us and our subsidiary.

$130 million loan facility, dated March 13, 2008, as amended

We entered into this facility for working capital and general corporate purposes. Currently, the vessels MV Toro and MV Delray are provided as collateral under this loan facility. The loan bears interest at LIBOR plus a margin and is repayable in 28 quarterly installments plus a balloon payment, payable with the last installment in March 2015. As of December 31, 2009, we had outstanding borrowings in the amount of $49.0 million under this loan facility.

On July 30, 2009, we entered into a supplemental agreement with respect to this credit facility providing for the waiver of certain covenants through March 31, 2011. This supplemental agreement, among other things: (i) increases the applicable margin on the facility; (ii) requires that until the end of the waiver period, proceeds from the sale or loss of the collateral vessels be applied to the outstanding advance of the facility; (iii) requires additional security and a restricted cash account equaling a minimum of the next four quarterly principal installments; (iv) waives the minimum required security cover until March 31, 2011; and (v) waives our financial covenants until March 31, 2011.

On 25 January, 2010 the Company entered into a vessel substitution agreement for MVs Toro and Delray. This agreement provides, among other things, that after the end of the waiver period the applicable margin is reduced.

$101.2 million loan facility, dated December 4, 2007, as amended

We entered into this facility to partially finance the acquisition cost of the second hand vessels MV Saldahna and MV Avoca. The loan bears interest at LIBOR plus a margin, and is repayable in 28 quarterly installments, with a balloon payment, payable together with the last installment in January 2015. As of December 31, 2009, we had outstanding borrowings in the amount of $70.3 million under this loan facility.

On June 11, 2009, we entered into a supplemental agreement on waiver terms on this loan facility. This supplemental agreement provides, among other things that through May 19, 2011, (i) the lender will waive the financial covenants contained in the corporate guarantee; (ii) the lender will waive the required prepayment in the event of a security value shortfall; (iii) the applicable margin will be increased; and (iv) we will not pay any cash dividends except under certain circumstances.

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$47 million loan facility, dated November 16, 2007, as amended

We entered into this facility to partially finance the acquisition cost of the second hand MV Oregon. The loan bears interest at LIBOR plus a margin, and is repayable in 32 quarterly installments, with a balloon payment, payable together with the last installment in December 2015. As of December 31, 2009, we had outstanding borrowings in the amount of $29.0 million under this loan facility.

In February 2009, we entered in a supplemental agreement on waiver and amendment terms on this loan facility, providing for a waiver of certain covenants through December 31, 2009. On November 11, 2009, we entered into an agreement to confirm that the conditions in such waivers remain satisfied, and that the waivers extend to certain financial covenants in our guarantee of this loan facility through December 31, 2009.

In February 2010, we signed a waiver letter, which is subject to documentation, providing for certain covenant amendments including the waiver of our financial covenants until January 1, 2011. The waiver letter increases the applicable margin on this facility.

$90 million loan facility, dated October 5, 2007, as amended

We entered into this facility to partially finance the acquisition cost of the second hand MV Samatan and MV VOC Galaxy. The loan bears interest at LIBOR plus a margin depending on corporate leverage, and is repayable in 32 quarterly installments beginning in the first quarter of 2008, with a balloon payment, payable together with the last installment in November, 2015. As of December 31, 2009, we had outstanding borrowings in the amount of $74.0 million under this loan facility.

On July 30, 2009, the Company entered into a covenant waiver and amendment agreement with respect to this facility providing for the waiver of certain covenants. This covenant waiver and amendment agreement, among other things, (i) increases the applicable margin on the facility until the final maturity date; (ii) requires that until March 31, 2011, proceeds from the sale or loss of the collateral vessels be applied to the outstanding advance of the facility; (iii) requires additional security; (iv) waives the minimum required security cover until March 31, 2011; and (v) waives the financial covenants of DryShips as guarantor until March 31, 2011.

$35 million loan facility, dated October 2, 2007, as amended

We entered into this facility to partially finance the acquisition cost of the secondhand MV Clipper Gemini. The loan bears interest at LIBOR plus a margin, and is repayable in 36 quarterly installments beginning in the first quarter of 2008, with a balloon payment, payable together with the last installment in October 2016. As of December 31, 2009, we had outstanding borrowings in the amount of $25.0 million under this loan facility.

On February 25, 2010, we entered into a supplemental agreement providing for a waiver of certain covenants. These covenant waivers and amendment agreements, among other things: (i) increase the applicable margin on the facilities from January 1, 2009 until December 31, 2010; (ii) amends minimum security cover; and (iii) amend our financial covenants as guarantor until midnight of December 31, 2010.

$628.8 million senior and junior loan facilities, dated March 31, 2006, as amended

We entered into these facilities to provide us with working capital, and to partially finance the acquisition cost of certain vessels. These facilities are comprised of (i) term loan and short-term credit facilities (senior loan facility) and (ii) term loan and short-term credit facilities (junior loan facility).

The senior loan facility bears interest at LIBOR plus a margin. The term loan facility is repayable in 37 quarterly installments, with a balloon payment, payable together with the last installment on May 31, 2016. Each advance from the short term credit facility is repayable in quarterly installments with the next term loan facility installment As of December 31, 2009 we had outstanding borrowings in the amount of $498.3 million under this loan facility.

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The junior loan facility bears interest at LIBOR plus a margin. The term loan facility is repayable in 37 quarterly installments, with a balloon payment, payable with the last installment on May 31, 2016. Each advance from the short term credit facility is repayable in quarterly installments with the next term loan facility installment. As of December 31, 2009, we had outstanding borrowings in the amount of $99.9 million under this loan facility.

On November 17, 2009 the Company entered into a supplemental agreement waiving and amending terms of its senior and junior loan facilities. These supplemental agreements, among other things, amend the (i) market adjusted equity ratios; (ii) market value adjusted net worth; (iii) interest coverage ratios; (iv) minimum liquidity; (v) applicable margins on the facilities from December 22, 2008 until September 30, 2010; and (vi) security cover requirements during the waiver period.

$230 million loan facilities, dated September 10, 2007, as amended

In connection with the acquisition of Drillships Holdings on May 15, 2009, we assumed two $115 million loan facilities that were entered into in September 2007, in order to finance the construction of Hulls 1837 and 1838. The loans bear interest at LIBOR plus margin and are repayable upon the delivery of Hull 1837 in December 2010 and Hull 1838 in March 2011. In addition to the customary security and guarantees issued to the borrower, this facility was collateralized by certain vessels owned by certain related parties, corporate guarantees of certain related parties, and a personal guarantee from Mr. Economou.

As of December 31, 2009 we had outstanding borrowings in the amount of $230.0 million under these loan facilities.

As of April 6, 2010, we were not in compliance with certain covenants under these loan facilities.

All of the credit facilities discussed in this section are secured by a first priority mortgage over the vessels, assignment of shipbuilding contracts and refund guarantees, corporate guarantees, a first assignment of all freights, earnings, insurances and requisition compensation. The loans contain covenants including restrictions, without the bank’s prior consent, as to changes in management and ownership of the vessels, additional indebtedness and mortgaging of vessels and change in the general nature of our business. In addition, the vessel owning companies are not permitted to pay any dividends without the requisite lender’s prior consent. The loans also contain certain financial covenants relating to our financial position, operating performance and liquidity.

Repaid Credit Facilities

$800 million credit facility and NOK 5.0 billion guarantee facility, dated May 9, 2008

We entered into this facility to finance our acquisition of Ocean Rig and to refinance debt. This loan bears interest at LIBOR plus a margin, and is repayable in four quarterly installments of $75 million each, followed by four quarterly installments of $50 million each plus a balloon payment of $300 million, payable with the last installment on May 12, 2010. As of December 31, 2008, we had outstanding borrowings in the amount of $650.0 million under this facility. During 2009, this facility was fully repaid using proceeds raised from equity offerings.

$31.1 million fixed-rate term notes

In connection with the acquisition of Drillships Holdings on May 15, 2009, we assumed two $15.6 million fixed-rate term notes that were entered into in January 2009, in order to finance the construction of Hulls 1837 and 1838. The term notes were fully repaid in July 2009.

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Cash Flows

Year ended December 31, 2009 compared to year ended December 31, 2008

Our cash and cash equivalents increased to $693.2 million as of December 31, 2009, compared to $303.1 million as of December 31, 2008, primarily due to increased cash provided by operating and financing activities. Working capital is equal to current assets minus current liabilities, including the current portion of long-term debt. Our working capital deficit was $715.4 million as of December 31, 2009. The deficit decrease is due to the reclassification of long term debt to current liabilities. If we were not in breach of our loan covenants, and $1.3 billion of indebtedness were not reclassified to current liabilities as a result of such breach, our working capital would be a “surplus” $582.3 million.

If our working capital deficit is not reduced or continues to grow, lenders may be unwilling to provide future financing or will provide future financing at significantly increased interest rates, which will negatively affect our earnings, liquidity and capital position, and our ability to make timely payments on our newbuilding purchase contracts and to meet our debt repayment obligations.

We are currently in negotiations with our lenders to obtain additional waivers for those that expire in 2010, or to restructure our debt. Management expects that the lenders will not demand payment of loans before their maturity, provided that we pay loan installments and accumulated accrued interest as they come due under the existing facilities. Management plans to settle the loan interest and scheduled loan repayments with cash generated from operations.

Net Cash Provided By Operating Activities

Net cash provided by operating activities decreased by $253.9 million, or 47%, to $286.2 million for the year ended December 31, 2009 compared to $540.1 million for the year ended December 31, 2008. This decrease is primarily attributable to the decreased time charter rates for the drybulk carrier segment during the year ended December 31, 2009, which is offset in part by the annual contribution for the drilling rig segment in 2009 as compared to a partial contribution in 2008.

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Net Cash Used In Investing Activities

Net cash used in investing activities was $162.0 million for the year ended December 31, 2009, The Company made payments of approximately $185.1 million for asset acquisitions and improvements, and $23.3 million as a result of the net increase in minimum cash deposits required by our lenders. These cash outflows were partially offset by receipt of vessel sale proceeds of approximately $45.4 million.

Net cash used in investing activities was $2.1 billion during 2008 consisting of $991.3 million paid to acquire Ocean Rig, $742.8 million in payments for vessel acquisitions, $507.3 million in advances for vessel acquisitions and vessels under construction, $16.6 million in payments for rig improvements, $262.7 million in payments to restricted cash, partially offset by an amount of $410.2 million representing the net proceeds received from the sale of the vessels MV Matira, MV Menorca, MV Netadola, MV Lanzarotte, MV Waikiki, MV Solana and MV Tonga during the year ended December 31, 2008.

Net Cash Provided By Financing Activities

Net cash provided by financing activities was $265.9 million for the year ended December 31, 2009, consisting mainly of net proceeds of $950.6 million from the issuance of common stock in at-the-market offerings, the net proceeds of $447.8 million from the issuance of the convertible senior notes and the drawdown of an additional $150.9 million under the credit facilities. This is partially offset by the repayment of $1.2 billion of debt under our long and short-term credit facilities and the $50 million paid for the acquisition of the non-controlling interests for the acquisition of the drillships.

Net cash provided by financing activities was $1.8 billion for the year ended December 31, 2008, consisting mainly of a $2.9 billion drawdown under short-term and long-term facilities and $662.7 million from net proceeds from the issuance of common stock, partly offset by payments under short-term and long-term credit facilities in the aggregate amount of $1.7 billion and $33.2 million of cash dividends paid to stockholders.

C. Research and Development, Patents and Licenses etc.

Not Applicable.

D. Trend Information

See other discussions within item 5.

E. Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations and their maturity dates as of December 31, 2009:

	Payments due by period
Obligations	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
(In thousands of Dollars)
Long-term debt (1)	2,852,840	1,721,923	218,417	912,500	—
Interest and borrowing fees (2)	559,152	396,439	102,299	60,414	—
Shipbuilding contracts-Drillships (3)	1,892,277	1,005,984	886,293	—	—
Retirement Plan Benefits (4)	1,358	82	153	134	989
Operating leases (5)	3,040	1,527	1,513	—	—
Office space rent (6)	23	13	10	—	—
Total	5,308,690	3,125,968	1,208,685	973,048	989

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(1) As further discussed in Note 11 to our audited consolidated financial statements, the outstanding balance of our long-term debt at December 31, 2009, was $2,852.8 million (gross of unamortized deferred financing fees and debt discount of $168.2 million), which were used to partially finance the expansion of our fleet, the construction of drilling rigs and the acquisition of Ocean Rig. The loans bear interest at LIBOR plus a margin. The amounts in the table under “Long Term Debt” do not include any projected interest payments.

(2) Our long-term debt outstanding as of December 31, 2009 bears variable interest at margin over LIBOR, but such variable interest is fixed by our existing interest rate swaps. The calculation of interest payments is based on the weighted average fixed interest rate of 4.06% for the drybulk segment and 3.78% and 1.83% for the drilling rig segment for the year ended December 31, 2009.

(3) As of December 31, 2009, an amount of $411.9 million was paid to the shipyard representing the first and second installment for the construction cost of the two drillships Hulls 1865 and 1866. An amount of $508.7 million was paid to the shipyard representing the first, second and third installment for the construction cost of Hulls 1837 and 1838.

(4) During 2009 Ocean Rig had five defined plans for employees managed and funded through Norwegian life insurance companies. It terminated two plans at the end of 2009. Three plans were therefore left as of December 31, 2009. The pension plan covered 264 employees by the year ended 2009. The number of employees covered by the plans since January 1, 2010 is 124. Pension liabilities and pension costs are calculated based on the crucial cost method as determined by an independent third party actuary.

(5) The Company entered into a five year office lease agreement with Vestre Svanholmen 6 AS which commenced on July 1, 2007. This lease includes an option for an additional five year term, which must be exercised at least six months prior to the end of the term of the contract which expires in June 2012. The lease agreements relating to office space are considered to be operational lease contracts.

(6) The Company leases office space in Athens, Greece, from Mr. George Economou, our Chairman and Chief Executive Officer.

Dividend Payments

On January 9, April 2, July 18 and September 30, 2008, the Company declared dividends in the aggregate amount of $33.2 million ($7.3 million ($0.20 per share, paid on January 31, 2008 to the stockholders of record as of January 18, 2008), ($8.5 million ($0.20 per share, paid on April 30, 2008 to the stockholders of record as of April 17, 2008), $8.7 million ($0.20 per share, paid on August 22, 2008 to the stockholders of record as of August 8, 2008, $8.7 million $0.20 per share, paid on October 31, 2008 to the stockholders of record as of October 15, 2008, respectively.)

In light of a lower freight rate environment and a highly challenged financing environment, our board of directors, beginning with the fourth quarter of 2008, has suspended our common share dividend. Our dividend policy will be assessed by the board of directors from time to time. The suspension allows us to preserve capital and use the preserved capital to enhance our liquidity. The payment of dividends to our shareholders in the future is subject to limitations imposed by our lenders.

The declaration and payment of dividends will be subject at all times to the discretion of our board of directors. The timing and amount of dividends will depend on our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividends, or if there is no surplus, dividends may be declared or paid out of net profits for the fiscal year in which the dividend is declared and for the preceding fiscal year.

G. Safe Harbor

See section “forward looking statements” at the beginning of this annual report.

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Item 6. Directors and Senior Management

A. Directors and Senior Management

Set forth below are the names, ages and positions of our directors, executive officers and key employees. Our board of directors is elected annually on a staggered basis. Each director elected holds office until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal, or the earlier termination of his term of office. Officers are elected from time to time by vote of our board of directors and hold office until a successor is elected.

Name	Age	Position
George Economou	57	Chairman, President, Chief Executive Officer and Class A Director
Harry Kerames	56	Class A Director
Vassilis Karamitsanis	34	Class A Director
Evangelos Mytilinaios	60	Class B Director
George Xiradakis	45	Class B Director
Chryssoula Kandylidis	55	Class C Director
George Demathas	54	Class C Director
Pankaj Khanna	40	Chief Operating Officer
Ziad Nakhleh	37	Chief Financial Officer
Niki Fotiou	40	Senior Vice President Head of Accounting and Reporting
Iro Bei	27	Secretary

The term of our Class B directors expires at the annual general shareholders meeting in 2012. Our Class B directors are Evangelos Mytilinaios and George Xiridakis. The term of our Class C directors expires at the annual general shareholders meeting in 2010. Our Class C directors are George Demathas and Chryssoula Kandylidis. The term of our Class A directors expires at the annual general shareholders meeting in 2011. Each of our Class A, B and C new directors shall hold their positions until their successor shall be elected or until the earlier of their resignation or removal.

The business address of each officer and director is the address of our principal executive offices, which are located at 80, Kifissias Avenue, GR 15125, Amaroussion, Greece.

Biographical information with respect to each of our directors, executives and key personnel is set forth below:

George Economou has over 30 years of experience in the maritime industry and he has served as Chairman, President and Chief Executive Officer of Dryships Inc. since its incorporation in 2004. He successfully took the Company public in February 2005, on NASDAQ under the trading symbol: DRYS. Mr. Economou has overseen the Company’s growth into the largest US listed dry bulk company in fleet size and revenue and the second largest Panamax owner in the world. Between 1986 and 1991 he invested and participated in the formation of numerous individual shipping companies and in 1991 he founded Cardiff Marine Inc. Mr. Economou is a member of ABS Council, Intertanko Hellenic Shipping Forum and Lloyds Register Hellenic Advisory Committee. Mr. Economou is a graduate of the Massachusetts Institute of Technology and holds both a Bachelor of Science and a Master of Science degree in Naval Architecture and Marine Engineering and a Master of Science in Shipping and Shipbuilding Management.

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Harry Kerames was appointed to the Board of Directors of Dryships Inc. on July 29, 2009. Harry Kerames has over 21 years of experience in the transportation industry. Mr. Kerames has been the Managing Director of Global Capital Finance where he was responsible for the firm’s shipping practice. Prior to joining Global Capital Finance in 2006, he was the Chief Marketing Officer at Charles R. Weber Company Inc., where he brokered the freight derivative business, and co-founded a freight derivatives hedge fund. Mr. Kerames has also held various directorships, senior level marketing positions, and consultative roles with Illinois Central Railroad, Genstar Corporation, Motive Power Industries, Hub Group Distribution Services, and Ship and Transportation Equipment Finance and Oceanfreight Inc. Mr. Kerames is a member of the Baltic Exchange, the Hellenic American Chamber of Commerce, and the Connecticut Maritime Association. Mr. Kerame graduated with a Bachelor of Science from the University of Connecticut.

Vassilis Karamitsanis was appointed to the Board of Directors of Dryships Inc. on July 29, 2009. Vassilis Karamitsanis is an attorney and a founding partner of SigmaKappaSigma Law Offices. From 2007 to 2009, Mr. Karamitsanis was the Head of the legal department at Karouzos Construction & Development Group. Mr. Karamitsanis has also previously served as a legal advisor to Dimand Real Estate Development and LPSA Consultants S.A., and as a special advisor to the Hellenic Ministry of Health & Welfare. He is a member of the Athens Bar Association and practices real estate, corporate, domestic and international contracting, telecommunications, and energy law. Mr. Karamitsanis graduated from Athens College Lyceum, and received his law degree from Aristotle University of Thessaloniki. He also holds a postgraduate degree in Economic Analysis of Law from Erasmus University of Rotterdam, and a postgraduate degree in Economic Analysis of Institutions from University Aix-Marseille III, Aix-en-Provence.

George Demathas was appointed to the Board of Directors of DryShips Inc. on July 18, 2006 to fill the vacancy resulting from the resignation of Mr. Nikolas Tsakos. Mr. Demathas has a BA in Mathematics and Physics from Hamilton College in New York and an M.S. in Electrical Engineering and Computer Science from Columbia University. As a principal in Marketing Systems Ltd, he supplied turnkey manufacturing equipment to industries in the USSR. Since 1991, Mr. Demathas has been involved in Malden Investment Trust Inc. in association with Lukoil, working in the Russian petrochemical industry. Since 1996 he has invested in natural gas trunk pipelines in Central Asia. He is based in Moscow and travels widely in Europe and the U.S.A.

George Xiradakis was appointed to the Board of Directors of DryShips Inc. in May 2006. Since 1999, Mr. Xiradakis has been the Managing Director of XRTC Business Consultants Ltd., a consulting firm providing financial advice to the maritime industry, including financial and state institutions. XRTC acted as the commercial representative of international banks including the French banking groups Credit Lyonnais and NATIXIS in Greece. Mr. Xiradakis is also the advisor of various shipping companies, as well as international and state organizations. Mr. Xiradakis has served as a President of the Hellenic Real Estate Corporation and Hellenic National Center of Port Development. He also serves as the General Secretary of the Association of Banking and Shipping Executives of Hellenic Shipping. Mr. Xiradakis has a certificate as a Deck Officer from the Hellenic Merchant Marine and he is a graduate of the Nautical Marine Academy of Aspropyrgos, Greece. He also holds a postgraduate Diploma in Commercial Operation of Shipping from London Guildhall University formerly known as City of London Polytechnic in London. Mr. Xiradakis holds an MSc. in Maritime Studies from the University of Wales.

Chryssoula Kandylidis was appointed to the Board of Directors of DryShips Inc. on March 5, 2008, to fill the vacancy resulting from the resignation of Mr. Aristidis Ioannidis. Mrs. Kandylidis is the beneficial owner of all the issued and outstanding capital stock of Prestige Finance S.A., a Liberian corporation which owns 30% of the outstanding capital stock of Cardiff. Mrs. Kandylidis has also served as an Advisor to the Minister of Transport and Communications in Greece for matters concerning People with Special Abilities for the past three years on a voluntary basis. Mrs. Kandylidis graduated from Pierce College in Athens, Greece and from the Institut Francais d’ Athenes. She also holds a degree in Economics from the University of Geneva. Mrs. Kandylidis is the sister of George Economou, our Chief Executive Officer.

Evangelos Mytilinaios was appointed to the Board of Directors of DryShips Inc. on December 19, 2008, to fill the vacancy resulting from the resignation of Mr. Angelos Papoulias. Mr. Mytilinaios has over 20 years of experience in the shipping industry. He served as a senior executive in the Peraticos and Inlessis Group of Companies, which are involved in the drybulk and tanker shipping sectors. He presently heads a diversified group of companies involved in tourism and real estate development in Greece and the United Kingdom. After attending the Athens University of Economics, he started his career by joining and heading his family’s aluminum production enterprise, Mytilineos Holdings S.A., one of the largest aluminum product manufacturers in Greece. Mr. Mytilinaios is the chairman of our audit committee.

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Pankaj Khanna was appointed as the Company’s Chief Operating Officer in March 2009. Mr. Khanna has 21 years of experience in the shipping industry. Prior to joining the Company, Mr. Khanna was the Chief Strategy Officer for Excel Maritime Carriers Ltd. Mr. Khanna also previously served as Chief Operating Officer of Alba Maritime Services S.A. Prior to joining Alba Maritime Services S.A. Mr. Khanna was Vice President of Strategic Development at Teekay Corporation where he headed vessel sales & purchase activities, newbuilding ordering activities, and other strategic development projects from 2001 through 2007. Prior to this, Mr. Khanna was a Senior Analyst at SSY, a large multinational shipbroker. Prior to that Mr. Khanna sailed on merchant vessels as a deck officer. Mr. Khanna graduated from Blackpool and the Fylde College, Fleetwood Nautical Campus and also received a post-graduate diploma in international trade and transport from London Metropolitan University.

Ziad Nakhleh was appointed as the Company’s Chief Financial Officer in October 2009. Mr. Nakhleh has over 12 years of finance experience. From January, 2005 to September, 2008, he served as Treasurer and Chief Financial Officer of Aegean Marine Petroleum Network Inc., a publicly traded marine fuels logistics company listed on the New York Stock Exchange. For the past year, he was engaged in a consulting capacity to various companies in the shipping and marine fuels industries. Prior to his time with Aegean, Mr. Nakhleh was employed at Ernst & Young and Arthur Andersen in Athens. Mr. Nakhleh is a graduate of the University of Richmond in Virginia and is a member of the American Institute of Certified Public Accountants.

Niki Fotiou was appointed as the Company’s Senior Vice President Head of Accounting and Reporting in January 2010. From July 2006 to December 2009 she served as the Group Controller of Cardiff Marine Inc. For the period from 1993 to 2006, Ms. Fotiou worked for Deloitte and for Hyatt International Trade and Tourism Hellas. Ms Fotiou is a graduate of the University of Cape Town and is a member of the Association of Chartered Certified Accountants. Ms Fotiou serves as Chief Financial Officer and corporate secretary of Allships Ltd. since 2009.

Iro Bei was appointed as corporate secretary of the Company with effect from August 21, 2008. Ms. Bei is an attorney-at-law and is an associate at Deverakis Law Office. Ms. Bei graduated from the School of Law, University College London, U.K. with an LL.B. (2003) and an LL.M. (2004) and she is a member of the Athens Bar Association (2008).

B. Compensation of Directors and Senior Management

We paid an aggregate amount of $5.0 million as cash compensation to our executive directors for the fiscal year ended December 31, 2009. Non-executive directors received annual cash compensation in the aggregate amount of $0.3 million plus reimbursement of their out-of-pocket expenses. We do not have a retirement plan for our officers or directors.

We entered into an agreement with Fabiana with an effective date of February 2008, a related-party entity incorporated in the Marshall Islands in October 2008. Fabiana is beneficially owned by the Company’s Chief Executive Officer. Under the agreement, Fabiana provides the services of the individuals who serve in the positions of Chief Executive and Chief Financial Officer of the Company. The agreement is for a period of five years unless terminated earlier in accordance with the terms of the agreement. Pursuant to the agreement, the Company is obligated to pay (i) annual remuneration to Fabiana in the amount of $2,000,000; (ii) potential bonus compensation for the services provided at the end of each year with any such bonus to be determined by the Compensation Committee; and (iii) a grant to Fabiana of 1,000,000 shares of common stock out of the 1,834,055 shares reserved in the Company’s 2008 Equity Incentive Plan (described below). Such shares vest quarterly in eight equal installments beginning in May 2008.

On January 21, 2009, the Company’s Chief Executive Officer received a retroactive cash bonus of Euro 5,000,000. In addition, the annual remuneration to Fabiana was changed to Euro 2,000,000 instead of $2,000,000.

On January 25, 2010, the Compensation Committee approved that a bonus in the form of 4,500,000 shares of the Company’s common stock, with par value $0.01, be granted to Fabiana for the contribution during 2009 as well as for anticipated services as the Company’s CEO during the years 2010, 2011 and 2012. The shares shall vest over a period of four years, with 1,000,000 shares to vest on the grant date; 1,000,000 shares to vest on each of December 31, 2010 and 2011; 1,500,000 shares to vest on December 31, 2012, respectively.

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On January 25, 2010, the Company’s 2008 Equity Incentive Plan was amended to provide that a total of 21,834,055 common shares be reserved for issuance under the Plan and the annual remuneration to Fabiana was amended to Euro 2,700,000.

Equity Incentive Plan

On January 16, 2008, the Company’s Board of Directors approved the 2008 Equity Incentive Plan, or the Plan. Under this Plan, officers, key employees, and directors are eligible to receive, with respect to the Company’s common stock, awards of stock options, stock appreciation rights, restricted stock, restricted stock units, phantom stock units and unrestricted stock. A total of 1,834,055 shares of common stock were reserved for issuance under the Plan, subject to adjustment for changes in capitalization as provided in the Plan. The Plan is administered by our board of directors. Unless terminated earlier by our board of directors, the plan will expire after January 16, 2018, which is the tenth anniversary of the date the Plan was adopted. As of December 31, 2008, we have awarded 1,000,000 common shares to Fabiana. The shares vest quarterly in eight equal installments with the first installment of 125,000 common shares vesting on May 28, 2008. The fair value of each share on the grant date was $75.09. The fair value of the 1,000,000 common shares on the grant date amounted to $75.1 million, or $75.09 per share, and will be recognized as compensation in the consolidated accompanying statements of income over the two year vesting period. The related stock based compensation expense for the year ended December 31, 2009 amounted to $37.8 million and is included in “General and administrative expenses in the accompanying consolidated statements of operations. As of April 6, 2010, all of these common shares have vested.

On October 2, 2008, the Company’s Board of Directors and Compensation Committee approved grants in the amount of 9,000 vested shares and 9,000 unvested shares to the non-executive directors of the Company. The unvested common shares will vest ratably over a three year period with the first vesting date being January 1, 2009. The fair value of each vested share on the grant date was $33.59 and will be recognized as compensation in the consolidated statements of operations over the three year vesting period quarterly in 12 equal installments. The fair value of the non-vested shares granted amounted to $0.3 million and will be recognized as compensation in the accompanying consolidated statements of income over the three year vesting period. Stock based compensation for our directors relating to this grant for the year ended December 31, 2009 amounted to $0.1 million and is included in “General and administrative expenses” in the accompanying consolidated statements of operations.

On March 12, 2009, 70,621 shares of non-vested common stock out of the 1,834,055 shares reserved in the Company’s 2008 Equity Incentive Plan were granted to an executive of the Company. The shares will vest in annual installments of 42,373 and 28,248 shares on March 1, 2010 and 2011, respectively. Stock based compensation for our directors relating to this grant for the year ended December 31, 2009 amounted to $0.2 million and is included in “General and administrative expenses” in the accompanying consolidated statements of operation.

On January 25, 2010, the Compensation Committee approved that a bonus in the form of 4,500,000 shares of the Company’s common stock, with par value $0.01, be granted to Fabiana for the contribution during 2009 as well as for anticipated services of the Company’s CEO during the years 2010, 2011 and 2012. The shares shall vest over a period of four years, with 1,000,000 shares to vest on the grant date; 1,000,000 shares to vest on each of December 31, 2010 and 2011; 1,500,000 shares to vest on December 31, 2012, respectively.

On January 25, 2010, the Company’s 2008 Equity Incentive Plan was amended to provide that a total of 21,834,055 common shares be reserved for issuance under the Plan.

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Stock options and stock appreciation rights may be granted under the Plan with a per share exercise price equal to the per share fair market value of our common stock on the date of grant, unless otherwise determined by the Plan’s administrator, but in no event will the exercise price be less than the fair market value of a common share on the date of grant. Options and stock appreciation rights may be exercisable at times and under conditions as determined by the Plan’s administrator, but in no event will they be exercisable later than ten years from the date of grant. Awards of restricted stock, restricted stock units and phantom stock units may be granted under the Plan subject to vesting and forfeiture provisions and other terms and conditions as determined by the Plan’s administrator. The Plan’s administrator may grant dividend equivalents with respect to grants of restricted stock units and phantom stock units.

Adjustments may be made to outstanding awards in the event of a corporate transaction or change in capitalization or other extraordinary event. In the event of a “change in control” (as defined in the Plan), unless otherwise provided by the Plan’s administrator in an award agreement, awards then outstanding will become fully vested and exercisable in full.

C. Board Practices

Committees of the Board of Directors

The Board has established an audit committee comprised of three independent directors: Evangelos Mytilinaios, George Demathas and George Xiradakis. The Audit Committee is governed by a written charter, which is approved by the Board. The Board has determined that the members of the Audit Committee meet the applicable independence requirements under United States Securities and Exchange Commission, or SEC, Rule 10A-3 that all members of the Audit Committee fulfill the requirement of being financially literate and that George Xiradakis qualifies as an audit committee financial expert as defined under current SEC regulations. The Audit Committee is appointed by the Board and is responsible for, among other matters:

• engaging the Company’s external and internal auditors;

• approving in advance all audit and non-audit services provided by the auditors;

• approving all fees paid to the auditors;

• reviewing the qualification and independence of the Company’s external auditors;

• reviewing the Company’s relationship with external auditors, including considering audit fees which should be paid as well as any other fees which are payable to auditors in respect of non-audit activities, discussing with the external auditors such issues as compliance with accounting principles and any proposals which the external auditors have made vis-à-vis the Company’s accounting principles and standards and auditing standards;

• overseeing the Company’s financial reporting and internal control functions;

• overseeing the Company’s whistleblower’s process and protection; and

• overseeing general compliance with related regulatory requirements.

In March 2008, the board of directors appointed a compensation committee consisting of two independent directors, Mr. George Xiradakis and Mr. George Demathas, who serves as Chairman. The compensation committee is responsible for determining the compensation of the Company’s executive officers. Previously, the full board of directors performed the function of the compensation committee. In March 2008, the board of directors appointed a nominating committee consisting of two independent directors, Mr. George Demathas and Mr. George Xiradakis, who serves as Chairman. The nominating committee is responsible for identifying, evaluating and recommending to

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the board individuals for membership on the board, as well as considering nominees proposed by shareholders in accordance with the Company’s by-laws. Previously, the full board of directors performed the functions of the nominating committee.

D. Employees

As of December 31, 2009, the Company employed four persons at its offices in Athens, Greece.

E. Share Ownership

With respect to the total amount of common stock owned by all of our officers and directors, individually and as a group, see Item 7 “Major Shareholders and Related Party Transactions”.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth information regarding the owners of more than five percent of our common stock as at April 6, 2010. All of our shareholders, including the shareholders listed in this table, are entitled to one vote for each share of common stock held.

Title of Class	Identity of Person or Group	Amount Owned	Percentage of Common Stock
Common Stock, par value $0.01	George Economou *	44,931,746	15.8	%

* Mr. Economou may be deemed to beneficially own 10,944,910 of these shares through Elios Investments Inc., which is a wholly-owned subsidiary of the Entrepreneurial Spirit Foundation, a Lichtenstein foundation, the beneficiaries of which are Mr. Economou and members of his family. Mr. Economou may be deemed to beneficially own 5,500,000 of these shares through Fabiana Services S.A., a Marshall Islands corporation, of which Mr. Economou is the controlling person. Mr. Economou may be deemed to beneficially own 254,512 of these shares through Goodwill Shipping Company Limited, a Malta corporation, of which Mr. Economou is the controlling person.

Mr. Economou may be deemed to beneficially own 963,667 of these shares, as well as an additional 3,500,000 shares which are issuable upon the exercise of warrants dated April 8, 2009, through Sphinx Investment Corp., a Marshall Islands corporation, of which Mr. Economou is the controlling person. Each warrant entitles the holder to purchase one share of common stock. The warrants have been issued to Sphinx Investment Corp. pursuant to a Securities Purchase Agreement dated March 6, 2009. A total of 1,500,000 warrants to purchase shares of common stock became exercisable on October 8, 2009, at an exercise price of $20 per share. A total of 1,500,000 warrants to purchase shares of common stock will became exercisable on April 8, 2010, at an exercise price of $25 per share. A total of 500,000 warrants to purchase shares of common stock will became exercisable on October 8, 2010, at an exercise price of $30 per share.

Mr. Economou may be deemed to beneficially own 23,768,657 of these shares through Entrepreneurial Spirit Holdings Inc., a Liberian corporation, which is a wholly-owned subsidiary of the Entrepreneurial Spirit Foundation, a Lichtenstein foundation, the beneficiaries of which are Mr. Economou and members of his family. Entrepreneurial Spirit Holdings Inc owns 33,955,224 shares in Series A Convertible Preferred Stock of the Issuer, which in accordance with the terms of the Securities Purchase Agreements, dated July 9, 2009, by and between the Issuer and Entrepreneurial Spirit Holdings Inc. and the sellers named therein, may be converted into shares of common stock at the option of Entrepreneurial Spirit Holdings Inc., at any time, at a rate of 1:0.7.

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B. Related Party Transactions

Mr. George Economou, our Chairman and Chief Executive Officer, controls the Entrepreneurial Spirit Foundation (the “Foundation”), a Liechtenstein foundation that owns 70.0% of the issued and outstanding capital stock of Cardiff, our manager. The other shareholder of Cardiff is Prestige Finance S.A., a Liberian corporation, all of the issued and outstanding capital of which is beneficially owned by Mr. Economou’s sister, Ms. Chryssoula Kandylidis, who serves on our board of directors.

Cardiff Management and Services Agreements: We outsource all of our technical and commercial functions relating to the operation and employment of our drybulk carrier vessels to Cardiff pursuant to new management agreements effective July 1, 2008, with an initial term of five years that will be automatically extended to successive five year terms. In the case of a vessel having been sold, notice to terminate the relevant management agreement is not effective until 90 days following the date of the protocol of delivery, unless otherwise mutually agreed in writing.

The management fee we pay to Cardiff, our manager, is Euro 600 per day, per vessel. In addition, the management agreements provide for payment to Cardiff of: (i) a fee of Euro 105 per day per vessel for services in connection with compliance with Section 404 of the Sarbanes-Oxley Act of 2002; (ii) Euro 500 for superintendent visits on board vessels in excess of five days per annum, per vessel, for each additional day, per superintendent; (iii) chartering commission of 1.25% on all freight, hire and demurrage revenues; (iv) a commission of 1.00% on all gross sale proceeds or purchase price paid on vessels since October 1, 2006; (v) a quarterly fee of $250,000 for services in relation to the financial reporting requirements of the Company under the Securities and Exchange Commission rules and the establishment and monitoring of internal controls over financial reporting; and (vi) a commission of 0.2% on derivative agreements and loan financing or refinancing.

Cardiff also provides commercial operations and freight collection services in exchange for a fee of Euro 90 per day, per vessel. Cardiff provides insurance services and obtains insurance policies for the vessels for a fee of 5.00% on the total insurance premiums, per vessel. Furthermore, if required, Cardiff will also handle and settle all claims arising out of its duties under the management agreements (other than insurance and salvage claims) in exchange for a fee of Euro 150 per person, per eight hour day.

Cardiff provides the Company with financial accounts services in exchange for a fee of Euro 120 per day, per vessel. The Company also pays Cardiff a quarterly fee of Euro 260,500 for services rendered by Cardiff in connection with the Company’s financial accounting services. Pursuant to the terms of the management agreements, all fees payable to Cardiff are adjusted upward or downward based on the year-on-year increase in the Greek consumer price index.

Additionally the Company pays a management fee of $40,000 per month per drillship Hull 1837 and Hull 1838. The management agreements also provide for: (i) chartering commission of 1.25% on all freight, hire and demurrage revenues; (ii) a commission of 1% on all gross sale proceeds or purchase price paid for drillships; (iii) a commission of 1% on loan financing or refinancing; and (iv) a commission of 2% on insurance premiums.

Until September 30, 2006, under the management agreement with Cardiff, Drybulk S.A. was acting as the chartering broker and sales and purchase broker for the Company in exchange for a commission of 1.25% on all freight, hire, demurrage revenues and a commission of 1% on all gross sale proceeds of, or purchase prices paid for, vessels. Since October 1, 2006 Cardiff has acted as the Company’s chartering broker and sales and purchase broker.

Management fees for the period from January 1 to December 31, 2007 were based at a daily fixed fee of $689 per vessel which was based on the Dollar/Euro exchange rate of $1.30 per Euro. At the beginning of each

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calendar quarter, the daily fixed per vessel fee was adjusted upward or downward according to the Dollar/Euro exchange rate as quoted by EFG Eurobank Ergasias S.A. two business days before the end of the immediately preceding calendar quarter. Management fees for the period from January 1, 2008 to June 30, 2008 were based on a daily fixed fee of $775.50 per vessel which was based on the Dollar/Euro exchange rate of $1.41 per Euro. At the beginning of each calendar quarter, the daily fixed per vessel fee was adjusted upward or downward according to the Dollar/Euro exchange rate as quoted by EFG Eurobank Ergasias S.A. two business days before the end of the immediately preceding calendar quarter.

Office Lease: We lease office space in Athens, Greece, from Mr. George Economou, our Chairman and Chief Executive Officer. On October 1, 2005 and effective as of the same date, we entered into a rental agreement with our Chief Executive Officer to lease office space in Athens, Greece. The agreement is for the duration of 5 years beginning October 1, 2005 and expires on September 30, 2010. The annual rental for the first two years is Euro 9,000 and thereafter it will be adjusted annually for inflation increases.

Consultancy Agreement: We entered into an agreement with Fabiana, a related-party entity incorporated in the Marshall Islands, in October 2008, with an effective date of February 2008. Fabiana is beneficially owned by the Company’s Chief Executive Officer. Under the agreement, Fabiana provides the services of the individuals who serve in the positions of Chief Executive and Chief Financial Officer of the Company. The agreement is for a period of five years unless terminated earlier in accordance with the terms of the agreement. Pursuant to the agreement, the Company is obligated to pay (i) annual remuneration to Fabiana in the amount of $2,000,000; (ii) potential bonus compensation for the services provided at the end of each year with any such bonus to be determined by the Compensation Committee; and (iii) a grant to Fabiana of 1,000,000 shares of common stock out of the 1,834,055 shares reserved in the Company’s 2008 Equity Incentive Plan (described below). Such shares vest quarterly in eight equal installments beginning in May 2008. On January 21, 2009 the annual remuneration to Fabiana was changed to Euro 2,000,000 from $2,000,000. On January 25, 2010, the Compensation Committee approved that a bonus in the form of 4,500,000 shares of the Company’s common Stock, with par value $0.01, be granted to George Economou for his contribution during 2009 as well as for anticipated services as the Company’s CEO during the years 2010, 2011 and 2012. The shares shall vest over a period of four years, with 1,000,000 shares to vest on the grant date; 1,000,000 shares to vest on each of December 31, 2010 and 2011; and 1,500,000 shares to vest on December 31, 2012, respectively. In addition on January 25, 2010, the Company’s 2008 Equity Incentive Plan was amended to provide that a total of 21,834,055 common shares be reserved for issuance under the Plan and that the annual remuneration be amended to Euro 2,700,000.

Right of First Refusal: Until February 2010, Mr. Economou was a party to a letter agreement that included a provision requiring Mr. Economou to (i) use commercially reasonable efforts to cause each company affiliated with Cardiff that owns a bareboat chartered vessel (meaning a vessel for which the charterer bears all operating expense and risk) to sell its vessels upon redelivery from its bareboat charterer and allow the Company to exercise a right of first refusal to acquire that bareboat chartered vessel once an agreement that sets forth the terms of the sale is entered into, and (ii) allow the Company to exercise a right of first refusal to acquire any drybulk carrier, after Mr. Economou, or any of his other affiliates, entered into an agreement that set forth terms upon which he or it would acquire that drybulk carrier. Under the agreement, Mr. Economou was required to notify our audit committee of any agreement that he or his other affiliates entered into to purchase a drybulk carrier (or to sell the bareboat chartered vessel) and provide the audit committee with a period of 7 days for single vessel transactions and 14 days for multi-vessel transactions in which to decide whether to accept the opportunity and nominate a subsidiary of the Company to become the purchaser before Mr. Economou could accept the opportunity or offer it to any of his other affiliates. The letter agreement was terminated on February 22, 2010 and, as a result, the Company no longer has a right of first refusal for the acquisition of drybulk vessels.

Purchase of Derivatives from Related Parties: In order to maintain the minimum hedging ratio of the loan amendment with an international bank, on June 22, 2007 the Company acquired interest rate derivatives which were valued on that date by the financial institutions that were counterparties to these agreements at an amount of $1.3 million (asset), from two related companies controlled by Mr. Economou.

Purchase of Ocean Rig ASA shares: On December 20, 2007, Primelead Limited, a wholly owned subsidiary of DryShips acquired 51,778,647 shares in Ocean Rig ASA following its nomination as a buyer from Cardiff. This represented 30.4% of the issued shares in Ocean Rig. A commission was paid to Cardiff amounting to $4.1 million. The commission was treated as an internal cost and is included in “Other, net” in the Company’s consolidated statements of operations. This commission was paid on February 1, 2008.

In April 2008, 7,546,668 shares, representing 4.4% of the share capital of Ocean Rig, were purchased from companies controlled by the Company’s Chief Executive Officer for a consideration of $66.8 million, which is the U.S. dollar equivalent of NOK 45 per share, which is the price that was offered to all shareholders in the mandatory offering.

A commission of $9.9 million was paid to Cardiff for services rendered in relation to the acquisition of the remaining shares in Ocean Rig ASA. This above commission was paid on December 5, 2008 and is reflected in “Other, net” in the company’s consolidated statements of operations.

Cancellation of Purchases of Four Panamax Vessels: We previously entered into separate agreements to acquire four Panamax vessels, including two newbuildings, for an aggregate purchase price of $400 million, from

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companies beneficially owned by George Economou, our Chairman and Chief Executive Officer. In December 2008, we agreed to cancel these transactions in exchange for a cash payment by us of $105.0 million in addition to the sellers’ retaining the deposits totaling $55.0 million which we previously paid for the four vessels. The vessels were: (i) a 75,228 dwt Panamax vessel built in 2008; (ii) a 75,204 dwt Panamax vessel built in 2007; (iii) a 75,000 dwt Panamax vessel under construction in China scheduled to be delivered during the fourth quarter of 2008; and (iv) a 75,000 dwt Panamax vessel under construction in China scheduled to be delivered during the first quarter of 2009. As part of the termination agreement, we were granted exclusive option to purchase the abovementioned four Panamax drybulk carriers on an en bloc basis at a fixed purchase price of $160.0 million. The exclusive purchase option granted to us by the selling companies terminated on December 31, 2009 and was not exercised.

Cancellation of Purchases of Nine Capesize Vessels: In October 2008, we agreed to purchase nine Capesize drybulk carriers for consideration aggregating $1.17 billion, consisting of 19.4 million of our common shares and the assumption of an aggregate of $478.3 million in debt and future commitments. The sellers were clients of Cardiff, including affiliates of George Economou, our Chairman and Chief Executive Officer, and unaffiliated parties. In light of the considerable decrease in asset values of the nine Capesize vessels, we reached an agreement with the sellers to cancel this transaction. The consideration to cancel the transaction consisted of the issuance of 6.5 million of our common shares to entities that are unaffiliated with us and nominated by the third-party sellers, which were subject to a six month lock-up period. The consideration received by entities controlled by George Economou consisted solely of 3,500,000 warrants with strike prices, depending on the relevant tranches, of between $20 to $30 per share. Each warrant entitles the holder to purchase one share of our common stock. The warrants vest over an 18-month period and expire after five years.

Adjustment in Contract Price for Two Panamax Newbuildings: We had previously agreed to acquire two Panamax newbuildings, identified as Hulls 1518A and 1519A, for a purchase price in the amount of $33.6 million each. These vessels were scheduled for delivery from Hudong Shipbuilding in the fourth quarter of 2009 and the first quarter of 2010, respectively. An affiliated client of our manager, Cardiff, with which we are affiliated, had agreed to purchase Hull 1569A, a sister vessel to Hulls 1518A and 1519A. We had agreed to increase the purchase price for Hulls 1518A and 1519A by $4.5 million each in consideration for: (i) a corresponding $9.0 million decrease in the purchase price of Hull 1569A and (ii) an undertaking that on delivery of Hulls 1518A and 1519A, the owner of Hull 1569A did repay us by effecting payment of $9.0 million to Hudong Shipbuilding. We issued a guarantee to the shipyard for this increase in the purchase price of Hulls 1518A and 1519A. These hulls were delivered in 2009 and $9.0 million was paid upon delivery.

Acquisition of Newbuilding Drillships Identified as Hulls 1837 and 1838: On October 3, 2008, we entered into a share purchase agreement to acquire the equity interests of DrillShips Holdings, which owns two newbuilding advanced capability drillships for use in ultra deepwater drilling locations, identified as Hull 1837 and Hull 1838, and is controlled by clients of Cardiff, including Mr. Economou. As part of this transaction, the Company assumed the liabilities for two $115 million loan facilities which, in addition to the customary security and guarantees issued to the borrower, were collateralized by certain vessels owned by certain parties affiliated with Mr. Economou, corporate guarantees of certain entities affiliated with Mr. Economou and a personal guarantee from Mr. Economou. The drillships are sister vessels to drillship hulls 1865 and 1866 and are also being constructed by Samsung Heavy Industries. The expected cost of construction is approximately $800 million per unit. As of April 6, 2010, $614 million has been paid in installments for these hulls. As of April 6, 2010 we have installment payments due totaling $767.7 million and have incurred total debt obligations of $230 million. We have not yet obtained financing for these installment payments for Hulls 1837 and 1838, which amount to approximately 70% of the purchase price of these drillships.

On May 15, 2009, the above transaction closed. As consideration of this acquisition, Ocean Rig UDW issued to the sellers the number of common shares equal to 25% of its total issued and outstanding common shares as of May 15, 2009. The consideration paid to the related-party sellers was determined based on various fair value valuation methods.

On July 15, 2009, the Company acquired the remaining 25% of the total issued and outstanding capital stock of Ocean Rig UDW from the minority interests. The consideration paid for the 25% interest consisted of a one-time $50 million cash payment and the issuance of 52,238,806 shares of the Company’s Series A Convertible Preferred Stock with an aggregate face value of $280 million.

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C. Interests of Experts and Counsel

Not Applicable.

Item 8. Financial Information

A. Consolidated statements and other financial information.

See Item 18.

Legal Proceedings

We have not been involved in any legal proceedings which may have, or have had, a significant effect on our business, financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.

We previously entered into an agreement with Samsun Logix Corporation, or Samsun, the buyers of the MV Toro, to sell the vessel at a reduced price. The buyers were obligated to remit an additional deposit of $1.5 million. We received notice from Samsun that it filed for receivership. Following Samsun’s failure to pay the additional deposit, we commenced arbitration proceedings against Samsun. In February 2010 Samsun’s plan of reorganization was approved by its creditors. As part of this plan the Company will recoup a certain percentage of the agreed-upon purchase price. As this is contingent on the successful implementation of the plan of reorganization, the Company is unable to estimate the impact on the Company’s financial statements.

On March 15, 2008, we entered into a memorandum of agreement to sell the MV Delray ex Lacerta, a 1994 built, 71,862 dwt Panamax drybulk carrier, to an unaffiliated third party for a sale price of $55.5 million. The sale will not close due to the buyer’s repudiation of its obligations under the memorandum of agreement. A deposit on the vessel in the amount of $5.6 million was made by the buyer. We are pursuing all legal remedies against the buyer.

In January 2009, we entered into an agreement to cancel the previously announced acquisition of the 2005 built Panamax drybulk carrier MV Petalidi (ex MV Maple Valley) for a purchase price of $61.0 million from an unrelated third party. In view of market conditions and following negotiations, we and the seller mutually agreed to cancel the memorandum of agreement to acquire the MV Petalidi (ex MV Maple Valley) in consideration of a payment of $8.0 million to the seller and the seller’s retention of the $6.1 million deposit that was previously paid. This cancellation reduced our 2009 capital expenditures by $46.9 million. Proceedings that had been pending in London and New York were both discontinued as a result of this agreement.

On March 5, 2009, a complaint against the Company’s board of directors and a former director was filed in the High Court of the Republic of the Marshall Islands for an unspecified amount of damages alleging that such directors had breached their fiduciary duty of good faith in connection with the termination of the acquisition of four Panamax drybulk carriers and nine Capesize drybulk carriers. The complaint, which was amended on August 14, 2009, also seeks the disgorgement of all payments made in connection with the termination of these acquisitions. The Company filed a motion for an early dismissal of this complaint. This motion to dismiss the complaint was granted by the High Court in February 2010. On March 16, 2010, the claimant filed with the Supreme Court of the Republic of the Marshall Islands a Notice of Appeal against the Order of the High Court. This appeal is to be heard by the Supreme Court on a future unknown date.

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Ocean Rig’s Leiv Eiriksson operated in Angola in the period 2002 to 2007. Ocean Rig understands that the Angolan government may retroactively levy import/export duties for the period 2004 to 2007. Ocean Rig has not received any formal claim in relation to the potential duties and no provision has been made. The maximum exposure related to a potential claim is estimated to be between $5 to $10 million.

Dividend Policy

In light of a lower freight rate environment and a highly challenged financing environment, our board of directors, beginning in the fourth quarter of 2008, suspended our common share dividend. Our dividend policy will be assessed by the board of directors from time to time. The suspension allows us to preserve capital and use the preserved capital to capitalize on market opportunities as they may arise. Until market conditions improve, it is unlikely that we will reinstate the payment of dividends. In addition, other external factors, such as our lenders imposing restrictions on our ability to pay dividends under the terms of our loan agreements, may limit our ability to pay dividends. Further, we may not be permitted to pay dividends if we are in breach of the covenants contained in our loan agreements. In addition, the waivers of our non-compliance with covenants in our loan agreements that we received from our lenders may prohibit us from paying our dividends.

Declaration and payment of any dividend is subject to the discretion of our Board of Directors. The timing and amount of dividend payments will be dependent upon our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of distributions to shareholders and other factors.

Because we are a holding company with no material assets other than the stock of our subsidiaries, our ability to pay dividends, if any, in the future, will depend on the earnings and cash flow of our subsidiaries and their ability to pay dividends to us. If there is a substantial decline in the drybulk charter market, our earnings would be negatively affected thus limiting our ability to pay dividends, if any, in the future. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividend.

We believe that, under current law, our dividend payments from earnings and profits will constitute “qualified dividend income” and as such will generally be subject to a 15% United States federal income tax rate with respect to non -corporate individual stockholders. Distributions in excess of our earnings and profits will be treated first as a non-taxable return of capital to the extent of a United States stockholder’s tax basis in its common stock on a dollar-for-dollar basis and thereafter as capital gain. Please see the section of this report entitled “Tax Considerations” for additional information relating to the tax treatment of our dividend payments.

B. Significant Changes

See note 19 of item 18.

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Item 9. The Offer and Listing

PRICE RANGE OF COMMON STOCK

Our common stock currently trades on the NASDAQ Global Select Market under the symbol “DRYS”. Since our initial public offering in February 2005, the high and low closing price of our common stock for the designated periods were as follows:

	Sales Price
For the Period	High		Low
2010
April 1 through April 6	$	6.00	$	6.39
March	$	6.18	$	5.38
February	$	5.82	$	5.27
January	$	6.77	$	5.50
2009
Fourth quarter	$	7.37	$	5.82
December		6.36		5.82
November		7.14		5.86
October		7.37		6.01
Third quarter	$	7.48	$	4.90
September		7.48		5.65
August		6.71		5.69
July		7.08		4.90
Second quarter	$	10.70	$	4.52
First quarter	$	16.58	$	2.79
2008
1st Quarter ended March 31, 2008	$	87.45	$	52.18
2nd Quarter ended June 30, 2008	$	110.74	$	59.98
3rd Quarter ended September 30, 2008	$	79.61	$	33.15
4th Quarter ended December 31, 2008	$	35.45	$	3.54
Year ended December 31, 2008	$	110.74	$	3.54
2007
1st Quarter ended March 31, 2007	$	23.50	$	16.99
2nd Quarter ended June 30, 2007	$	43.38	$	23.24
3rd Quarter ended September 30, 2007	$	91.40	$	44.14
4th Quarter ended December 31, 2007	$	130.97	$	69.67
Year ended December 31, 2007	$	130.97	$	16.99
2006
Year ended December 31, 2006	$	18.01	$	8.58
	High		Low
2005
February 3, 2005 to December 31, 2005	$	23.16	$	12.16

Item 10. Additional Information

A. Share Capital

Not Applicable.

B. Memorandum and Articles of Association

Our current amended and restated articles of incorporation have been filed with the SEC as Exhibit 3.1 to our Registration Statement on Form 8-A (File No. 001-33922) on January 18, 2008, and our current amended and restated bylaws have been filed with the SEC as Exhibit 3.2 to our Registration Statement on Form 8-A (File No. 001-33922) on January 18, 2008. The information contained in these exhibits is incorporated by reference herein.

Information regarding the rights, preferences and restrictions attaching to each class of the shares is described in the sections entitled “Description of Capital Stock” and “Description of Preferred Shares” in our

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Registration Statement on Form F-3ASR (File No. 333-146540) filed with the SEC on October 5, 2007, as amended by Post-Effective Amendment No. 1, filed with the SEC on October 20, 2008, provided that since the date of that Registration Statement, our outstanding shares of common stock have increased to 284,826,871 as of April 6, 2010. Our outstanding shares of preferred stock have not increased since the date of the Registration Statement.

Directors

Our directors are elected by a plurality of the votes cast by stockholders entitled to vote in an election. Our articles of incorporation provide that cumulative voting shall not be used to elect directors. Our board of directors must consist of at least three members. The exact number of directors is fixed by a vote of at least 66 ²/3% of the entire board. Our bylaws provide for a staggered board of directors whereby directors shall be divided into three classes: Class A, Class B and Class C which shall be as nearly equal in number as possible. Shareholders, acting at a duly constituted meeting, or by unanimous written consent of all shareholders, initially designated directors as Class A, Class B or Class C. Class A directors served for a term expiring at the 2005 annual meeting of shareholders. Directors designated as Class B directors served for a term expiring at the 2006 annual meeting. Directors designated Class C directors served for a term expiring at the 2007 annual meeting. At annual meetings for each initial term, directors elected to replace those whose terms expire at such annual meetings will hold office until the third succeeding annual meeting. For instance, the current Class C directors were elected to hold office at the 2007 annual meeting and therefore their terms do not expire until the 2010 annual meeting. Each director serves his respective term of office until his successor has been elected and qualified, except in the event of his death, resignation, removal or the earlier termination of his term of office. Our board of directors has the authority to fix the amounts which shall be payable to the members of the board of directors for attendance at any meeting or for services rendered to us.

Stockholder Meetings

Under our bylaws, annual stockholder meetings will be held at a time and place selected by our board of directors. The meetings may be held in or outside of the Marshall Islands. Special meetings may be called by the board of directors, chairman of the board or by the president. Our board of directors may set a record date between 15 and 60 days before the date of any meeting to determine the stockholders that will be eligible to receive notice and vote at the meeting.

Dissenters’ Rights of Appraisal and Payment

Under the BCA, our stockholders have the right to dissent from various corporate actions, including any merger or consolidation, sale of all or substantially all of our assets not made in the usual course of our business, and receive payment of the fair value of their shares. In the event of any further amendment of our amended and restated articles of incorporation, a stockholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights with respect to those shares. The dissenting stockholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting stockholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the high court of the Republic of the Marshall Islands or in any appropriate court in any jurisdiction in which the Company’s shares are primarily traded on a local or national securities exchange.

Stockholders’ Derivative Actions

Under the BCA, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of common stock both at the time the derivative action is commenced and at the time of the transaction to which the action relates.

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Indemnification of Officers and Directors

Our bylaws include a provision that entitles any director or officer of the Corporation to be indemnified by the Corporation upon the same terms, under the same conditions and to the same extent as authorized by the BCA if he acted in good faith and in a manner reasonably believed to be in and not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

We are also authorized to carry directors’ and officers’ insurance as a protection against any liability asserted against our directors and officers acting in their capacity as directors and officers regardless of whether the Company would have the power to indemnify such director or officer against such liability by law or under the provisions of our bylaws. We believe that the indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.

The indemnification provisions in our bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.

Anti-Takeover Provisions of Our Charter Documents

Several provisions of our articles of incorporation and bylaws may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize stockholder value in connection with any unsolicited offer to acquire us. However, these anti -takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of our company by means of a tender offer, a proxy contest or otherwise, that a stockholder may consider in its best interest and (2) the removal of incumbent officers and directors.

Blank Check Preferred Stock

Under the terms of our articles of incorporation, our board of directors has authority, without any further vote or action by our stockholders, to issue up to 500 million shares of blank check preferred stock. Our board of directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management.

Stockholders Rights Agreement

We entered into a Stockholders Rights Agreement with American Stock Transfer & Trust Company, as Rights Agent, as of January 18, 2008. Under this Agreement, we declared a dividend payable of one preferred share purchase right, or Right, to purchase one one-thousandth of a share of the Company’s Series A Participating Preferred Stock for each outstanding share of DryShips Inc. common stock, par value U.S.$0.01 per share. The Right will separate from the common stock and become exercisable after (1) a person or group acquires ownership of 15% or more of the company’s common stock or (2) the 10th business day (or such later date as determined by the company’s board of directors) after a person or group announces a tender or exchange offer which would result in that person or group holding 15% or more of the company’s common stock. On the distribution date, each holder of a right will be entitled to purchase for $250 (the “Exercise Price”) a fraction (¹/1000th) of one share of the company’s preferred stock which has similar economic terms as one share of common stock. If an acquiring person (an “Acquiring Person”) acquires more than 15% of the company’s common stock then each holder of a right (except that acquiring person) will be entitled to buy at the exercise price, a number of shares of the company’s common stock which has a market value of twice the exercise price. Any time after the date an Acquiring Person obtains more than 15% of the company’s common stock and before that Acquiring Person acquires more than 50% of the company’s outstanding common stock, the company may exchange each right owned by all other rights holders, in whole or in part, for one share of the company’s common stock. The rights expire on the earliest of (1) February 4, 2018 or (2) the exchange or redemption of the rights as described above. The company can redeem the rights at any time prior to a public announcement that a person has acquired ownership of 15% or more of the company’s common stock. The terms of the rights and the Stockholders Rights Agreement may be amended without the consent of the rights holders at any time on or prior to the Distribution Date. After the Distribution Date, the

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terms of the rights and the Stockholders Rights Agreement may be amended to make changes, which do not adversely affect the rights of the rights holders (other than the Acquiring Person). The rights do not have any voting rights. The rights have the benefit of certain customary anti-dilution protections. As of December 31, 2009, no exercise of any purchase right has occurred. As of July 9, 2009, an amendment has been effected to the stockholders rights agreement to reflect the issuance of Series A Convertible Preferred Stock.

Classified Board of Directors

Our articles of incorporation provide for a board of directors serving staggered, three-year terms. Approximately one-third of our board of directors will be elected each year. The classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay stockholders who do not agree with the policies of the board of directors from removing a majority of the board of directors for two years.

Election and Removal of Directors

Our articles of incorporation prohibit cumulative voting in the election of directors. Our bylaws require shareholders to give advance written notice of nominations for the election of directors. Our bylaws also provide that our directors may be removed only for cause and only upon affirmative vote of the holders of at least 66 ²/3% of the outstanding voting shares of the Company. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.

Limited Actions by Stockholders

Our by-laws provide that if a quorum is present, and except as otherwise expressly provided by law, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders. Shareholders may act by way of written consent in accordance with the provisions of Section 67 of the BCA.

Advance Notice Requirements for Shareholder Proposals and Director Nominations

Our bylaws provide that shareholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of shareholders must provide timely notice of their proposal in writing to the corporate secretary. Generally, to be timely, a shareholder’s notice must be received at our principal executive offices not less than 150 days nor more than 180 days prior to the one year anniversary of the preceding year’s annual meeting. Our bylaws also specify requirements as to the form and content of a shareholder’s notice. These provisions may impede shareholders’ ability to bring matters before an annual meeting of shareholders or make nominations for directors at an annual meeting of shareholders.

C. Material Contracts

For a description of our loan agreements, please see Item 5. “Operating Financial Review and Prospects – B. Liquidity and Capital Resources – Current Credit Facilities.” Other than as discussed in this annual report, we have no other material contracts, other than contracts entered into in the ordinary course of business, to which the Company or any member of the group is a party.

D. Exchange Controls

Under Marshall Islands and Greek law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non -resident holders of our common stock.

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E. Taxation

United States Taxation

The following discussion is based upon the provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed U.S. Treasury Department regulations, or Treasury Regulations, administrative rulings, pronouncements and judicial decisions, all as of the date of this Annual Report. Unless otherwise noted, references to the “Company” include the Company’s subsidiaries. This discussion assumes that the Company does not have an office or other fixed place of business in the United States.

Taxation of the Company’s Shipping Income: In General

The Company anticipates that it will derive gross income from the use and operation of vessels in international commerce and that this income will principally consist of freights from the transportation of cargoes, hire or lease from time or voyage charters and the performance of services directly related thereto, which the Company refers to as “shipping income.”

Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States will be considered to be 50% derived from sources within the United States. Shipping income attributable to transportation that both begins and ends in the United States will be considered to be 100% derived from sources within the United States. The Company is not permitted by law to engage in transportation that gives rise to 100% U.S. source income. Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States.

Shipping Income derived from sources outside the United States will not be subject to U.S. federal income tax.

Based upon the Company’s anticipated shipping operations, the Company’s vessels will operate in various parts of the world, including to or from U.S. ports. Unless exempt from U.S. taxation under Section 883 of the Code, the Company will be subject to U.S. federal income taxation, in the manner discussed below, to the extent its shipping income is considered derived from sources within the United States.

Application of Code Section 883

Under the relevant provisions of Section 883 of the Code and the Treasury Regulations promulgated thereunder, the Company will be exempt from U.S. taxation on its U.S. source shipping income if:

(i) It is organized in a “qualified foreign country” which is one that grants an equivalent exemption from tax to corporations organized in the United States in respect of each category of shipping income for which exemption is being claimed under Section 883 of the Code, which the Company refers to as the “Country of Organization Requirement”; and

(ii) It can satisfy any one of the following two (2) stock ownership requirements:

• more than 50% of the Company’s stock, in terms of value, is beneficially owned by individuals who are residents of a qualified foreign country, which the Company refers to as the “50% Ownership Test”; or

• the Company’s stock is “primarily and regularly” traded on an established securities market located in the United States or in a qualified foreign country, which the Company refers to as the “Publicly Traded Test”.

The U.S. Treasury Department has recognized (i) the Marshall Islands, the country of incorporation of the Company and of a number of its ship-owning subsidiaries and (ii) Malta, the country of incorporation of the remaining ship-owning subsidiaries of the Company, as qualified foreign countries. Accordingly, the Company and its subsidiaries satisfy the Country of Organization Requirement.

Therefore, the Company’s eligibility to qualify for exemption under Section 883 is wholly dependent upon being able to satisfy one of the stock ownership requirements. For the 2009 taxable year, the Company believes that

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it satisfied the Publicly-Traded Test since, for more than half the days of the Company’s 2009 taxable year, the Company’s stock was “primarily and regularly traded” on the Nasdaq Global Select Market, which is an “established securities market” in the United States within the meaning of the Treasury Regulation under Section 883 of the Code, and intends to take this position on its 2009 United States income tax returns.

Taxation in Absence of Exemption under Section 883 of the Code

To the extent the benefits of Section 883 of the Code are unavailable with respect to any item of U.S. source income, the Company’s U.S. source shipping income would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions, or the 4% gross basis tax regime. Since under the sourcing rules described above, no more than 50% of the Company’s shipping income would be treated as being derived from U.S. sources, the maximum effective rate of U.S. federal income tax on the Company’s shipping income would never exceed 2% under the 4% gross basis tax regime.

Based on the Company’s U.S. source Shipping Income during the 2008 and 2009 taxable years, the Company would be subject to U.S. federal income tax of approximately $1.7 million and $0.3 million respectively under Section 887 of the Code in the absence of an exemption under Section 883 of the Code.

Gain on Sale of Vessels

Regardless of whether we qualify for exemption under Section 883 of the Code, we will not be subject to U.S. federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States.

U.S. Federal Taxation of Our Other Income

In addition to our shipping operations, we provide drilling services to third parties on the United States Outer Continental Shelf through our indirect wholly-owned subsidiary, Ocean Rig USA LLC. Ocean Rig USA LLC is engaged in a trade or business in the United States. Therefore, Ocean Rig USA LLC is subject to U.S. federal income tax on a net basis on its taxable income. The amount of such taxable income and such U.S. federal income tax liability will vary depending upon the level of Ocean Rig USA LLC’s operations in the United States in any given taxable year. Distributions from Ocean Rig USA LLC to our subsidiary that owns the interests in Ocean Rig USA LLC may be subject to U.S. federal withholding tax at a 30% rate.

U.S. Federal Income Taxation of Holders

U.S. Federal Income Taxation of U.S. Holders

As used herein, the term “U.S. Holder” means a beneficial owner of common stock that is a U.S. citizen or resident, U.S. corporation or other U.S. entity taxable as a corporation, an estate the income of which is subject to U.S. federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust.

If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common stock, you are encouraged to consult your tax advisor regarding the U.S. federal income tax consequences of owning an interest in a partnership that holds our common stock.

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Distributions

Subject to the discussion of passive foreign investment companies below, any distributions made by us with respect to our common stock to a U.S. Holder will generally constitute dividends, which may be taxable as ordinary income or “qualified dividend income” as described in more detail below, to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current or accumulated earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder’s tax basis in its common stock on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a U.S. corporation, its Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive from the Company. Dividends paid with respect to our common stock will generally be treated as “passive category income” or, in the case of certain types of U.S. Holders, “general category income” for purposes of computing allowable foreign tax credits for U.S. foreign tax credit purposes.

Dividends paid on our common stock to a U.S. Holder who is an individual, trust or estate, or a U.S. Individual Holder, will generally be treated as “qualified dividend income” that is taxable to such U.S. Individual Holders at preferential tax rates (through 2010) provided that (1) the Company’s common stock is readily tradable on an established securities market in the United States (such as the Nasdaq Market, on which our common stock is listed); (2) we are not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we are, have been or will be); and (3) the U.S. Individual Holder has owned the common stock for more than 60 days in the 121-day period beginning 60 days before the date on which the common stock becomes ex-dividend. There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a U.S. Individual Holder. Legislation has been previously introduced in the U.S. Congress which, if enacted, would preclude our dividends from qualifying for such preferential rates prospectively from the date of its enactment. Any dividends paid by the Company which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Holder.

Special rules may apply to any “extraordinary dividend”, which is generally a dividend in an amount which is equal to or in excess of ten percent of a stockholder’s adjusted basis (or fair market value in certain circumstances) in a share of our common stock. If we pay an “extraordinary dividend” on our common stock that is treated as “qualified dividend income,” then any loss derived by a U.S. Individual Holder from the sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend.

Sale, Exchange or other Disposition of Common Stock

Assuming we do not constitute a passive foreign investment company for any taxable year, a U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common stock in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder’s tax basis in such stock. Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder’s holding period is greater than one year at the time of the sale, exchange or other disposition. Otherwise, such gain or loss will be treated as long-term capital gain on loss. Such capital gain or loss will generally be treated as U.S.-source income or loss, as applicable, for U.S. foreign tax credit purposes. A U.S. Holder’s ability to deduct capital losses is subject to certain limitations.

Passive Foreign Investment Company Status and Significant Tax Consequences

Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a passive foreign investment company, or a PFIC, for U.S. federal income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such holder held our common stock, either:

• at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business); or

• at least 50% of the average value of the assets held by the Company during such taxable year produce, or are held for the production of, passive income.

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For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which we own at least 25% of the value of the subsidiary’s stock. Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute passive income unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business.

Based on our current operations and future projections, we do not believe that we are, nor do we expect to become, a PFIC with respect to any taxable year. Although there is no legal authority directly on point, and we are not relying upon an opinion of counsel on this issue, our belief is based principally on the position that, for purposes of determining whether we are a PFIC, the gross income we derive or are deemed to derive from the time chartering and voyage chartering activities of our wholly-owned subsidiaries should constitute services income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that we or our wholly-owned subsidiaries own and operate in connection with the production of such income, in particular, the tankers, should not constitute assets that produce, or are held for the production of, passive income for purposes of determining whether we are a PFIC. We believe there is substantial legal authority supporting our position consisting of case law and Internal Revenue Service, IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, it should be noted that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, in the absence of any legal authority specifically relating to the Code provisions governing PFICs, the IRS or a court could disagree with our position. In addition, although we intend to conduct our affairs in a manner so as to avoid being classified as a PFIC with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future.

As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different taxation rules depending on whether the U.S. Holder makes an election to treat us as a “Qualified Electing Fund,” which election we refer to as a “QEF election.” As an alternative to making a QEF election, a U.S. Holder should be able to elect to mark-to-market our common stock, which election we refer to as a “Mark-to-Market Election.”

Taxation of U.S. Holders Making a Timely QEF Election

If a U.S. Holder makes a timely QEF election, which U.S. Holder we refer to as a “U.S. Electing Holder,” the U.S. Electing Holder must report each year for U.S. federal income tax purposes his pro rata share of our ordinary earnings and our net capital gain, if any, for our taxable year that ends with or within the taxable year of the U.S. Electing Holder, regardless of whether or not distributions were received from us by the U.S. Electing Holder. The U.S. Electing Holder’s adjusted tax basis in the common stock will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common stock and will not be taxed again once distributed. A U.S. Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common stock. A U.S. Holder would make a QEF election with respect to any taxable year that our company is a PFIC by filing IRS Form 8621 with his U.S. federal income tax return. If we were aware that we were to be treated as a PFIC for any taxable year, we would provide each U.S. Holder with all necessary information in order to make the QEF election described above.

Taxation of U.S. Holders Making a Mark-to-Market Election

Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate, our stock is treated as “marketable stock,” a U.S. Holder would be allowed to make a Mark-to-Market Election with respect to our common stock, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common stock at the end of the taxable year over such holder’s adjusted tax basis in the common stock. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in the common stock over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the Mark-to-Market Election. A U.S. Holder’s tax basis in its common stock would

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be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common stock would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common stock would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the U.S. Holder.

Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election

Finally, if we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a QEF election or a Mark-to-Market Election for that year, whom we refer to as a “Non-Electing U.S. Holder,” would be subject to special rules with respect to (1) any excess distribution (e.g., the portion of any distributions received by the Non-Electing U.S. Holder on our common stock in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing U.S. Holder in the three preceding taxable years, or, if shorter, the Non-Electing U.S. Holder’s holding period for the common stock), and (2) any gain realized on the sale, exchange or other disposition of our common stock. Under these special rules:

• the excess distribution or gain would be allocated ratably over the Non-Electing U.S. Holders’ aggregate holding period for the common stock;

• the amount allocated to the current taxable year and any taxable year before we became a PFIC would be taxed as ordinary income; and

• the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.

These penalties would not apply to a pension or profit sharing trust or other tax-exempt organization that did not borrow funds or otherwise utilize leverage in connection with its acquisition of our common stock. If a Non-Electing U.S. Holder who is an individual dies while owning our common stock, such holder’s successor generally would not receive a step-up in tax basis with respect to such stock.

U.S. Federal Income Taxation of “Non-U.S. Holders”

A beneficial owner of common stock that is not a U.S. Holder is referred to herein as a “Non-U.S. Holder.”

Dividends on Common Stock

Non-U.S. Holders generally will not be subject to U.S. federal income tax or withholding tax on dividends received from us with respect to our common stock, unless that income is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to those dividends, that income is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.

Sale, Exchange or Other Disposition of Common Stock

Non-U.S. Holders generally will not be subject to U.S. federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common stock, unless:

• the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of an income tax treaty with respect to that gain, that gain is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or

• the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met.

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If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, the income from the common stock, including dividends and the gain from the sale, exchange or other disposition of the common stock that is effectively connected with the conduct of that trade or business will generally be subject to regular U.S. federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, if you are a corporate Non-U.S. Holder, your earnings and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty.

Backup Withholding and Information Reporting

In general, dividend payments, or other taxable distributions, made within the United States to a holder of common shares will be subject to information reporting requirements. Such payments will also be subject to backup withholding tax if paid to a non-corporate U.S. Holder who:

• fails to provide an accurate taxpayer identification number;

• is notified by the IRS that he has failed to report all interest or dividends required to be shown on his U.S. federal income tax returns; or

• in certain circumstances, fails to comply with applicable certification requirements.

Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS Form W-8BEN, W-8ECI or W-8IMY, as applicable.

If a Non-U.S. Holder sells the Company’s common stock to or through a U.S. office or broker, the payment of the proceeds is subject to both U.S. backup withholding and information reporting unless the Non-U.S. Holder certifies that it is a non-U.S. person, under penalties of perjury, or it otherwise establishes an exemption. If a Non-U.S. Holder sells common stock through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to the Non-U.S. Holder outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to the Non-U.S. Holder outside the United States, if the Non-U.S. Holder sells common stock through a non-U.S. office of a broker that is a U.S. person or has some other contacts with the United States.

Backup withholding tax is not an additional tax. Rather, a taxpayer generally may obtain a refund of any amounts withheld under backup withholding rules that exceed the taxpayer’s income tax liability by filing a refund claim with the Internal Revenue Service.

Marshall Islands Tax Considerations

We are incorporated in the Marshall Islands. Under current Marshall Islands law, we are not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon payments of dividends by us to our stockholders.

Other Tax Considerations

In addition to the tax consequences discussed above, we may be subject to tax in one or more other jurisdictions where we conduct activities. The amount of any such tax imposed upon our operations may be material.

Ocean Rig provides offshore drilling services to third parties through its fully owned subsidiaries. Such services may be provided in countries where the tax legislation subjects the drilling revenue to withholding tax or other corporate taxes, and where the operating cost may also be increased due to tax requirements. The amount of such taxable income and liability will vary depending upon the level of Ocean Rig’s operations in such jurisdiction in any given taxable year. Distributions from Ocean Rig subsidiaries may be subject to withholding tax.

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Ocean Rig does not benefit from income tax positions that we believe are more likely than not to be disallowed upon challenge by a tax authority. If any tax authority successfully challenges our operational structure, inter-company pricing policies or the taxable presence of our key subsidiaries in certain countries; or if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure; or if we lose a material tax dispute in any country, particularly in the United States, Canada, the United Kingdom, or Norway, our effective tax rate on our world-wide earnings could increase substantially and our earnings and cash flows from operations could be materially adversely affected.

F. Dividends and Paying Agents

Not Applicable

G. Statement by Experts

Not Applicable

H. Documents on display

We file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549, or from the SEC’s website: http://www.sec.gov. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-0330 and you may obtain copies at prescribed rates.

I. Subsidiary information

Not Applicable

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Our Risk Management Policy

Our primary market risks relate to adverse movements in the charter hire rates for our fleet, in both the drybulk carrier sector and the drilling rig sector, and any declines that may occur in the value of our assets which are made up primarily of the vessels and drilling rigs. Our policy is to continuously monitor our exposure to other business risks, including the impact of changes in interest rates, currency rates, and charterer rates and bunker prices on earnings and cash flows. We intend to assess these risks and, when appropriate, enter into derivative contracts with credit-worthy counter parties to minimize our exposure to these risks. In regard to charterer rates and bunker prices, as our employment policy for our vessels and rigs has been, and is expected to continue to be, with a high percentage of our fleet on periodic employment, we are not directly exposed to increases in bunker fuel prices as these are the responsibility of the charterer under period charter arrangements.

Our management regularly reviews the strategic decision with respect to the appropriate ratio of spot charter revenues to fixed rate charter revenues taking into account its expectations about spot and time charter forward rates. Decisions to modify fixed rate coverage are implemented in either the physical markets through changes in time charters or in the FFA markets, thus managing the desired strategic position while maintaining flexibility of ship availability to customers. The Company enters into Forward Freight Agreements with an objective of economically hedging risk seeking to reduce its exposure to changes in the spot market rates earned by some of its vessels in the normal course of its shipping business. None of these FFAs qualify as cash flow hedges for accounting purposes. FFAs are executed mainly through the London Clearing House, or LCH. LCH requires the posting of collateral by all participants. The use of a clearing house reduces the Company’s exposure to counterparty credit risk.

Under the terms of our loan agreements, we are required to maintain compliance with minimum valuation covenants in regard to the vessels that are mortgaged to those banks. As such, in order to monitor on a regular basis

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the current market value of our fleet and thus to highlight any downturn in its value, we obtain on a semi-annual basis two independent valuations of all of our vessels from two international sale and purchase brokers to determine the ongoing market value of our fleet, including the drybulk vessels and the drilling rigs. These valuations are used in the assessment regarding the necessary ongoing level of depreciation that we are recording in our books.

Interest rate risk

Our exposure to market risk for changes in interest rates relates primarily to our long-term and short-term debt. The international drybulk and offshore drilling industries are capital intensive industries, requiring significant amounts of investment. Much of this investment is provided in the form of long-term debt. Our debt usually contains interest rates that fluctuate with LIBOR. Increasing interest rates could adversely impact future earnings.

Historically, we have been subject to market risks relating to changes in interest rates, because we have had significant amounts of floating rate debt outstanding. We manage this risk by entering into interest rate swap agreements in which we exchange fixed and variable interest rates based on agreed upon notional amounts. We use such derivative financial instruments as risk management tools and not for speculative or trading purposes. In addition, the counterparty to the derivative financial instrument is a major financial institution in order to manage exposure to nonperformance counterparties.

We have a total of 34 interest rate swap, cap and floor agreements, maturing from June 2011 through September 2017. These agreements are entered into in order to hedge our exposure to interest rate fluctuations with respect to our borrowings.

Our interest expense is affected by changes in the general level of interest rates. As an indication of the extent of our sensitivity to interest rate changes, an increase of 100 basis points would have decreased our net income and cash flows in the current year by approximately $24.4 million based upon our debt level at December 31, 2009. A 1% increase in LIBOR would have increased our interest expense for the year ended December 31, 2009 from $76.5 million to $100.9 million.

Foreign currency exchange risk

We generate all of our revenues in Dollars but currently incur approximately 50% of our operating expenses and the majority of our management expenses in currencies other than the U.S. dollar, primarily the Euro. For accounting purposes, expenses incurred in Euros are converted into U.S. dollars at the exchange rate prevailing on the date of each transaction. Because a significant portion of our expenses are incurred in currencies other than the U.S. dollar, our expenses may from time to time increase relative to our revenues as a result of fluctuations in exchange rates, particularly between the U.S. dollar and the Euro, which could affect the amount of net income that we report in future periods. As of December 31, 2009, the net effect of a 1% adverse movement in U.S. dollar/euro exchange rates would not have a material effect on our net income.

Our international operations expose us to foreign exchange risk. We use a variety of techniques to minimize exposure to foreign exchange risk, such as the use of foreign exchange derivative instruments. Fluctuations in foreign currencies typically have not had a material impact on our overall results. In situations where payments of local currency do not equal local currency requirements, foreign exchange derivative instruments, specifically foreign exchange forward contracts, or spot purchases, may be used to mitigate foreign currency risk. A foreign exchange forward contract obligates us to exchange predetermined amounts of specified foreign currencies at specified exchange rates on specified dates or to make an equivalent U.S. dollar payment equal to the value of such exchange. We do not enter into derivative transactions for speculative purposes. On December 31, 2009, we had ten open foreign currency forward exchange contracts.

Item 12. Description of Securities Other than Equity Securities

A. Debt securities

Not Applicable

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B. Warrants and rights

Not Applicable

C. Other securities

Not Applicable

D. American depository shares

Not Applicable

PART II.

Item 13. Defaults, Dividend Arrearages and Delinquencies

See “Item 4.B. – Business Overview – Recent Developments – Discussions Concerning Waiver and Amendment of our Loan Agreement Covenants” and “Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Breach of Loan Covenants.”

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2009. The term disclosure controls and procedures is defined under SEC rules as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of December 31, 2009.

(b) Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and the Chief Financial Officer and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP and includes those policies and procedures that

The Company’s system of internal control over financial reporting includes those policies and procedures that:

a. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets;

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b. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with the authorization of its management and directors; and

c. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the Company’s assets that could have a material effect on its consolidated financial statements.

Our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, the Company used the control criteria framework of the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) published in its report entitled Internal Control-Integrated Framework. As a result of this assessment, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s internal controls over financial reporting is effective as of December 31, 2009.

(c) Attestation report of the Registered Public Accounting Firm.

The registered public accounting firms that audited the consolidated financial statements, Ernst & Young AS and Deloitte Hadjipavlou, Sofianos & Cambanis S.A., have each issued an attestation report on the Company’s internal control over financial reporting, appearing on pages F-3 and F-5, respectively, of the financial statements filed as part of this report, which such reports are incorporated herein by reference.

(d) Changes in Internal Control over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Item 16A. Audit Committee Financial Expert

The Board of Directors of the Company has determined that Mr. Xiradakis, whose biographical details are included in Item 6, a member of our Audit Committee, qualifies as a financial expert and is considered to be independent under SEC Rule 10A-3.

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Item 16B. Code of Ethics

The Company has adopted a code of ethics that applies to its directors, officers and employees. In March 2008, the Board of Directors adopted an amendment to our code of ethics that would permit officers, directors and employees of the Company who own common shares to transact in the Company’s securities pursuant to trading plans adopted in reliance upon Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. A copy of our code of ethics is posted in the “Investor Relations” section of the Dryships Inc. website, and may be viewed at http://www.dryships.com. We will also provide a hard copy of our code of ethics free of charge upon written request of a shareholder. Shareholders may direct their requests to the attention of Investor Relations, DryShips Inc., 80, Kifissias Avenue, 151 25 Amaroussion, Greece.

Item 16C. Principal Accountant Fees and Services

Audit Fees

The table below sets forth the total fees for the services performed by: (i) Deloitte in 2008 and 2009; and (ii) Ernst and Young (Norway) in 2008 and 2009 in connection with Ocean Rig ASA, which we refer to as the Independent Registered Public Accounting Firms. The table below also identifies these amounts by category of services.

	2008		2009
Audit fees	$	1,550,618	$	2,687,996
Audit related fees		—		—
Tax fees		—		—
All other fees		—		—
Total fees	$	1,550,618	$	2,687,996

The 2009 amount of $2,687,996 relates to audit services provided in connection with the audit of our consolidated financial statements and PCAOB AU 722 Interim Financial Information for the issuance of 165,054,595 common shares in January through May 2009 under our sales agency agreement and for the issuance of the $460 million of convertible senior notes in November 2009. There were no tax, audit-related or other fees billed in 2009.

The 2008 amount of $1,550,618 relates to audit services provided in connection with the audit of our consolidated financial statements and PCAOB AU 722 Interim Financial Information, the issuance of 4,759,000 common shares in March 2008 and the issuance of 27,050,000 common shares from October through December 2008 under our controlled equity offering sales agreement. There were no tax, audit-related or other fees billed in 2008.

All audit services provided by the Independent Registered Public Accounting Firms were pre-approved by the Audit Committee.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not Applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not Applicable.

Item 16F. Changes in Registrant’s Certifying Accountant

Not Applicable.

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Item 16G. Corporate Governance

Exemptions from Nasdaq corporate governance rules

As a foreign private issuer, the Company is exempt from many of the corporate governance requirements other than the requirements regarding the disclosure of a going concern audit opinion, notification of material non-compliance with Nasdaq corporate governance practices, the establishment and composition of an audit committee that complies with SEC Rule 10A-3 and a formal audit committee charter. The practices followed by the Company in lieu of Nasdaq’s corporate governance rules are described below:

• In lieu of obtaining shareholder approval prior to the issuance of designated securities, the Company complies with provisions of the Marshall Islands Business Corporations Act, or BCA, providing that the Board of Directors approves share issuances.

• The Company’s Board does not hold regularly scheduled meetings at which only independent directors are present.

• As a foreign private issuer, we are not required to solicit proxies or provide proxy statements to Nasdaq pursuant to Nasdaq corporate governance rules or Marshall Islands law. Consistent with Marshall Islands law and as provided in our bylaws, we will notify our shareholders of meetings between 15 and 60 days before the meeting. This notification will contain, among other things, information regarding business to be transacted at the meeting. In addition, our bylaws provide that shareholders must give us between 150 and 180 days advance notice to properly introduce any business at a meeting of shareholders.

Other than as noted above, we are in full compliance with all other applicable Nasdaq corporate governance standards.

PART III.

Item 17. Financial Statements

See Item 18.

Item 18. Financial Statements

The financial statements, beginning on page F-1, together with the respective reports of the Independent Registered Public Accounting Firms thereon, are filed as a part of this report.

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Item 19. Exhibits

(a) Exhibits, Exhibit Number, Description

1.1	Articles of Amendment to Articles of Incorporation of the Company (1)
1.2	Amended and Restated Bylaws of the Company (2)
2.1	Form of Share Certificate*
2.2	Form of Global Note
2.3	Indenture dated November 17, 2009 (3)
2.4	First Supplemental Indenture dated November 25, 2009 to the Indenture dated November 17, 2009 (4)
4.1	Amended and Restated 2008 Equity Incentive Plan of the Company
4.2	Loan Agreement dated November 12, 2004 by and between certain subsidiaries of the Company, Commerzbank AG and HSH Nordbank AG relating to a facility of up to $185,000,000 (5)
4.3	Senior Loan Agreement dated March 31, 2006 by and between the Company, HSH Nordbank AG and certain other financial institutions listed therein relating to a term loan and short-term credit facilities of up to $518,750,000 (6)
4.4	Junior Loan Agreement dated March 31, 2006 by and between the Company, HSH Nordbank AG and certain other financial institutions listed therein relating to a term loan and short-term credit facilities of up to $110,000,000 (7)
4.5	Supplemental Letter Agreement dated May 15, 2006 to the HSH Nordbank Senior and Junior Loan Agreement
4.6	Supplemental Agreement dated November 28, 2006 to the HSH Nordbank Senior Loan Agreement (8)
4.7	Supplemental Agreement dated November 28, 2006 to the HSH Nordbank Junior Loan Agreement (9)
4.8	Amending and Restating Agreement dated May 23, 2007 to the HSH Nordbank Senior Loan Agreement (10)
4.9	Amending and Restating Agreement dated May 23, 2007 to the HSH Nordbank Junior Loan Agreement (11)
4.10	Supplemental Agreement dated February 27, 2008 to the HSH Nordbank Senior Loan Agreement (12)
4.11	Supplemental Agreement dated February 27, 2008 to the HSH Nordbank Junior Loan Agreement (13)
4.12	Supplemental Letter Agreement dated April 23, 2008 to the HSH Nordbank Senior Loan Agreement (14)
4.13	Supplemental Letter Agreement dated April 23, 2008 to the HSH Nordbank Junior Loan Agreement (15)
4.14	Supplemental Agreement dated November 17, 2009 to the HSH Nordbank Senior Loan Agreement
4.15	Supplemental Agreement dated November 17, 2009 to the HSH Nordbank Junior Loan Agreement
4.16	Controlled Equity Offering Sales Agreement dated October 12, 2007 by and between the Company and Cantor Fitzgerald & Co. (16)
4.17	Contract for the Construction and Sale of a Drillship (Hull No. 1837) dated September 17, 2007 by and between Drillship Hydra Owners Inc. and Samsung Heavy Industries Co., Ltd. (17)
4.18	Contract for the Construction and Sale of a Drillship (Hull No. 1838) dated September 17, 2007 by and between Drillship Paros Owners Inc. and Samsung Heavy Industries Co., Ltd. (18)
4.19	Loan Agreement dated October 2, 2007 by and between Ioli Owning Company Limited and Deutsche Schiffsbank Aktiengesellschaft relating to a secured loan of up to $35,000,000 (19)

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4.20	Loan Agreement dated October 5, 2007 by and between Boone Star Owners Inc., Iokasti Owning Company Limited and Piraeus Bank A.E. relating to a loan facility of up to $90,000,000 (20)
4.21	First Supplemental Agreement dated July 30, 2009 to a loan agreement dated October 5, 2007 by and between Boone Star Owners Inc., Iokasti Owning Company Limited and Piraeus Bank A.E. relating to a loan facility of up to $90,000,000
4.22	Loan Agreement dated November 16, 2007 by and between Iason Owning Company Limited and EFG Eurobank Ergasias S.A. relating to a loan of up to $47,000,000 (21)
4.23	Waiver Letter, dated February 24, 2010 to a loan agreement dated November 16, 2007 by and between Iason Owning Company Limited and EFG Eurobank Ergasias S.A. relating to a loan of up to $47,000,000
4.24	Loan Agreement dated December 4, 2007 by and between Team-Up Owning Company Limited, Orpheus Owning Company Limited and DnB NOR Bank ASA relating to a loan of up to $101,150,000 (22)
4.25	Supplemental Agreement dated June 11, 2009 to a loan agreement dated December 4, 2007 by and between Team-Up Owning Company Limited, Orpheus Owning Company Limited and DnB NOR Bank ASA relating to a loan of up to $101,150,000
4.26	Contract for Construction and Sale of a Drillship (Hull No. 1865) dated January 24, 2008 by and between Drillship Kithira Owners Inc. and Samsung Heavy Industries Co., Ltd. (23)
4.27	Contract for Construction and Sale of a Drillship (Hull No. 1866) dated January 24, 2008 by and between Drillship Skopelos Owners Inc. and Samsung Heavy Industries Co., Ltd. (24)
4.28	Construction and Sale Contract of Drillship Hull No. 1838 by Samsung Heavy Industries Co., LTD to Drillship Paros Owners Inc., dated September 17, 2007
4.29	Construction and Sale Contract of Drillship Hull No. 1837 by Samsumg Heavy Industries Co., LTD to Drillship Hydra Owners Inc., dated September 17, 2007
4.30	Agreement dated January 24, 2008 by and between Drillship Skopelos Owners Inc. and Samsung Heavy Industries Co., Ltd. relating to Hull No. 1865 (25)
4.31	Agreement dated January 24, 2008 by and between Drillship Kithira Owners Inc. and Samsung Heavy Industries Co., Ltd. relating to Hull No. 1866 (26)
4.32	Addendum No. 1 dated March 21, 2008 to the Contract for Construction and Sale of a Drillship (Hull No. 1866) by and between Drillship Skopelos Owners Inc. and Samsung Heavy Industries Co., Ltd. (27)
4.33	Addendum No. 1 dated March 21, 2008 to the Contract for Construction and Sale of a Drillship (Hull No. 1865) by and between Drillship Kithira Owners Inc. and Samsung Heavy Industries Co., Ltd. (28)
4.34	Loan Agreement dated March 13, 2008 by and between Annapolis Shipping Company Limited, Atlas Owning Company Limited, Farat Shipping Company Limited, Lansat Shipping Company Limited and Piraeus Bank A.E. relating to a loan facility of up to $130,000,000 (29)
4.35	First Supplemental Agreement dated December 12, 2008 to a loan agreement dated March 13, 2008 by and between Annapolis Shipping Company Limited, Atlas Owning Company Limited, Farat Shipping Company Limited, Lansat Shipping Company Limited and Piraeus Bank A.E. relating to a loan facility of up to $130,000,000
4.36	Second Supplemental Agreement dated July 30, 2009 to a loan agreement dated March 13, 2008 by and between Annapolis Shipping Company Limited, Atlas Owning Company Limited, Farat Shipping Company Limited, Lansat Shipping Company Limited and Piraeus Bank A.E. relating to a loan facility of up to $130,000,000

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4.37	Loan Agreement dated May 5, 2008 by and between Dalian Star Owners Inc., Dresdner Bank AG and other financial institutions listed therein relating to a term loan facility of up to $90,000,000 (30)
4.38	Waiver Letter, dated October 22, 2009 to a loan agreement dated May 5, 2008 by and between Dalian Star Owners Inc., Dresdner Bank AG (now Commerzbank AG) and other financial institutions listed therein relating to a term loan facility of up to $90,000,000
4.39	International Swap Dealers Association Inc. Master Agreement dated May 7, 2008 by and between the Company and EFG Eurobank Ergasias S.A. (31)
4.40	Loan and Guarantee Facility Agreement dated May 9, 2008 by and between Primelead Limited, Nordea Bank Finland Plc and DnB NOR Bank ASA relating to a credit facility of up to $800,000,000 and a guarantee facility of up to NOK 5,000,000,000 (32)
4.41	Waiver Agreement dated February 12, 2009, to the Nordea Bank $800,000,000 Loan and Guarantee Facility (33)
4.42	Loan Agreement dated May 13, 2008 by and between Ionian Traders Inc., Norwalk Star Owners Inc. Deutsche Schiffsbank Aktiengesellschaft Bayerische Hypo-Und Vereinsbank AG, and certain other financial institutions listed therein relating to a secured loan of $125,000,000 (34)
4.43	Consultancy Agreement dated May 28, 2008 by and between the Company and Fabiana Services S.A. (35)
4.44	First Supplemental Agreement, dated February 25, 2010 to a loan agreement dated May 13, 2008 by and between Ionian Traders Inc., Norwalk Star Owners Inc., Deutsche Schiffsbank Aktiengesellschaft Bayerische Hypo-Und Vereinsbank AG, and certain other financial institutions listed therein relating to a secured loan of $125,000,000
4.45	Loan Agreement dated June 20, 2008 by and between Aegean Traders Inc., Iguana Shipping Company Limited and WestLB AG relating to a loan facility of up to $103,200,000 (36)
4.46	First Supplemental Agreement, dated October 8, 2009, to a loan agreement dated June 20, 2008 by and between Aegean Traders Inc., Iguana Shipping Company Limited and WestLB AG relating to a loan facility of up to $103,200,000
4.47	Loan Agreement dated July 23, 2008 by and between Cretan Traders Inc. and Norddeutsche Landesbank Girozentrale relating to a term loan facility of up to $126,400,000 (37)
4.48	Supplemental Agreement, dated October 12, 2009 loan agreement dated July 23, 2008 by and between Cretan Traders Inc. and Norddeutsche Landesbank Girozentrale relating to a term loan facility of up to $126,400,000
4.49	Credit Facility Agreement dated July 18, 2008 by and between Drillship Skopelos Owners Inc., Deutsche Bank A.G. and certain financial institutions listed therein for a maximum of $562,500,000 (38)
4.50	Credit Facility Agreement dated July 18, 2008 by and between Drillship Kithira Owners Inc., Deutsche Bank A.G. and certain financial institutions listed therein for a maximum of $562,500,000 (39)
4.51	Supplemental Agreement, dated September 17, 2008, relating to a $562,500,000 Credit Facility Agreement dated July 18, 2008, between Drillship Skopelos Owners Inc. and Deutsche Bank AG
4.52	Supplemental Agreement, dated September 17, 2008, relating to a $562,500,000 Credit Facility Agreement dated July 18, 2008, between Drillship Kithira Owners Inc. and Deutsche Bank AG
4.53	Supplemental Agreement No. 2, dated December 18, 2008, relating to a $562,500,000 Credit Facility Agreement dated July 18, 2008, between Drillship Skopelos Owners Inc. and Deutsche Bank AG
4.54	Supplemental Agreement No. 2, dated December 18, 2008, relating to a $562,500,000 Credit Facility Agreement dated July 18, 2008, between Drillship Kithira Owners Inc. and Deutsche Bank AG

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4.55	Supplemental Agreement No. 3, dated January 29, 2010, relating to a $562,500,000 Credit Facility Agreement dated July 18, 2008, between Drillship Skopelos Owners Inc. and Deutsche Bank AG
4.56	Supplemental Agreement No. 3, dated January 29, 2010, relating to a $562,500,000 Credit Facility Agreement dated July 18, 2008, between Drillship Kithira Owners Inc. and Deutsche Bank AG
4.57	Guarantee, Revolving Credit and Term Loan Facility Agreement dated September 17, 2008 by and between Ocean Rig ASA, Ocean Rig Norway AS and certain financial institutions listed therein for $1,040,000,000 (40)
4.58	Addendum No. 1, dated December 19, 2008, to a Guarantee, Revolving Credit and Term Loan Facility Agreement dated September 17, 2008 by and between Ocean Rig ASA, Ocean Rig Norway AS and certain financial institutions listed therein for $1,040,000,000
4.59	Amendment and Restatement Agreement, dated November 19, 2009, to a Guarantee, Revolving Credit and Term Loan Facility Agreement dated September 17, 2008 by and between Ocean Rig ASA, Ocean Rig Norway AS and certain financial institutions listed therein for $1,040,000,000
4.60	Share Purchase Agreement dated October 3, 2008 by and between Primelead Shareholders Inc., Entrepreneurial Sprit Holdings Inc., Advice Investments S.A., Magic Management Inc. and Deep Sea Investments Inc. (41)
4.61	Agreement dated January 15, 2009 by and between the Company and Central Mare Inc., as amended on March 18, 2009 (42)
4.62	ATM Equity OfferingSM Sales Agreement dated January 28, 2009 by and between the Company and Merrill Lynch, Pierce, Fenner & Smith, Incorporated (43)
4.63	Termination and Release Agreement dated March 6, 2009 by and between the Company and the purchasers named therein (44)
4.64	Securities Purchase Agreement dated March 6, 2009 by and between the Company and the purchasers named therein (45)
4.65	Secured Loan Agreement, dated September 10, 2007, by and between Drillship Hydra Owners Inc. and Drillship Paros Owners Inc. and DVB Bank AG, relating to a loan of up to $230,000,000
4.66	First Supplemental Agreement, dated January 10, 2008, to Secured Loan Facility Agreement dated September 10, 2007, by and between Drillship Hydra Owners Inc. and Drillship Paros Owners Inc. and DVB Bank AG
4.67	Second Supplemental Agreement, dated January 23, 2009, by and between Drillship Hydra Owners Inc. and Drillship Paros Owners Inc. and DVB AG, to a Secured Loan Facility Agreement dated September 10, 2007 as amended and supplemented by a First Supplemental Agreement Dated January 10, 2008
4.68	ATM Equity OfferingSM Sales Agreement dated May 7, 2009 by and between the Company and Merrill Lynch, Pierce, Fenner & Smith, Incorporated (46)
4.69	Loan Agreement, dated May 13, 2009, between Primelead Holding Inc. and Nordea Bank Finland PLC, relating to a loan facility of up to $300,000,000
4.70	Securities Purchase Agreement, dated as of July 9, 2009, by and between the Company and Entrepreneurial Sprit Holdings Inc., Advice Investments S.A., Magic Management Inc. and Deep Sea Investments Inc (47)
4.71	Underwriting Agreement dated November 19, 2009 by and between the Company, Deutsche Bank and Deutsche Bank AG, London Branch relating to the issuance of loan of up to 26,100,000 shares of common stock by the Company (48)
4.72	Underwriting Agreement dated November 19, 2009 by and between the “Company and Deutsche Bank Securities Inc. relating to the offering of 5.00% Convertible Senior Notes by the Company (49)
4.73	Share Lending Agreement dated November 19, 2009 between the Company and Deutsche Bank AG, London Branch (50)

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8.1	Subsidiaries of the Company
12.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
12.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
13.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1	Consent of Independent Registered Public Accounting Firm (Ernst & Young AS)
15.2	Consent of Independent Registered Public Accounting Firm (Ernst & Young AS)
15.3	Consent of Independent Registered Public Accounting Firm (Deloitte Hadjipavlou, Sofianos & Cambanis S.A.)

(1) Filed as Exhibit 3.1 to the Company’s Registration Statement on Form 8-A (File No. 001-33922) on January 18, 2008.

(2) Filed as Exhibit 3.2 to the Company’s Registration Statement on Form 8-A (File No. 001-33922) on January 18, 2008.

(3) Filed as Exhibit 4.7 to the Company’s Post-effective Amendment to the Registration Statement on Form F-3 (File No. 001-146540) on November 17, 2009.

(4) Filed as Exhibit 3 to the Company’s Current Report on Form 6-K on November 25, 2009.

(5) Filed as Exhibit 10.2 to the Company’s Registration Statement on Form F-1 (File No. 333-122008) on January 13, 2005.

(6) Filed as Exhibit 4.4 to the Company’s Annual Report on Form 20-F on April 21, 2006.

(7) Filed as Exhibit 4.5 to the Company’s Annual Report on Form 20-F on April 21, 2006.

(8) Filed as Exhibit 4.5 to the Company’s Annual Report on Form 20-F on March 31, 2008.

(9) Filed as Exhibit 4.6 to the Company’s Annual Report on Form 20-F on March 31, 2008.

(10) Filed as Exhibit 4.8 to the Company’s Annual Report on Form 20-F on March 31, 2008.

(11) Filed as Exhibit 4.9 to the Company’s Annual Report on Form 20-F on March 31, 2008.

(12) Filed as Exhibit 4.10 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(13) Filed as Exhibit 4.11 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(14) Filed as Exhibit 4.12 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(15) Filed as Exhibit 4.13 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(16) Filed as an Exhibit 1.1 to the Company’s Current Report on Form 6-K on October 15, 2007.

(17) Filed as Exhibit 10.2 to the Company’s Post-Effective Amendment to an Automatic Shelf Registration Statement on Form POSASR (File No. 333-146540) on October 20, 2008.

(18) Filed as Exhibit 10.3 to the Company’s Post-Effective Amendment to an Automatic Shelf Registration Statement on Form POSASR (File No. 333-146540) on October 20, 2008.

(19) Filed as Exhibit 4.10 to the Company’s Annual Report on Form 20-F on March 31, 2008.

(20) Filed as Exhibit 4.22 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(21) Filed as Exhibit 4.11 to the Company’s Annual Report on Form 20-F on March 31, 2008.

(22) Filed as Exhibit 4.12 to the Company’s Annual Report on Form 20-F on March 31, 2008.

(23) Filed as Exhibit 10.4 to the Company’s Post-Effective Amendment to an Automatic Shelf Registration Statement on Form POSASR (File No. 333-146540) on October 20, 2008.

(24) Filed as Exhibit 10.5 to the Company’s Post-Effective Amendment to an Automatic Shelf Registration Statement on Form POSASR (File No. 333-146540) on October 20, 2008.

(25) Filed as Exhibit 4.29 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(26) Filed as Exhibit 4.30 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(27) Filed as Exhibit 4.31 to the Company’s Annual Report on Form 20-F on March 30, 2009.

121

(28) Filed as Exhibit 4.32 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(29) Filed as Exhibit 4.33 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(30) Filed as Exhibit 4.34 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(31) Filed as Exhibit 4.35 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(32) Filed as Exhibit 4.36 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(33) Filed as Exhibit 4.37 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(34) Filed as Exhibit. 4.38 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(35) Filed as Exhibit 4.39 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(36) Filed as Exhibit 4.40 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(37) Filed as Exhibit 4.41 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(38) Filed as Exhibit 10.6 to the Company’s Post-Effective Amendment to an Automatic Shelf Registration Statement on Form POSASR (File No. 333-146540) on October 20, 2008.

(39) Filed as Exhibit 10.7 to the Company’s Post-Effective Amendment to an Automatic Shelf Registration Statement on Form POSASR (File No. 333-146540) on October 20, 2008.

(40) Filed as Exhibit 4.44 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(41) Filed as Exhibit 10.1 to the Company’s Post-Effective Amendment to an Automatic Shelf Registration Statement on Form POSASR (File No. 333-146540) on October 20, 2008.

(42) Filed as Exhibit 4.46 to the Company’s Annual Report on Form 20-F on March 30, 2009.

(43) Filed as Exhibit 1.4 to the Company’s Current Report on Form 6-K on January 29, 2009.

(44) Filed as Exhibit 1 to the Company’s Current Report on Form 6-K on March 10, 2009.

(45) Filed as Exhibit 2 to the Company’s Current Report on Form 6-K on March 10, 2009.

(46) Filed as Exhibit 1.6 to the Company’s Current Report on Form 6-K on May 12, 2009.

(47) Filed as Exhibit 1 to the Company’s Current Report on Form 6-K on July 14, 2009.

(48) Filed as Exhibit 2 to the Company’s Current Report on Form 6-K on November 25, 2009.

(49) Filed as Exhibit 1 to the Company’s Current Report on Form 6-K on November 25, 2009.

(50) Filed as Exhibit 4 to the Company’s Current Report on Form 6-K on November 25, 2009.

* Previously filed as an exhibit to the Company’s Annual Report on Form 20-F on March 30, 2009.

122

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	DRYSHIPS INC.
	(Registrant)
Date: April 9, 2010	By:	/s/    Ziad Nakhleh
		Ziad Nakhleh
		Chief Financial Officer

DRYSHIPS INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm (Ernst & Young AS)	F-2
Report of Independent Registered Public Accounting Firm (Ernst & Young AS)	F-3
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting (Ernst & Young AS)	F-4
Report of Independent Registered Public Accounting Firm (Deloitte Hadjipavlou, Sofianos & Cambanis S.A.)	F-5
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting (Deloitte Hadjipavlou Sofianos & Cambanis S.A.)	F-6
Consolidated Balance Sheets as of December 31, 2008 and 2009	F-7
Consolidated Statements of Operations for the years ended December 31, 2007, 2008 and 2009	F-8
Consolidated Statements of Stockholders’ Equity for the years ended December  31, 2007, 2008 and 2009	F-9
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2008 and 2009	F-10
Notes to Consolidated Financial Statements	F-11

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Ocean Rig UDW Inc.

We have audited the accompanying consolidated balance sheet of Ocean Rig UDW Inc. and subsidiaries (“the Company”) as of 31 December 2009, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year in the period ended 31 December 2009 (not presented separately herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

IAS 1 requires that financial statements be presented with comparative financial information. These consolidated financial statements have been prepared solely for the purpose of meeting the requirements of Rule 2-05 of Regulation S-X as it relates to the results of operations of the Company for the year in the period ended 31 December 2009. Accordingly no comparative financial information is presented.

In our opinion, except for the omission of comparative information as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ocean Rig UDW Inc. and subsidiaries at 31 December 2009, and the consolidated results of their operations and their cash flows for the year in the period ended 31 December 2009, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

International Financial Reporting Standards as issued by the International Accounting Standards Board differ in certain respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 23 to the consolidated financial statements.

The accompanying consolidated financial statements have been prepared assuming that Ocean Rig UDW Inc. and subsidiaries will continue as a going concern. Ocean Rig UDW Inc. is a wholly owned subsidiary of DryShips Inc. As more fully described in Note 20, Ocean Rig UDW Inc. and subsidiaries is dependent upon support from its parent entity or additional external debt or equity financing to meet future capital expenditures. In addition, due to cross default provisions associated with its parent entity’s loans and breaches of certain financial covenants, certain of Ocean Rig UDW Inc.’s outstanding balances of debt are classified as current liabilities. Further, DryShip Inc.’s inability to comply with financial covenants under its original loan agreements and a negative working capital position, raise substantial doubt about DryShips Inc.’s ability to continue as a going concern. Because of the aforementioned conditions relating to DryShips Inc., and the uncertainties surrounding its plans to address its liquidity needs, the parent entity’s actions or inability to further support Ocean Rig UDW Inc.’s funding needs could have a substantial effect on Ocean Rig UDW Inc. and subsidiaries’ assets; therefore, there is also substantial doubt about whether Ocean Rig UDW Inc. and subsidiaries will continue as a going concern. The 2009 consolidated financial statements of Ocean Rig UDW Inc. and subsidiaries do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ocean Rig UDW Inc.’s internal control over financial reporting as of 31 December 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 7 April 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young AS

Stavanger, Norway

7 April 2010

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Ocean Rig ASA

We have audited the accompanying consolidated balance sheet of Ocean Rig ASA and subsidiaries (“the Company”) as of December 31, 2008, and the related consolidated statements of income, shareholders’ equity, and cash flows for the period May 15, 2008 to December 31, 2008 (not presented separately herein). These financial statements are the responsibility of the Company’s management and the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

IAS 1 requires that financial statements be presented with comparative financial information. These consolidated financial statements have been prepared solely for the purpose of meeting the requirements of Rule 2-05 of Regulation S-X as it relates to the results of operations of the Company for the period following the date control of the Company was acquired by DryShips Inc. through December 31, 2008. Accordingly no comparative financial information is presented.

In our opinion, except for the omission of comparative information as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ocean Rig ASA and subsidiaries at December 31, 2008, and the consolidated results of their operations and their cash flows for the period May 15, 2008 to December 31, 2008, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

International Financial Reporting Standards as issued by the International Accounting Standards Board differ in certain respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 21 to the consolidated financial statements.

The accompanying consolidated financial statements have been prepared assuming that Ocean Rig ASA and subsidiaries will continue as a going concern. As more fully described in Note 14, Ocean Rig ASA is a wholly owned subsidiary of DryShips Inc. On a consolidated basis, DryShips Inc. reported a current portion of long-term debt of $2,370,556 as of December 31, 2008 due to DryShip Inc.’s inability to comply with financial covenants under its current debt agreements and a negative working capital position. These conditions raise substantial doubt about DryShips Inc.’s ability to continue as a going concern. Because of the aforementioned conditions relating to DryShips Inc., and the uncertainties surrounding its plans to address its liquidity needs, the parent entity’s actions could have a substantial effect on Ocean Rig ASA and subsidiaries’ assets; therefore, there is also substantial doubt about whether Ocean Rig ASA and subsidiaries will continue as a going concern. The 2008 consolidated financial statements of Ocean Rig ASA and subsidiaries do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ Ernst & Young AS

Stavanger, Norway

March 27, 2009

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Ocean Rig UDW Inc.

We have audited Ocean Rig UDW Inc. and subsidiaries’ (“The Company”) internal control over financial reporting as of 31 December 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO criteria”). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s report on internal control of financial reporting (not presented separately herein). Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of 31 December 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ocean Rig UDW Inc. and subsidiaries as of 31 December 2009, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year in the period ended 31 December 2009 and our report dated 7 April 2010 expressed an unqualified opinion thereon.

7 April 2010

/s/ Ernst & Young AS

Stavanger, Norway

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of DryShips, Inc.

We have audited the accompanying consolidated balance sheets of DryShips, Inc. and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the Index at Item 18. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We did not audit the consolidated financial statements of Ocean Rig UDW and subsidiaries (a consolidated subsidiary) as of December 31, 2009 and for the year then ended, which statements reflect total assets and total revenues constituting 53% and 47%, respectively, of the related consolidated totals for that year. We did not audit the consolidated financial statements of Ocean Rig ASA and subsidiaries (a consolidated subsidiary) as of December 31, 2008 and for the period from May 15, 2008 to December 31, 2008. Such statements reflect total assets constituting 30.5% of consolidated total assets as of December 31, 2008 and total revenues constituting 18.7% of consolidated total revenues for the period May 15, 2008 to December 31, 2008, prior to the allocation of the Company’s purchase price to Ocean Rig ASA and subsidiaries’ net assets. Those statements were audited by other auditors whose report (which as to 2009 and 2008 express an unqualified opinion on the consolidated financial statements and includes an explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern) has been furnished to us, and our opinion, insofar as it relates to the amounts included for Ocean Rig UDW and Ocean Rig ASA for the years ended December 31, 2009 and 2008, is based solely on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of DryShips, Inc. and its subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.

The accompanying consolidated financial statements for the years ended December 31, 2009 and 2008, have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company’s inability to comply with financial covenants under its original loan agreements as of December 31, 2009 and 2008, its negative working capital position and other matters discussed in Note 3 raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 3 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated

April 7, 2010 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte.

Hadjipavlou Sofianos & Cambanis S.A.

Athens, Greece

April 7, 2010

F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of DryShips, Inc.

We have audited the internal control over financial reporting of DryShips Inc. and subsidiaries (the “Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assertion of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We did not audit the effectiveness of internal control over financial reporting of Ocean Rig UDW and subsidiaries (a consolidated subsidiary) (the “Ocean Rig UDW”) whose financial statements reflect total assets and revenues constituting 53% and 47%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2009. The effectiveness of Ocean Rig UDW’s internal control over financial reporting was audited by other auditors whose report has been furnished to us, and our opinion, insofar as they relate to the effectiveness of Ocean Rig UDW’s internal control over financial reporting, is based solely on the report of the other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.

A Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our audit and the report of the other auditors, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2009, of the Company and our report dated April 7, 2010, expressed an unqualified opinion on those consolidated financial statements and financial statement schedule and included explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern, based on our audit and the report of the other auditors.

/s/ Deloitte.

Hadjipavlou Sofianos & Cambanis S.A.

Athens, Greece

April 7, 2010

F-6

DRYSHIPS INC.

Consolidated Balance Sheets

As of December 31, 2008 and 2009

(Expressed in thousands of U.S. Dollars - except for share and per share data)

	2008			2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	303,114		$	693,169
Restricted cash (Note 2 and 9)		320,560			350,833
Trade accounts receivable, net of allowance for doubtful receivables of $957 and $487		52,441			66,681
Insurance claims		1,179			1,853
Due from related parties (Note 4)		17,696			27,594
Inventories		3,488			3,118
Financial instruments (Note 10)		779			993
Other current assets		21,170			36,409
Total current assets		720,427			1,180,650
FIXED ASSETS, NET:
Advances for vessels and rigs under construction and acquisitions (Note 5)		535,616			1,174,693
Vessels, net (Note 6)		2,134,650			2,058,329
Drilling rigs, machinery and equipment, net (Note 6)		1,393,158			1,329,641
Total fixed assets, net		4,063,424			4,562,663
OTHER NON-CURRENT ASSETS:
Intangible assets, net (Note 8)		14,143			12,639
Above-market acquired time charter (Note 8)		12,960			2,048
Other non-current assets (Note 10 and 13)		31,726			41,088
Total other non-current assets		58,829			55,775
Total assets	$	4,842,680		$	5,799,088
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 9)	$	2,370,556		$	1,698,692
Accounts payable		17,122			19,727
Accrued liabilities		63,073			80,236
Deferred revenue		23,009			19,693
Financial instruments (Note 10)		44,795			72,837
Other current liabilities		6,493			4,838
Total current liabilities		2,525,048			1,896,023
NON-CURRENT LIABILITIES
Below- market acquired time charter (Note 8)		28,006			7,632
Long-term debt, net of current portion (Note 9)		788,314			985,992
Financial instruments (Note 10)		208,961			104,763
Other non-current liabilities (Note 13)		779			43
Total non-current liabilities		1,026,060			1,098,430
COMMITMENTS AND CONTINGENCIES (Note 14)		—			—
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 500,000,000 shares authorized at December 31, 2008 and 2009; none issued and outstanding (Note 11)		—			—
Series A Convertible preferred stock, $0.01 par value; 100,000,000 shares authorized and 52,238,806 issued and outstanding at December 31, 2009 (Note 11)		—			522
Common stock, $0.01 par value; 1,000,000,000 shares authorized at December 31, 2008 and 2009; 70,600,000 and 280,326,271 shares issued and outstanding at December 31, 2008 and 2009, respectively (Note 11)		706			2,803
Accumulated other comprehensive loss		(44,847	)		(28,137	)
Additional paid-in capital (Note 11)		1,148,365			2,681,974
Retained earnings		187,348			147,473
Total stockholders’ equity		1,291,572			2,804,635
Total liabilities and stockholders’ equity	$	4,842,680		$	5,799,088

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

F-7

DRYSHIPS INC.

Consolidated Statements of Operations

For the years ended December 31, 2007, 2008 and 2009

(Expressed in thousands of U.S. Dollars - except for share and per share data)

	2007			2008			2009
REVENUES:
Revenues (Note 17)	$	582,561		$	1,066,236		$	819,834
Revenues-related party (Note 4 and 17)		—			14,466			—
		582,561			1,080,702			819,834
EXPENSES:
Voyage expenses (Note 15)		24,488			42,636			23,342
Voyage expenses-related party (Note 4 and 15)		7,159			10,536			5,437
Vessel and drilling rigs operating expenses (Note 15 and 17)		63,225			165,891			201,887
Depreciation and amortization (Note 6, 8 and 17)		76,511			157,979			196,309
Gain on sale of assets, net (Note 6)		(137,694	)		(223,022	)		(2,045	)
Gain on contract cancellation (Note 6)		—			(9,098	)		(15,270	)
Contract termination fees and forfeiture of vessel deposits (Note 4 and 5 )		—			160,000			259,459
Vessel impairment charge (Note 6 and 10)		—			—			1,578
Goodwill impairment charge (Note 7 and 17)		—			700,457			—
General and administrative expenses		17,072			89,358			90,823
Operating income/(loss)		531,800			(14,035	)		58,314
OTHER INCOME / (EXPENSES):
Interest and finance costs (Note 16 and 17)		(51,231	)		(113,194	)		(97,599	)
Interest income (Note 17)		5,073			13,085			10,414
Gain/(loss) on interest rate swaps (Note 10)		(3,981	)		(207,936	)		23,160
Other, net (Note 10 )		(3,037	)		(12,640	)		(6,692	)
Total expenses, net		(53,176	)		(320,685	)		(70,717	)
INCOME /(LOSS) BEFORE INCOME TAXES AND EQUITY IN LOSS OF INVESTEE
Income taxes (Note 19)		—			(2,844	)		(12,797	)
Equity in loss of investee (Note 7 and 17)		(299	)		(6,893	)		—
NET INCOME/(LOSS)		478,325			(344,457	)		(25,200	)
Less: Net income attributable to non controlling interests (Note 4)		—			(16,825	)		(7,178	)
NET INCOME/(LOSS) ATTRIBUTABLE TO DRYSHIPS INC.	$	478,325			(361,282	)	$	(32,378	)
EARNINGS/(LOSS) PER COMMON SHARE ATTRIBUTABLE TO DRYSHIPS INC. COMMON STOCKHOLDERS, BASIC AND DILUTED (Note 18)	$	13.40		$	(8.11	)	$	(0.19	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES, BASIC AND DILUTED (Note 18)		35,700,182			44,598,585			209,331,737

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

F-8

DRYSHIPS INC.

Consolidated Statements of Stockholders’ Equity

For the years ended December 31, 2007, 2008 and 2009

			Series A Convertible Preferred Stock		Common Stock
	Comprehensive Income/ Loss		# of Shares	Par Value	# of Shares	Par Value	Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Dryships’ Inc. Stockholders Equity		Non controlling interests		Total Equity		Redeemable Non controlling interests (Temporary equity)		Net income
BALANCE, December 31, 2006			—	—	35,490,097	355	327,446		—		116,891		444,692		—		444,692
-Net income	478,325		—	—	—	—	—		—		478,325		478,325		—		478,325
-Issuance of common stock			—	—	1,191,000	12	127,092		—		—		127,104		—		127,104
Dividends declares and paid (0.80 per share)			—	—	—	—	—		—		(28,392	)	(28,392	)	—		(28,392	)
Comprehensive income	478,325
BALANCE, December 31, 2007			—	—	36,681,097	367	454,538		—		566,824		1,021,729		—		1,021,729
-Net loss	(361,282	)	—	—	—	—	—		—		(361,282	)	(361,282	)	—		(361,282	)	16,825		(344,457	)
-Issuance of common stock	—		—	—	32,918,903	329	662,335		—		—		662,664		—		662,664
-Issuance of non-vested shares and amortization of stock based compensation	—		—	—	1,000,000	10	31,492		—		—		31,502		—		31,502
-Acquisition of subsidiary shares to non controlling interest	—		—	—	—	—	—		—		—		—		—		—		4,644
-Unrealized loss on cash flows hedges	(46,548	)	—	—	—	—	—		(46,548	)	—		(46,548	)	—		(46,548	)
-Redemption of non controlling interest	—		—	—	—	—	—		—		15,050		15,050		—		15,050		(21,469	)
-Amortization of stock based compensation	—		—	—	—	—	—		—		—		—		—		—
-Decrease in minimum pension liability	1,701		—	—	—	—	—		1,701		—		1,701		—		1,701
-Dividends declared and paid ($ 0.80 per share)	—		—	—	—	—	—		—		(33,244	)	(33,244	)	—		(33,244	)
Comprehensive loss	(406,129	)
BALANCE, December 31, 2008			—	—	70,600,000	706	1,148,365		(44,847	)	187,348		1,291,572		—		1,291,572
-Net income/(loss)	(25,200	)	—	—	—	—	—		—		(32,378	)	(32,378	)	7,178		(25,200	)
-Issuance of common stock and warrants	—		—	—	209,645,000	2,096	1,027,967		—		—		1,030,063		—		1,030,063
Issuance of non-vested shares	—		—	—	81,271	1	(1	)	—		—		—		—		—
Equity component of convertible notes	—		—	—	—	—	125,336		—		—		125,336		—		125,336
-Issuance of subsidiary shares to non controlling interest	—		—	—	—	—	(37,511	)	9,738		—		(27,773	)	385,898		358,125
-Issuance of Series A convertible preferred stock	—		52,238,806	522	—	—	267,478		—		—		268,000		—		268,000
-Acquisition of non controlling interest	—		—	—	—	—	84,814		(6,331	)	—		78,483		(396,483	)	(318,000	)
-Shareholder’s contribution of cancellation fees for vessels acquisitions.	—		—	—	—	—	19,958		—		—		19,958		—		19,958
-Unrealized gain on cash flows hedges	16,140		—	—	—	—	—		12,889		—		12,889		3,251		16,140
-Amortization of stock based compensation	—		—	—	—	—	38,071		—		—		38,071		—		38,071
-Decrease in minimum pension liability	570		—	—	—	—	—		414		—		414		156		570
Dividends declared							7,497				(7,497	)
Comprehensive loss	(8,490	)	—	—	—	—			—				—		—		—
BALANCE December 31, 2009			52,238,806	522	280,326,271	2,803	2,681,974		(28,137	)	147,473		2,804,635		—		2,804,635

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

F-9

DRYSHIPS INC.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of U.S. Dollars - except for share and per share data)

	Year ended December 31,
	2007			2008			2009
Cash Flows from Operating Activities:
Net income/(loss)	$	478,325		$	(344,457	)	$	(25,200	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		76,511			157,979			196,309
Commitments fees on undrawn line of credit		—			2,855			5,760
Amortization, write off of financing costs and premium paid over withdrawn loans		2,190			15,980			12,940
Amortization of convertible senior notes debt discount		—			—			1,769
Amortization of fair value of acquired time charters		(7,185	)		(34,638	)		(9,462	)
Vessel impairment charge		—			—			1,578
Gain on sale of vessels, net		(137,694	)		(223,022	)		(2,045	)
Gain on contract cancellation		—			(9,098	)		(15,270	)
Goodwill impairment charge		—			700,457			—
Equity in loss of investees		299			6,893			—
Forfeiture of advances for vessel acquisitions		—			55,000			93,158
Contract termination fees		—			—			99,205
Amortization of stock based compensation		—			31,502			38,071
Interest income on restricted cash		—			—			(6,997	)
Change in fair value of derivatives		128			204,964			(60,230	)
Security deposits for derivatives		—			(31,600	)		(9,100	)
Amortization of free lubricants benefit		(257	)		(276	)		(333	)
Changes in operating assets and liabilities:
Trade accounts receivable		(6,303	)		23			(14,240	)
Insurance claims		(7,296	)		(994	)		(1,190	)
Due from related parties		(6,610	)		(2,770	)		(15,451	)
Inventories		(1,341	)		462			370
Other current assets		(1,741	)		965			(15,239	)
Accounts payable		(4,257	)		556			2,605
Due to related parties		(86	)		—			—
Other current liabilities		—			(847	)		(1,346	)
Pension liability		—			—			(142	)
Accrued liabilities		13,017			10,770			13,887
Other non – current assets		—			—			126
Deferred revenue		10,199			(575	)		(3,316	)
Net Cash Provided by Operating Activities		407,899			540,129			286,217
Cash Flows from Investing Activities:
Insurance proceeds		3,160			4,622			516
Business acquisitions, net of cash acquired		(406,024	)		(991,306	)		—
Cash from acquisition of drillships		—			—			248
Advances for vessel acquisitions / rig under construction		(105,242	)		(507,322	)		(121,982	)
Advances for rigs under constructions – related party		—			(4,963	)		—
Vessel acquisitions and improvements		(799,456	)		(742,844	)		(48,542	)
Drilling rigs, equipment and other improvements		—			(16,584	)		(14,540	)
Proceeds from sale of vessels		351,813			410,204			45,433
Proceeds from sale of subsidiary		—			—			100
Increase in restricted cash		—			(262,659	)		(35,363	)
Decrease in restricted cash		—			—			12,087
Net Cash Used in Investing Activities		(955,749	)		(2,110,852	)		(162,043	)
Cash Flows from Financing Activities:
Proceeds from issuance of convertible notes		—			—			447,810
Increase in Restricted cash		(177	)		—			—
Proceeds from long-term credit facility		787,298			2,443,987			855
Proceeds from short-term credit facility		73,476			430,926			150,000
Payments of short-term credit facility		(68,400	)		(793,416	)		(355,052	)
Principal payments and repayments of long-term debt		(228,278	)		(914,347	)		(874,344	)
Net proceeds from common stock issuance		127,104			662,664			950,555
Proceeds from share-lending arrangement		—			—			261
Acquisition of noncontrolling interests		—			—			(50,000	)
Dividends paid		(28,392	)		(33,244	)		—
Payment of financing costs		(6,250	)		(33,801	)		(4,204	)
Net Cash Provided by Financing Activities		656,381			1,762,769			265,881
Net increase in cash and cash equivalents		108,531			192,046			390,055
Cash and cash equivalents at beginning of period		2,537			111,068			303,114
Cash and cash equivalents at end of period	$	111,068		$	303,114		$	693,169
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year/period for:
Interest, net of amount capitalized	$	47,342			85,910		$	76,983
Income taxes		—			2,566			13,233
Non cash financing and investing activities:
Issuance of non-vested shares		—			10			1
Issuance of common stock and warrants for termination agreements		—			—			79,247
Deemed shareholders contribution		—			—			19,958
Fair value of shares issued for the acquisition of non controlling interest		—			—			268,000
Issuance of subsidiary shares to non controlling interest		—			—			357,877
Fair value of below market charter acquired		(38,687	)		—			—
Fair value of preferred share dividends		—			—			7,497
Amounts owed for capital expenditures	$	(671	)		—			—

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

F-10

DRYSHIPS INC.

Notes to Consolidated Financial Statements

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

1. Basis of Presentation and General Information:

The accompanying consolidated financial statements include the accounts of DryShips Inc. and its subsidiaries (collectively, the “Company” or “DryShips”). DryShips was formed on September 9, 2004 under the laws of the Republic of the Marshall Islands. The Company is engaged in the ocean transportation services of drybulk cargoes worldwide and deepwater drilling rig services.

The Company’s material subsidiaries (all 100% owned) as of December 31, 2009 are listed below.

	Ship-owning Company	Country of Incorporation	Vessel
1.	Malvina Shipping Company Limited (“Malvina”)	Malta	Coronado
2.	Arleta Navigation Company Limited (“Arleta”)	Malta	Xanadu
3.	Selma Shipping Company Limited (“Selma”)	Malta	La Jolla
4.	Samsara Shipping Company Limited (“Samsara”)	Malta	Ocean Crystal
5.	Farat Shipping Company Limited (“Farat”)	Malta	Toro
6.	Iguana Shipping Company Limited (“Iguana”)	Malta	Iguana (Note 6)
7.	Borsari Shipping Company Limited (“Borsari”)	Malta	Catalina
8.	Onil Shipping Company Limited (“Onil”)	Malta	Padre
9.	Fabiana Navigation Company Limited (“Fabiana Navigation”)	Malta	Alameda
10.	Karmen Shipping Company Limited (“Karmen”)	Malta	Sonoma
11.	Thelma Shipping Company Limited (“Thelma”)	Malta	Manasota
12.	Celine Shipping Company Limited (“Celine”)	Malta	Mendocino
13.	Lotis Traders Inc.(“Lotis”)	Marshall Islands	Delray (Note 6)
14.	Tempo Marine Co. (“Tempo”)	Marshall Islands	Maganari
15.	Star Record Owning Company Limited (‘Star”)	Marshall Islands	Ligari
16.	Argo Owning Company Limited (“Argo”)	Marshall Islands	Redondo
17.	Rea Owning Company Limited (“Rea”)	Marshall Islands	Ecola
18.	Gaia Owning Company Limited (“Gaia”)	Marshall Islands	Samsara
19.	Kronos Owning Company Limited (“Kronos”)	Marshall Islands	Primera
20.	Trojan Maritime Co. (“Trojan”)	Marshall Islands	Brisbane
21.	Dione Owning Company Limited (“Dione”)	Marshall Islands	Marbella
22.	Phoebe Owning Company Limited (“Phoebe”)	Marshall Islands	Majorca
23.	Uranus Owning Company Limited (“Uranus”)	Marshall Islands	Levando
24.	Selene Owning Company Limited (“Selene”)	Marshall Islands	Bargara
25.	Tethys Owning Company Limited (“Tethys”)	Marshall Islands	Capitola
26.	Ioli Owning Company Limited (“Ioli”)	Marshall Islands	Paros I (ex Clipper Gemini)
27.	Iason Owning Company Limited (“Iason”)	Marshall Islands	Oregon
28.	Orpheus Owning Company Limited (“Orpheus”)	Marshall Islands	Avoca
29.	Team up Owning Company Limited (“Team-up”)	Marshall Islands	Saldanha
30.	Iokasti Owning Company Limited (“Iokasti”)	Marshall Islands	Pachino (ex VOC Galaxy)

F-11

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

1. Basis of Presentation and General Information-(continued)

	Ship-owning Company	Country of Incorporation	Vessel
31.	Boone Star Owners Inc. (“Boone”)	Marshall Islands	Samatan
32.	Norwalk Star Owners Inc. (“Norwalk”)	Marshall Islands	Capri
33.	Ionian Traders Inc. (“Ionian”)	Marshall Islands	Positano
34.	NT LLC Investors Ltd. (“NT”)	Marshall Islands	Conquistador
35.	Dalian Star Owners Inc. (“Dalian”)	Marshall Islands	Mystic
36.	Aegean Traders Inc. (“Aegean”)	Marshall Islands	Sorrento
37.	Cretan Traders Inc. (“Cretan”)	Marshall Islands	Flecha
38.	Monteagle Shipping S.A. (“Monteagle”)	Marshall Islands	Oliva (Note 6)
39.	Roscoe Marine Ltd. (“Roscoe”)	Marshall Islands	Rapalo (Note 6)
40.	Ocean Rig 1 Inc.	Marshall Islands	Leiv Eriksson
41.	Ocean Rig 2 Inc.	Marshall Islands	Eirik Raude
42.	Drillship Hydra Owners Inc (“Hydra”)	Marshall Islands	Drillship Hull 1837 (Note 5)
43.	Drillship Paros Owners Inc. (“Paros”)	Marshall Islands	Drillship Hull 1838 (Note 5)
44.	Drillship Kithira Owners Inc. (“Kithira”)	Marshall Islands	Drillship Hull 1865
45.	Drillship Skopelos Owners Inc. (“Skopelos”)	Marshall Islands	Drillship Hull 1866
	Company	Country of Incorporation	Description
46.	OCR UDW Inc. (formerly Primelead Shareholders Inc)	Marshall Islands	Holding Company
47.	Ocean Rig AS	Norway	Operations Manager
48.	Ocean Rig Ghana Ltd	Ghana	Operations
49.	Ocean Rig North Sea AS	Norway	Operations
50.	Sunlight Shipholding One Inc.	Marshall Islands	Other
51.	Wealth Management Inc.	Marshall Islands	Other

Charterers individually accounting for more than 10% of the Company’s voyage revenues and drilling rig revenues during the years ended December 31, 2007, 2008 and 2009 were as follows:

	Year ended December 31, 2009
	2007	2008		2009
Charterer A	—	16	%	—
Charterer B	—	10	%	19	%
Charterer C	—	—		27	%

In addition, 12%, 6% and 1% of the Company’s voyage revenues during the years ended December 31, 2007, 2008 and 2009, respectively, were derived from the participation of certain of the Company’s vessels in a drybulk pool.

F-12

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies:

(a) Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and include the accounts and operating results of DryShips and its wholly-owned subsidiaries referred to in Note 1 above. All intercompany balances and transactions have been eliminated on consolidation. Where necessary, comparatives have been reclassified to conform to changes in presentation in the current year.

(b) Equity method investments: Investments in entities that the Company does not control, but has the ability to exercise significant influence over the operating and financial policies, are accounted for using the equity method.

(c) Business Combinations: In accordance with Financial Accounting Standards guidance related to business combinations, the purchase price of acquired businesses or properties is allocated to tangible and identified intangible assets and liabilities based on their respective fair values. The excess of the purchase price over the respective fair value of net assets acquired is recorded as goodwill. Costs incurred in relation to pursuing any business acquisition were capitalized until adoption of the new guidance for business combinations on January 1, 2009 that requires the expensing of all costs related to business combinations, when they are directly related to the business acquisition and the acquisition is probable. Acquisition costs also include fees paid to bankers in connection with obtaining related financing. Such financing costs are an element of the effective interest cost of the debt; therefore they are classified as a contra to debt upon the business combination and the receipt of the related debt proceeds and are amortized using the effective interest method through the term of the respective debt.

(d) Goodwill and intangible assets: Goodwill represents the excess of the purchase price over the estimated fair value of net assets acquired within the Drilling Rigs reporting unit. Goodwill is reviewed for impairment whenever events or circumstances indicate possible impairment in accordance with guidance related to Goodwill and Other Intangible Assets. This guidance requires at least the annual testing for impairment, and not the amortization, of goodwill and other intangible assets with an indefinite life. The Company tests for impairment each year on December 31.

The Company tests goodwill for impairment by first comparing the carrying value of the Drilling Rigs reporting unit, which is defined as an operating segment or a component of an operating segment that constitutes a business for which financial information is available and is regularly reviewed by management, to its fair value. The Company estimates the fair value of the Drilling Rigs reporting unit by weighting the combination of generally accepted valuation methodologies, including both income and market approaches.

For the income approach, the Company discounts projected cash flows using a long-term weighted average cost of capital (“WACC”) rate, which is based on the Company’s estimate of the investment returns that market participants would require. To develop the projected net cash flows from the Company’s Drilling Rigs reporting unit, which are based on estimated future utilization, day rates, projected demand for its services, and rig availability, the Company considers key factors that include assumptions regarding future commodity prices, credit market uncertainties and the effect these factors may have on the Company’s contract drilling operations and the capital expenditure budgets of its customers.

For the market approach, the Company derives publicly traded company multiples from companies with operations similar to the Company’s reporting units by using information publicly disclosed by other publicly traded companies and, when available, analyses of recent acquisitions in the marketplace.

If the fair value of a reporting unit exceeds its carrying value, then no further testing is required. This is referred to as Step 1. If the fair value is determined to be less than the carrying value, a second step, or Step 2, is performed to compute the amount of the impairment, if any. In this process, an implied fair value for goodwill is estimated, based in part on the fair value of the

F-13

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies (continued):

(d) Goodwill and intangible assets (continued): operations, and is compared to its carrying value. The shortfall of the implied fair value of goodwill below its carrying value represents the amount of goodwill impairment.

From the date the Company acquired Ocean Rig ASA (“Ocean Rig”) in May 2008 through the annual goodwill impairment test performed on December 31, 2008, the market declined significantly and various factors negatively affected industry trends and conditions, which resulted in the revision of certain key assumptions used in determining the fair value of the Company’s Drilling Rigs reporting unit and therefore the implied fair value of goodwill. During the second half of 2008, the credit markets tightened, driving up the cost of capital and therefore the Company increased the rate of a long-term weighted average cost of capital. In addition, the economic downturn and the volatile oil prices resulted in a downward revision of projected cash flows from the Company’s Drilling Rigs reporting unit in the Company’s forecasted discounted cash flows analysis for its 2008 impairment testing. Furthermore, the decline in the global economy negatively impacted publicly traded company multiples used when estimating fair value under the market approach. Based on results of the Company’s annual goodwill impairment analysis and subsequent reconciliation to its market capitalization, the Company determined that the carrying value of the Company’s goodwill was impaired. A total impairment charge of $700.5 million was recorded for the year ended December 31, 2008, which represents the write-off of all recorded goodwill in the Drilling Rigs reporting unit (Note 7).

The Company’s finite-lived acquired intangible assets are amortized on a straight-line basis over their estimated useful lives as follows:

Intangible assets/liabilities	Years
Tradenames	10
Software	10
Fair value of above market acquired time charters	Over remaining contract term
Fair value of below market acquired time charters	Over remaining contract term

In accordance with guidance related to Accounting for the Impairment or Disposal of Long-Lived Assets, the Company evaluates the potential impairment of finite-lived acquired intangible assets when there are indicators of impairment. The finite-lived intangibles are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable based on estimates of future undiscounted cash flows. In the event of impairment, the asset is written down to its fair value. An impairment loss, if any, is measured as the amount by which the carrying amount of the asset exceeds its fair value. For finite-lived intangible assets, no impairment was recognized during any period presented.

(e) Use of Estimates: The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(f) Other Comprehensive Income/(Loss): The Company follows the provisions of guidance regarding reporting comprehensive income/(loss) which requires separate presentation of certain transactions, which are recorded directly as components of stockholders’ equity.

(g) Cash and Cash Equivalents: The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.

F-14

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies (continued):

(h) Restricted Cash: Restricted cash includes (i) cash collateral required under the Company’s financing and forward freight arrangements (“FFAs”), (ii) retention accounts which can only be used to fund the loan installments coming due and (iii) minimum liquidity requirements under the loan facilities.

In terms of the loan agreement, the Company is required to hold bank deposits which are used to fund the loan installments coming due. These funds can only be used for the purposes of loan repayments and are shown as “Restricted cash” under current assets that at December 31, 2008 and 2009, amounted to $320,560 and $337,764, respectively, in the accompanying consolidated balance sheets. Restricted cash also includes additional minimum cash deposits required to be maintained with certain banks under the Company’s borrowing arrangements.

Restricted cash balances include minimum required cash deposits, as defined in the loan agreements, which amounted to $280,000, and $270,000 at December 31, 2008 and 2009, respectively, and are classified as current assets in the accompanying consolidated balance sheets. Restricted cash has been classified as current as of December 31, 2008 and 2009, as the related debt has been classified as current as discussed above. Included in the restricted cash balances of the accompanying consolidated balance sheets are minimum required cash deposits, as defined in the FFAs which amounted to $0 and $13,069, at December 31, 2008 and 2009, respectively. These deposits are used as collateral to FFAs.

(i) Concentration of Credit Risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents; trade accounts receivable and derivative contracts (interest rate swaps, foreign currency contracts and forward freight agreements). The Company places its cash and cash equivalents, consisting mostly of deposits, with qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions. The Company is exposed to credit risk in the event of non-performance by counter parties to derivative instruments; however, the Company limits its exposure by diversifying among counter parties. The Company limits its credit risk with trade accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its trade accounts receivable.

(j) Trade Accounts Receivable: The amount shown as accounts receivable, trade, at each balance sheet date, includes receivables from charterers for hire of vessels and drilling rigs, freight and demurrage billings, net of a provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. Provision for doubtful accounts at December 31, 2008 and 2009 totaled $957 and $487, respectively.

Balance December 31, 2007	$	—
Additions		957
Balance December 31, 2008		957
Write off		470
Balance December 31, 2009	$	487

(k) Fixed assets under construction: This represents amounts expended by the Company in accordance with the terms of the purchase agreements for vessels and the construction contracts for vessels and drilling rigs. Interest costs incurred during the construction (until the asset is substantially complete and ready for its intended use) are capitalized. Capitalized interest expense for the years ended December 31, 2007, 2008 and 2009 amounted to $2,597, $13,058 and $23,476, respectively.

(l) Insurance Claims: The Company records insurance claim recoveries for insured losses incurred on damages to fixed assets and for insured crew medical expenses. Insurance claims are recorded on the accrual basis and represent the claimable expenses, net of applicable deductibles, incurred through December 31, of each reported period, which are expected to be recovered from insurance companies.

F-15

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies (continued):

(m) Inventories: Inventories consist of consumable bunkers (if any), lubricants and victualling stores, which are stated at the lower of cost or market value. Cost is determined by the first in, first out method.

(n) Foreign Currency Translation: The functional currency of the Company is the U.S. Dollar since the Company operates in international shipping and drilling markets, and therefore primarily transacts business in U.S. Dollars. The Company’s books of accounts are maintained in U.S. Dollars. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in other currencies, are translated into U.S. Dollars at the year-end exchange rates. Resulting gains or losses are included in “General and administrative expenses” in the accompanying consolidated statements of operations.

(o) Fixed Assets, Net:

(i) Drybulk carrier vessels are stated at cost, which consists of the contract price and any material expenses incurred upon acquisition (initial repairs, improvements, delivery expenses and other expenditures to prepare the vessel for its initial voyage). Subsequent expenditures for major improvements are also capitalized when they appreciably extend the useful life, increase the earning capacity or improve the efficiency or safety of the vessels. The cost of each of the Company’s vessels is depreciated beginning when the vessel is ready for its intended use, on a straight-line basis over the vessel’s remaining economic useful life, after considering the estimated residual value. Vessel’s residual value is equal to the product of its lightweight tonnage and estimated scrap rate per ton. In general, management estimates the useful life of the Company’s vessels to be 25 years from the date of initial delivery from the shipyard. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted at the date such regulations are adopted.

(ii) Drilling rigs are stated at cost less accumulated depreciation. Such costs include the cost of adding/replacing parts of drilling rig machinery and equipment when that cost is incurred, if the recognition criteria are met. The recognition criteria require that the cost incurred extends the useful life of a drilling rig. The carrying amounts of those parts that are replaced are written off and the cost of the new parts are capitalised. Depreciation is calculated on a straight- line basis over the useful life of the assets as follows: baredeck 30 years and other asset parts 5 to 15 years.

(iii) Drilling rig machinery and equipment, IT and office equipment, are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives.

(p) Long lived assets held for sale: The Company classifies long lived assets as being held for sale when: (i) management has committed to a plan to sell the long lived assets; (ii) the long lived assets are available for immediate sale in their present condition; (iii) an active program to locate a buyer and other actions required to complete the plan to sell the long lived assets have been initiated; (iv) the sale of the long lived assets is probable and transfer of the asset is expected to qualify for recognition as a completed sale within one year; and (v) the long lived assets are being actively marketed for sale at a price that is reasonable in relation to its current fair value and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Long lived assets classified as held for sale are measured at the lower of their carrying amount or fair value less cost to sell. These long lived assets are not depreciated once they meet the criteria to be classified as held for sale.

When the Company concludes a Memorandum of Agreement for the disposal of a vessel/rig which has yet to complete a time charter contract, it is considered that the held for sale criteria discussed in guidance are not met until the time charter contract has been completed as the vessel is not available for immediate sale. As a result, such vessels/rigs are not classified as held for sale.

When the Company concludes a Memorandum of Agreement for the disposal of a vessel/rig which has no time charter contract to complete or a time charter that is transferable to a buyer, it is considered that the held for sale criteria discussed in guidance are met. As a result such vessels/rigs are classified as held for sale.

Furthermore, in the period a long-lived asset meets the held for sale criteria of guidance, a loss is recognized for any reduction of the long-lived asset’s carrying amount to its fair value less cost to sell. No such adjustments were identified for the years ended December 31, 2007, 2008 and 2009 (Note 6).

F-16

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies (continued):

(q) Fair value of above/below market acquired time charter: Where the Company identifies any assets or liabilities associated with the acquisition of a vessel or drilling rigs the Company records all such identified assets or liabilities at fair value. Fair value is determined by reference to market data. The Company values any asset or liability arising from the market value of the time charters assumed when a vessel and/or rig is acquired. The amount to be recorded as an asset or liability at the date of delivery of a vessel or drilling rig is based on the difference between the current fair values of a charter with similar characteristics as the time charter assumed and the net present value of future contractual cash flows from the time charter contract assumed. When the present value of the time charter assumed is greater than the current fair value of such charter, the difference is recorded as “Fair value of above market acquired time charter”. When the opposite situation occurs, the difference is recorded as “Fair value of below-market acquired time charter”. Such assets and liabilities are amortized as a reduction of, or an increase in revenue, respectively over the period of the time charter assumed.

(r) Impairment of Long-Lived Assets: The Company reviews for impairment long-lived assets held and used whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In this respect, the Company reviews its assets for impairment on a vessel by vessel or drilling rig by drilling rig basis. When the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount, the Company evaluates the asset for impairment loss. The impairment loss is determined by the difference between the carrying amount of the asset and the fair value of the asset.

No impairment indicators were present and therefore no impairment losses were recorded in the year ended December 31, 2007.

As at December 31, 2008 and 2009, as well as at the end of each quarterly reporting period during 2009, the Company performed an impairment review of the Company’s long-lived assets due to the global economic downturn, the significant decline in charter rates in the drybulk shipping industry and the outlook of the oil services industry. The Company compared undiscounted cash flows with the carrying values of the Company’s long-lived assets to determine if the assets were impaired. In developing estimates of future cash flows, the Company relied upon assumptions made by management with regard to the Company’s vessels and drilling rigs, including future charter rates, utilization rates, operating expenses, future dry docking costs and the estimated remaining useful lives of the vessels and drilling rigs. These assumptions are based on historical trends as well as future expectations in line with the Company’s historical performance and the Company’s expectations for future fleet utilization under its current fleet deployment strategy, and are consistent with the plans and forecasts used by management to conduct its business. The variability of these factors depends on a number of conditions, including uncertainty about future events and general economic conditions; therefore, the Company’s accounting estimates might change from period to period. As a result of the impairment review, the Company determined that the carrying amounts of its assets held for use were recoverable, and therefore, concluded that no impairment loss was necessary for 2008 while for 2009 an impairment charge of $1,578 should be recognized in 2009 (Note 6).

(s) Dry-docking Costs: The Company follows the direct expense method of accounting for dry-docking costs whereby costs are expensed in the period incurred for the drybulk carrier vessels and the drilling rigs.

(t) Deferred Financing Costs: Deferred financing costs include fees, commissions and legal expenses associated with the Company’s long- term debt. These costs are amortized over the life of the related debt using the effective interest method and are included in interest expense. Unamortized fees relating to loans repaid or refinanced as debt extinguishments are expensed as interest and finance costs in the period the repayment or extinguishment is made. Amortisation and write offs for each of the years ended December 31, 2007, 2008 and 2009 amounted to $2,190, $15,848 and $12,745, respectively.

(u) Convertible Senior Notes: In accordance with Financial Accounting Standards guidance for convertible debt instruments that contain cash settlement options upon conversion at the option of the issuer, the Company determines the carrying amounts of the liability and equity components of its convertible notes issued in November 2009 that contain cash settlement provisions by first determining the carrying amount of the liability component of the convertible notes by measuring the fair value of a similar liability that does not have an associated equity component. The carrying amount of the equity component representing the embedded conversion option is then determined by deducting the fair value of the liability component from the total proceeds.

F-17

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies (continued):

(u) Convertible Senior Notes-(continued):

The resulting debt discount is amortized to interest cost using the effective interest method over the period the debt is expected to be outstanding as an additional non-cash interest expense. Transaction costs associated with the instrument are allocated pro-rata between the debt and equity components (Note 9).

(v) Revenue and Related Expenses:

(i) Drybulk Carrier vessels:

Time and bareboat charters: The Company generates its revenues from charterers for the charter hire of its vessels, which are considered to be operating lease arrangements. Vessels are chartered using time and bareboat charters and where a contract exists, the price is fixed, service is provided and collection of the related revenue is reasonably assured, revenue is recognized as it is earned ratably on a straight-line basis over the duration of the period of each time charter as adjusted for the off-hire days that the vessel spends undergoing repairs, maintenance and upgrade work depending on the condition and specification of the vessel.

Pooling Arrangement: For vessels operating in pooling arrangements, the Company earns a portion of total revenues generated by the pool, net of expenses incurred by the pool. The amount allocated to each pool participant vessel, including the Company’s vessels, is determined in accordance with an agreed-upon formula, which is determined by points awarded to each vessel in the pool based on the vessel’s age, design and other performance characteristics. Revenue under pooling arrangements is accounted for on the accrual basis and is recognized when an agreement with the pool exists, price is fixed, service is provided and the collectability is reasonably assured.

The allocation of such net revenue may be subject to future adjustments by the pool however, historically, such changes have not been material.

Voyage related and vessel operating costs: Voyage related and vessel operating costs are expensed as incurred. Under a time charter, specified voyage costs, such as fuel and port charges are paid by the charterer and other non-specified voyage expenses, such as commissions, are paid by the Company. Vessel operating costs including crews, maintenance and insurance are paid by the Company. Under a bareboat charter, the charterer assumes responsibility for all voyage and vessel operating expenses and risk of operation.

Deferred Voyage Revenue: Deferred voyage revenue primarily relates to cash advances received from charterers. These amounts are recognized as revenue over the voyage or charter period.

(ii) Drilling Rigs:

Revenues: The majority of revenues are derived from contracts including day rate based compensation for drilling services. In connection with drilling contracts the Company may receive revenues for preparation and mobilization of equipment and personnel or for capital improvements to the drilling rigs and day rate or fixed price mobilization and demobilization fees. For each contract the Company determines whether the contract, for accounting purposes, is a multiple element arrangement and, if so, identifies all deliverables For each element the Company determines how and when to recognize revenue. There are two types of drilling contracts: well contracts and term contracts.

Well contracts: These are contracts where the assignment is to drill a certain number of wells. Revenue from day rate based compensation for drilling operations is recognized in the period during which the services are rendered at the rates established in the contracts. Mobilization revenues, expenses and contributions from customers for capital improvements are recognized over the estimated duration of the drilling period. Demobilization revenues and expenses are recognized over the demobilization period.

Term contracts: These are contracts where the assignment is to operate the unit for a specified period of time. For these types of contracts the Company determines whether the arrangement is a multiple element arrangement containing both a lease element and drilling services element. For revenues derived from contracts that contain a lease, the lease elements are recognized in the income statement on a straight line basis, taking into consideration the different day rates, utilization and transit between locations that are anticipated to take place in the lease period. The drilling services element is recognized

F-18

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies-(continued):

(v) Accounting for Revenue and Related Expenses (continued):

in the period in which the services are rendered at rates at fair value. Revenues related to mobilization and direct incremental expenses of mobilization are deferred and recognized over the estimated duration of the drilling contracts. To the extent that expenses exceed revenue to be recognized, it is expensed as incurred. Demobilization fees and expenses are recognized over the demobilization period.

(w) Earnings/(loss) per Common Share: Basic earnings per common share are computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted earnings per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised. Dilution has been computed by the treasury stock method whereby all of the Company’s dilutive securities (the warrants, stock options, non-vested common stock and convertible senior notes) are assumed to be exercised or converted and the proceeds used to repurchase common shares at the weighted average market price of the Company’s common stock during the relevant periods. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) are included in the denominator of the diluted earnings per share computation. The treasury stock method is used in calculating diluted earnings per share for convertible senior notes as the Company expects to settle the principle partially or wholly in cash. The “if converted method” is used in calculating diluted earnings per share for Series A convertible preferred stock.

(x) Segment Reporting:.The Company reports financial information and evaluates its operations by charter revenues and not by the length of its vessel or its drilling rig employment by its customers, i.e., spot or time charters. The Company does not have discrete financial information to evaluate the operating results for each such type of employment. Although revenue can be identified for these types of employments, management cannot and does not identify expenses, profitability or other financial information for these types of employments. As a result, management, including the chief operating officer reviews results solely by revenue per day and operating results of the drybulk carrier and drilling rig fleets. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and as a result, the disclosure of geographic information is impracticable. The Company’s acquisition of Ocean Rig during 2008 has resulted in the Company determining that it operates under two reportable segments, as a provider of drybulk commodities for the steel, electric utility, construction and agri-food industries (Drybulk carrier segment) and as a provider of ultra deep water drilling rig services (Drilling rig segment). The accounting policies applied to the reportable segments are the same as those used in the preparation of the Company’s consolidated financial statements.

(y) Financial Instruments: The Company designates its derivatives based upon guidance on accounting for derivative instruments and hedging activities which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The guidance on accounting for certain derivative instruments and certain hedging activities requires all derivative instruments to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings unless specific hedge accounting criteria are met.

(i) Hedge Accounting: At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy undertaken for the hedge. The documentation includes identification of the hedging instrument, hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting exposure to changes in the hedged item’s cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine whether they actually have been highly effective throughout the financial reporting periods for which they were designated.

The Company is party to interest swap agreements where it receives a floating interest rate and pays a fixed interest rate for a certain period in exchange. Contracts which meet the strict criteria for hedge accounting are accounted for as cash flow hedges. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability, or a highly probable forecasted transaction that could affect profit or loss.

F-19

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies-(continued):

The effective portion of the gain or loss on the hedging instrument is recognized directly as a component of Other comprehensive income in equity, while any ineffective portion, if any, is recognized immediately in current period earnings.

The Company discontinues cash flow hedge accounting if the hedging instrument expires and it no longer meets the criteria for hedge accounting or designation is revoked by the Company. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is kept in equity until the forecasted transaction occurs. When the forecasted transaction occurs, any cumulative gain or loss on the hedging instrument is recognized in profit or loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to net profit or loss for the year as financial income or expense.

(ii) Other Derivatives: Changes in the fair value of derivative instruments that have not been designated as hedging instruments are reported in current period earnings.

(z) Guidance” Fair Value Measurements”: Effective January 1, 2008, the Company adopted the guidance “Fair Value Measurements and Disclosures”. In addition, on January 1, 2008, the Company made no election to account for its monetary assets and liabilities at fair values as allowed by FASB guidance for financial instruments. (Note 10).

(aa) Stock-based compensation: Stock-based compensation represents non-vested common stock granted to employees and directors, for their services. The Company calculates total compensation expense for the award based on its fair value on the grant date and amortizes the total compensation on a straight-line basis over the vesting period of the award or service period (Note 12).

(ab) Income Taxes: Income taxes have been provided for based upon the tax laws and rates in effect in the countries in which the Company’s operations are conducted and income is earned. There is no expected relationship between the provision for/or benefit from income taxes and income or loss before income taxes because the countries in which the Company operates have taxation regimes that vary not only with respect to the nominal rate, but also in terms of the availability of deductions, credits and other benefits. Variations also arise because income earned and taxed in any particular country or countries may fluctuate from year to year. Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company assets and liabilities using the applicable jurisdictional tax rates in effect at the year end. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. The Company accrues interest and penalties related to its liabilities for unrecognized tax benefits as a component of income tax expense

(ac) Pension and retirement benefit obligation: Administrative personnel employed by Ocean Rig are covered by state-sponsored pension funds under Norwegian law. Both employees and the Company are required to contribute a portion of the employees’ gross salary to the fund. Upon retirement, the state-sponsored pension funds are responsible for paying the employees retirement benefits and accordingly the Company has no such obligation. Administrative personnel are entitled to an indemnity in case of dismissal or retirement unless they resign or are dismissed with cause. The determination of the Company’s liability for pension and retirement benefits is based on an actuarial valuation.

(ad) Recent accounting pronouncements:

(i) In December 2007, new guidance established accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The new guidance also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The above-mentioned guidance was effective for fiscal years beginning after December 15, 2008, and was adopted by the Company in the first quarter of 2009. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements. The new guidance was retroactively applied to the consolidated statement of stockholders equity for the year ended December 31, 2008.

F-20

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies-(continued):

(ad) Recent accounting pronouncements-(continued):

(ii) In March 2008, new guidance was issued with the intent to provide users of financial statements with an enhanced understanding of derivative instruments and hedging activities. The new guidance requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This guidance was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. This guidance does not require comparative disclosures for earlier periods at initial adoption. The Company adopted this guidance in the first quarter of 2009 (Note 10).

(iii) In June 2008, new guidance clarified that all outstanding unvested share-based payment awards that contain rights to non forfeitable dividends participate in undistributed earnings with common shareholders. Awards of this nature are considered participating securities, and the two-class method of computing basic and diluted earnings per share must be applied. The Company determined that non-vested shares granted under its equity incentive plan are participating securities because the non-vested shares participate in dividends. The guidance was effective for fiscal years beginning after December 15, 2008. The Company adopted this new guidance in 2009, which was retroactively applied to the years ended December 31, 2008 and 2007 and did not have a material impact on the earnings per share (Note 12).

(iv) In December 2008 new guidance was issued which requires more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. The guidance was effective for fiscal years ending after December 15, 2009. Adoption of this guidance in 2009 did not have a significant impact on the Company’s financial statements (Note 13).

(v) In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance establishing the FASB Accounting Standards Codification as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. The Codification’s content effectively supersedes previous guidance and include only two levels of GAAP: authoritative and non authoritative. The guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the new guidance in the third quarter of 2009 and revised references to US GAAP in these consolidated financial statements to reflect the guidance in the Codification.

(vi) In June 2009, new guidance was issued with regards to the consolidation of variable interest entities (“VIE”). This guidance responds to concerns about the application of certain key provisions of the FASB Interpretation, including those regarding the transparency of the involvement with VIEs. The new guidance revises the approach to determining the primary beneficiary of a VIE to be more qualitative in nature and requires companies to more frequently reassess whether they must consolidate a VIE. Specifically, the new guidance requires a qualitative approach to identifying a controlling financial interest in a VIE and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. In addition, the standard requires additional disclosures about the involvement with a VIE and any significant changes in risk exposure due to that involvement. The guidance is effective as of the beginning of the first fiscal year that begins after November 15, 2009 and early adoption is prohibited. The Company is evaluating the impact of this guidance on its consolidated financial statements.

(vii) In September 2009, clarifying guidance was issued on multiple-element revenue arrangements. The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. The new guidance will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. The Company is currently assessing the future impact of this new accounting pronouncement to its consolidated financial statements.

F-21

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

2. Significant Accounting policies-(continued):

(ad) Recent accounting pronouncements-(continued):

(viii) In October, 2009 new guidance was issued with regards to accounting and reporting for own-share lending arrangements issued in contemplation of a convertible debt issuance. This guidance requires that a share-lending arrangement entered into on an entity’s own shares should be measured at fair value and recognized as an issuance cost, with an offset to additional paid-in capital. Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs. The amendments also require several disclosures including a description and the terms of the arrangement and the reason for entering into the arrangement.

The Company applied the new guidance to the own-share lending agreement entered into in association with the Convertible Senior Notes issued in November 2009 (Note 9).

3. Going Concern

As of December 31, 2008, the Company was in breach of certain financial covenants, mainly the loan-to-value ratios (also known as value maintenance clauses), contained in the Company’s loan agreements relating to $1.8 billion of the Company’s debt. Even though none of the lenders declared an Event of Default under the loan agreements, these breaches constituted potential events of default (also known as technical defaults) and could have resulted in the lenders requiring immediate repayment of the loans. During 2009 and up to December 31, 2009, the Company has obtained waivers from all of its lenders to resolve the above-mentioned breaches. Accordingly, as of December 31, 2009, the Company is in compliance with the loan-to-value ratios contained in the waiver agreements. However, some of these waiver agreements expire during 2010 when the original covenants come back in force. For some of these waiver agreements expiring in 2010, the Company, in theory, does not expect to meet the loan-to-value ratios contained in the original covenants using the current fair market values of its vessels. Accordingly, assuming that current market conditions would prevail upon waiver agreement expiration in 2010, the Company has deemed that it is probable that the Company will not be able to comply with the original covenants at measurement dates that are within the next 12 months. Accordingly, the Company has classified this debt as a current liability. In addition, the Company was in breach of a financial covenant in its $230 million loan facilities as of December 31, 2009, and is in process of resolving this breach. As a result of the cross default provisions in the Company’s loan agreements, actual breaches existing under its credit facilities, as well as theoretical technical defaults on waivers expiring in 2010, could result in defaults under all of the Company’s affected debt and the acceleration of such debt by its lender. As such the Company has classified all of the Company’s affected debt as current liabilities (Note 9).

The Company is currently in negotiations with its lenders to obtain waivers, waiver extensions or to restructure the affected debt. Management expects that the lenders will not demand payment of the loans before their maturity, provided that the Company pays loan installments and accumulated or accrued interest as they fall due under the existing credit facilities. Management plans to settle the loan interest and scheduled loan repayments with cash generated from operations.

As of December 31, 2009, the Company’s theoretical exposure (current portion of long-term debt less cash and cash equivalents less restricted cash) amounted to $654,690.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Accordingly, the financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, the amounts and classification of liabilities, or any other adjustments that might result in the event the Company is unable to continue as a going concern, except for the current classification of debt discussed in Note 9.

F-22

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

4. Transactions with Related Parties:

The amounts included in the accompanying consolidated balance sheets and consolidated statement of operations are as follows:

	December 31, 2008		December 31, 2009
Balance Sheet
Due from related party – Manager	$	12,733	$	27,594
Vessels, net – Manager, for the year		7,728		626
Advances for vessels/rigs under construction – Manager, for the year		352		1,557

	Year ended December 31,
	2007		2008		2009
Statement of Operations
Gain on sale of vessels	$	3,629	$	4,121	$	308
Contract termination fee and forfeiture of vessel deposits		—		160,000		25,350
Management fees		9,579		21,129		17,941
General and administrative expenses
- Consultancy fees – Fabiana		1,448		2,031		2,802
- SOX fees – Manager		2,369		2,832		3,056
- Rent – Manager		12		13		13
Interest and finance costs	$	614	$	—	$	—

(Per day and per quarter information in this note is expressed in United States Dollars/Euros)

Cardiff Marine Inc.: The operations of the Company’s vessels are managed by Cardiff (“Cardiff”), a related technical and commercial management company incorporated in Liberia. The Manager also acts as the Company’s charter and sales and purchase broker. The Manager is beneficially majority-owned by the Company’s Chairman and Chief Executive Officer George Economou, and members of his immediate family. The remaining interest in the Manager is beneficially owned by Ms. Chryssoula Kandylidis, who serves on the Company’s board of directors.

The Company pays a management fee of Euro 600 per day, per vessel to Cardiff. In addition, the management agreements provide for payment by the Company to Cardiff of: (i) a fee of Euro 105 per day per vessel for services in connection with compliance with Section 404 of the Sarbanes-Oxley Act of 2002; (ii) Euro 500 for superintendent visits on board vessels in excess of five days per annum, per vessel, for each additional day, per superintendent; (iii) chartering commission of 1.25% on all freight, hire and demurrage revenues; (iv) a commission of 1.00% on all gross sale proceeds or purchase price paid for vessels; (v) a quarterly fee of $250,000 for services in relation to the financial reporting requirements of the Company under Securities and Exchange Commission rules and the establishment and monitoring of internal controls over financial reporting; and (vi) a commission of 0.2% on derivative agreements and loan financing or refinancing.

Cardiff also provides commercial operations and freight collection services in exchange for a fee of Euro 90 per day, per vessel. Cardiff provides insurance services and obtains insurance policies for the vessels for a fee of 5% on the total insurance premiums per vessel. Furthermore, if required, Cardiff will also handle and settle all claims arising out of its duties under the management agreements (other than insurance and salvage claims) in exchange for a fee of Euro 150 per person, per day of eight hours.

Cardiff provides the Company with financial accounts services in exchange for a fee of Euro 120 per day, per vessel. The Company also pays Cardiff a quarterly fee of Euro 260,500 for services rendered by Cardiff in connection with the Company’s financial accounting services. Pursuant to the terms of the management agreements, all fees payable to Cardiff are adjusted upwards or downwards based on the year-on-year increase in the Greek consumer price index.

Transactions with the Manager in Euros are settled on the basis of the average USD rate on the invoice date.

F-23

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

4. Transactions with Related Parties-(continued):

Cardiff Marine Inc.-(continued):

Additionally the Company pays a management fee of $40 per month per drillship for Hull 1837 and Hull 1838. The management agreements also provide for: (i) chartering commission of 1.25% on all freight, hire and demurrage revenues; (ii) a commission of 1% on all gross sale proceeds or purchase price paid for drillships; (iii) a commission of 1% on loan financing or refinancing; and (iv) a commission of 2% on insurance premiums.

Consultancy Agreements: Under the consultancy agreements effective from February 3, 2005, between the Company and Fabiana Services S.A. (“Fabiana”), a related party entity incorporated in the Marshall Islands, Fabiana provides the services of George Economou in his capacity as Chief Executive Officer of the Company (Note 12).

On January 21, 2009, the Compensation Committee approved a Euro 5 million ($7 million) bonus payable for CEO services rendered during 2008.

On January 25, 2010, the Compensation Committee approved that a bonus in the form of 4,500,000 shares of the Company’s common Stock, with par value $0.01, be granted to Fabiana for the contribution of George Economou for CEO services rendered during 2009 as well as for anticipated services during the years 2010, 2011 and 2012. The shares shall vest over a period of four years, with 1,000,000 shares to vest on the grant date; 1,000,000 shares to vest on each of December 31, 2010 and 2011; 1,500,000 shares to vest on December 31, 2012, respectively.

Lease Agreement: The Company leases office space in Athens, Greece from George Economou.

Chartering agreement: During 2008, two subsidiaries concluded charter party agreements with Classic Maritime Inc., a then related party entity incorporated in the Marshall Islands and then controlled by George Economou. On September 3, 2008, Classic Maritime Inc. was sold to an unrelated party and was no longer considered a related party to Dryships. Under the agreements, the Company chartered the vessels Manasota and Redondo for a daily rate ranging from $35,000 to $67,000 and for period of five years.

Adjustment in Contract Price for Two Panamax Newbuildings: We had previously agreed to acquire two Panamax newbuildings, identified as Hulls 1518A and 1519A, for a purchase price in the amount of $33.6 million each. These vessels were scheduled for delivery from Hudong Shipbuilding in the fourth quarter of 2009 and the first quarter of 2010, respectively. An affiliated client of our manager, Cardiff, with which we are affiliated, had agreed to purchase Hull 1569A, a sister vessel to Hulls 1518A and 1519A. We had agreed to increase the purchase price for Hulls 1518A and 1519A by $4.5 million each in consideration for:(i) a corresponding $9.0 million decrease in the purchase price of Hull 1569A and (ii) an undertaking that on delivery of Hulls 1518A and 1519A, the owner of Hull 1569A will repay us by effecting payment of $9.0 million to Hudong Shipbuilding. We issued a guarantee to the shipyard for this increase in the purchase price of Hulls 1518A and 1519A. These hulls were delivered in 2009.

Cancellation of the acquisition of nine Capesize vessels: In October 2008, the Company agreed to purchase the ship-owning companies of nine Capesize drybulk carriers for an aggregate purchase price of $1.17 billion from clients of Cardiff, including affiliates of George Economou, and unrelated third parties, consisting of 19.4 million Company common shares and the assumption of an aggregate of $478,300 in debt and future commitments. In light of the considerable subsequent decrease in the asset values of the nine Capesize vessels, the Company reached an agreement with the sellers to cancel this transaction. The cancellation of the acquisition was approved by the independent members of the Company’s Board of Directors on January 21, 2009, and the termination and release agreements were signed on March 6, 2009. The consideration for canceling the transaction consisted of 6.5 million common shares issued to entities unaffiliated with the Company and nominated by the third-party sellers, which common shares were subject to a six-month “lock up” period, and 3.5 million “out-of-the-money” warrants issued to entities controlled by George Economou. As the affiliated entities received less consideration to cancel these contracts than the unrelated third parties, George Economou was deemed to have made an investor’s contribution to the Company’s capital.

F-24

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

4. Transactions with Related Parties-(continued):

Cancellation of the acquisition of nine Capesize vessels-(continued):

The shares and warrants were issued on April 9, 2009. Each warrant entitles the holder to purchase one share of the Company’s common stock. These warrants have a cost of $0.01 and strike prices, depending on the relevant tranches, of between $20 and $30 per share. The warrants are subject to an 18-month “lock up” period and expire after five years.

The costs of this cancellation recorded in “Contract termination fee and forfeiture of vessel deposits”, are summarized as follows:

Compensation to unrelated parties (a)	$	23,855
Compensation to related parties (b)		25,350
Total cancellation fee	$	49,205

(a) The fair value of the Company’s 6.5 million common shares issued to the third-party sellers was measured on March 6, 2009 (i.e., the date when the Company terminated the contracts in accordance with their terms) using the closing stock price of $3.67 per share or an aggregate fair value of $23,855.

(b) The fair value of the compensation to terminate the purchase commitment with the related parties on five of the nine vessels was $25,350, measured using the loss in value method (calculated as the difference between the total purchase consideration and the fair value of the five vessels using independent brokers’ valuations). A portion of such compensation was in the form of the Company’s warrants with a fair value of $5,392, which was determined using the Black-Scholes Model with the Company’s common shares as the underlying security.

Cancellation of the acquisition of vessels: On June 25, 2008, the Company entered into two memoranda of agreement to acquire the vessels Sidari and Petani built in 2007 and 2008 for $200,000 in total from companies beneficially owned by George Economou. The vessels were expected to be delivered by the end of 2008 with their existing time charters attached for a period of approximately four years each with an unrelated party for a daily rate of $43,800 each. On July 10, 2008, the Company paid $40,000 representing an advance payment of 20% in accordance with the related clauses of the memoranda of agreement. On December 10, 2008, the Company entered an agreement to cancel the acquisition of these vessels for a total consideration of $80,000 (Note 5).

Cancellation of the acquisition of companies: In July 2008, the Company entered into two agreements to acquire all of the issued and outstanding shares of two ship-owning companies beneficially owned by George Economou. The aggregate purchase price was $140,000, which represented the fair value of the sole assets of the two companies. In exchange for the aggregate purchase price, the Company agreed to acquire two newbuilding Panamax vessels that were scheduled to be delivered in the fourth quarter of 2008 and the first quarter of 2009, respectively, net of advances of $60,000 in total to be made under the shipbuilding contract by the Company. During October and November 2008 the Company paid $15,000 representing advances for the newbuilding hulls. On December 10, 2008, the Company entered an agreement to cancel the acquisition of these companies for a total consideration of $80,000 (Note 5).

Purchase of Ocean Rig from a related party: On December 20, 2007 Primelead Limited (“Primelead”) acquired 51,778,647 shares in Ocean Rig from Cardiff, who acted as an intermediary, for a consideration of $406,024. This represented 30.4% of the issued shares in Ocean Rig. A commission was paid to Cardiff, amounting to $4,050 which for the year ended December 31, 2007 was included in “Other, net” in the accompanying consolidated statements of operations. The above commission was paid on February 1, 2008.

In April 2008, 7,546,668 shares, representing 4.4% of the share capital of Ocean Rig were purchased from companies controlled by George Economou for a consideration of $66,782, which is the USD equivalent (Norwegian Kroner) of 45 per share, which is the price that was offered to all shareholders in a mandatory offering (Note 7).

In addition, a commission was paid to Cardiff amounting to $9,925 for services rendered in relation to the acquisition of the remaining shares in Ocean Rig. The above commission was paid on December 5, 2008 and is reflected in “Other, net” in the accompanying consolidated statements of operations.

F-25

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

4. Transactions with Related Parties - (continued):

Acquisition of drillships: On October 3, 2008, the Company’s wholly owned subsidiary, Ocean Rig UDW Inc. (“Ocean Rig UDW”), formerly known as Primelead Shareholders Inc., entered into a share purchase agreement with certain unrelated parties and certain entities affiliated with George Economou to acquire the full equity interests in Drillships Holdings Inc. (“Drillships Holdings”), the owner of drillships Hulls 1837 and 1838 newbuilding advanced capability drillships for use in ultra deepwater drilling locations (Note 5).

On May 15, 2009, the above transaction closed. As consideration of this acquisition, Ocean Rig UDW issued to the sellers the number of common shares equal to 25% of its total issued and outstanding common shares as of May 15, 2009. The consideration paid to the related-party sellers was determined based on various fair value valuation methods.

The following table summarizes the aggregate fair values of assets acquired and liabilities assumed by the Company as of May 15, 2009:

Fair value of assets and liabilities acquired
Cash equivalents	$	248
Advances for rigs under construction		625,445
Short-term borrowings (Note 9)		(31,102	)
Other current liabilities		(7,656	)
Long-term debt (Note 9)		(228,810	)
Total fair value of net assets	$	358,125

The carrying amount of the advances for rigs under construction was $447,445 as of the acquisition date. A fair value adjustment of $178,000 was made to the carrying amounts based on the fair value of the assets acquired. The carrying amounts of the remaining assets and liabilities acquired did not require fair value adjustments. No intangible assets were identified during the acquisition of Drillships Holdings.

On July 15, 2009, the Company acquired the remaining 25% of the total issued and outstanding capital stock of Ocean Rig UDW from the minority interests. The consideration paid for the 25% interest consisted of a one-time $50,000 cash payment and the issuance of the Company’s Series A Convertible Preferred Stock with an aggregate face value of $280,000 (Note 11).

In the event that any of the newbuilding drillships Hulls 1837 and 1838 are sold by the Company for less than $800 million prior to delivery, the sellers of Drillships Holdings are obligated to pay to the Company, in cash or in shares, 25% of the difference between the sale price and $800 million which cannot exceed $12.5 million. Management has assessed the probability of occurence of this event as remote.

Short-term credit facility: During 2007, the Company borrowed an aggregate amount of $63,000 from Elios Investment Inc., a wholly-owned subsidiary of the Foundation (Note 1) in order to partly finance the acquisition cost of the vessels Bargara, Marbella, Primera, Brisbane, Menorca, Capitola, Ecola and Majorca. The loan was provided in two tranches: $33,000 in April 2007 and $30,000 in May 2007 and was fully repaid as of June 15, 2007. Interest paid during the year ended December 31, 2007 amounted to $614.

Purchase of derivatives from related parties: In order to maintain the minimum hedging ratio of one of its loans, on June 22, 2007 the Company acquired from Sea Glory Navigation Ltd. and River Camel Shipping Co., both related-party companies managed by Cardiff, two interest rate cap and floor agreements which were valued on that date by the financial institutions counterparties to the agreements at an amount of $1,290 (asset).

F-26

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

4. Transactions with Related Parties-(continued):

Purchase of derivatives from related parties-(continued):

Drybulk S.A: An amount of $2,011 was charged by Drybulk S.A, a related party, during the year ended December 31, 2007 for chartering commissions.

5. Advances for Vessels and Rigs under Construction and Acquisitions:

The amounts shown in the accompanying consolidated balance sheets include milestone payments relating to the shipbuilding contracts with the shipyards, supervision costs and any material related expenses incurred during the construction periods, all of which are capitalized in accordance with the accounting policy discussed in Note 2.

As of December 31, 2008 and 2009, the advances for vessel and rigs under construction and acquisitions are set forth below:

				December 31, 2008				December 31, 2009
Vessel name	Expected delivery	Contract amount		Contract payments	Capitalized expenses	Total		Contract payments		Capitalized expenses and fair value adjustments	Total
H1518A	Delivered 2009	$	33,593	9,975	1,029	$	11,004	$	—	—	$	—
H1519A	Delivered 2009		33,593	9,975	992		10,967		—	—		—
HSS058	Cancelled 2009		54,250	10,850	749		11,599		—	—		—
HSS059	Cancelled 2009		54,250	10,850	749		11,599		—	—		—
H0002	Cancelled 2009		105,500	10,550	734		11,284		—	—		—
H0003	Cancelled 2009		105,500	10,550	734		11,284		—	—		—
H2089	Sold 2009		114,000	22,800	1,678		24,478		—	—		—
H1128	Cancelled 2009		—	15,300	705		16,005		—	—		—
Petalidi	Cancelled 2009		—	6,100	—		6,100		—	—		—
H1865	July 2011		701,555	205,939	4,703		210,642		205,939	14,068		220,007
H1866	September 2011		701,555	205,939	4,715		210,654		205,939	12,913		218,852
H1837	December 2010		689,795	—	—		—		254,347	114,250		368,597
H1838	March 2011		689,545	—	—		—		254,347	112,890		367,237
		$	3,283,136	518,828	16,788	$	535,616		920,572	254,121	$	1,174,693

On December 10, 2008, the Company agreed to cancel its acquisition of the four Panamax drybulk carriers, including two newbuildings (Note 4), from companies beneficially owned by George Economou. The agreement was negotiated and approved by a committee consisting of the independent members of the Company’s Board of Directors. The cancellation fee consisted of forfeiture of the Company’s deposits totaling $55,000, plus a cash payment of $26,250 per vessel. The total cancellation fee of $160,000 is included in contract termination fees and forfeiture of vessel deposits in the consolidated statement of operations. In addition, the Company has entered into an agreement with the selling companies of the above vessels, providing the Company with the exclusive option to purchase the abovementioned four Panamax drybulk carriers on an en bloc basis at a fixed purchase price of $160,000 to be exercised up to December 31, 2009. The fair value of such option as of December 31, 2008 is deemed to be zero. The exclusive purchase option granted to the Company by the seller was not exercised on December 31, 2009.

On August 13, 2008, the Company entered into a memorandum of agreement to acquire the vessel Maple Valley for total consideration of $61,000 from an unrelated party. The vessel was expected to be delivered during the first quarter of 2009. In

F-27

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

5. Advances for Vessels and Rigs Under Construction and Acquisitions - (continued):

September 2008, the Company paid $6,100 representing an advance payment of 10% in accordance with the related clauses of the memorandum of agreement. On January 29, 2009, the Company and the seller mutually agreed to cancel the memorandum of agreement to acquire the vessel in consideration of a payment of $8,000 to the seller and the seller’s retention of the $6,100 deposit that was previously paid.

On January 15, 2009, the Company agreed to transfer its interests in the ship-owning companies of three Capesize newbuildings (Hulls 0002, 0003 and 1128) to an entity not affiliated with the Company. In connection with this transfer of interest, the sellers released the Company and its relevant subsidiaries from the purchase agreements for these vessels.

The total consideration of $118,688, including capitalized expenses, included in “Contract termination fees and forfeiture of vessel deposits” in the accompanying consolidated statement of operations consists mainly of the forfeiture of $36,400 in deposits for the acquisition of the three vessels already made by the Company, $30,000 in cash consideration and two additional tranches of $25,000 each payable in cash or the equivalent amount in the form of common shares. On March 19, 2009, the Company issued a total of 11,990,405 common shares to the nominees of the seller to settle the two additional tranches.

On May 15, 2009, the Company acquired the equity interests of Drillships Holdings, which owns two newbuilding advanced capability drillships for use in ultra deepwater drilling locations, identified as Hull 1837 and Hull 1838 (Note 4).

On May 27, 2009, the Company sold the ship-owning company that had previously contracted for the purchase of newbuilding drybulk carrier H2089 to an unrelated party for $100 and incurred a cancellation fee and forfeiture of vessel deposits, of $44,693, including capitalized expenses. Pursuant to the sale, the buyer assumed the liability for the remaining payments due in respect of H2089 and has received the benefit of our down payment in the amount of $22,800 already made in respect of the vessel. In connection with this transfer of interest, the sellers released the Company and the relevant subsidiary from the purchase agreement for the vessel. The total consideration of $44,693 included in “Contract termination fees and forfeiture of vessel deposits” in the accompanying consolidated statement of operations was comprised of $24,693 in forfeited deposits including capitalized expenses, and a $20,000 cancellation fee which was paid to the sellers through Cardiff, who acted as agent for the Company.

On October 16, 2009, the Company entered into two separate agreements with third-party sellers to cancel Hulls SS058 and SS059. The total consideration of $30,773 included in “Contract termination fees and forfeiture of vessel deposits” in the accompanying consolidated statement of operations consists of the forfeiture of $23,773, including capitalized expenses, and $7,000 in cash consideration in respect of the cancellation.

During the years ended December 31, 2008 and 2009, the movement of the advances for vessels/drillships under construction and acquisitions was as follows:

	December 31,
	2008			2009
Balance at beginning of period	$	118,652		$	535,616
Acquisitions of Drillships		—			625,445
Advances for vessels/drillships under construction and related costs		509,165			128,755
Advances forfeited due to cancellation of vessel acquisitions		(55,000	)		(93,158	)
Vessels delivered		(37,201	)		(21,965	)
Balance at end of period	$	535,616		$	1,174,693

F-28

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

6. Fixed assets:

The amounts in the accompanying consolidated balance sheets are analyzed as follows:

Drybulk vessels:

	Cost			Accumulated Depreciation			Net Book Value
Balance, December 31, 2007	$	1,794,184		$	(150,317	)	$	1,643,867
Vessel acquisitions		779,374			—			779,374
Vessel disposals		(222,712	)		44,628			(178,084	)
Depreciation		—			(110,507	)		(110,507	)
Balance, December 31, 2008		2,350,846			(216,196	)		2,134,650
Vessel acquisitions		70,507			—			70,507
Vessel disposals		(37,312	)		9,584			(27,728	)
Depreciation		—			(117,522	)		(117,522	)
Vessel impairment charge		(11,651	)		10,073			(1,578	)
Balance, December 31, 2009	$	2,372,390		$	(314,061	)	$	2,058,329

During 2008, the vessels Avoca, Conquistador, Capri, Positano, Flecha, Sorrento and Mystic were delivered to the Company for $779,374. The vessels Matira, Netadola, Lanzarote, Menorca, Waikiki, Solana and Tonga were sold for net proceeds of $401,106 realizing a gain from the sale of $223,022.

In addition during 2008, the Company concluded Memoranda of Agreement for the sale of vessels, Paragon, Delray, Toro and MV La Jolla for $245,400. After negotiations the final sales price for these vessels was adjusted to $188,300. (Note 14) In 2009, the sale of the vessel La Jolla was cancelled and a gain on contract cancellation of $9,000 was recognized.

On May 19, 2008 the Company entered into a memorandum of agreement for the sale of vessel Primera for $75,000. The sale agreement was subsequently cancelled on October 15, 2008 and the advance of $9,098 was retained by the Company.

During 2009, the vessels Rapallo and Oliva were delivered to the Company for $70,507. In addition, during 2009, the vessel Paragon was sold for net proceeds of $30,163, resulting in a gain from the sale of $2,432.

During 2009, the Company concluded Memoranda of Agreement for the sale of vessels, Iguana and Delray for $23,350 and $20,145, respectively. The vessels were delivered in the first quarter of 2010.

Due to the above-mentioned sales, the Company performed an impairment review on the Iguana and the Delray as of December 31, 2009 to determine whether the change in the circumstances indicated that the carrying amount of the assets may not be recoverable. The Company’s review indicated that future undiscounted operating cash flows for the vessel Iguana, including revenues from the existing charter through the expected date of sale and the agreed-upon sale price, were below its carrying amount, and accordingly a vessel impairment charge of approximately $1,578 was recognized and reflected in the accompanying consolidated statement of operations for the year ended December 31, 2009.

F-29

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

6. Fixed assets-(continued):

Drilling rigs, machinery and equipment:

	Cost			Accumulated Depreciation			Net Book Value
Balance on acquisition	$	1,423,156			—		$	1,423,156
Acquisitions		16,584			—			16,584
Depreciation		—			(46,582	)		(46,582	)
Balance, December 31, 2008		1,439,740			(46,582	)		1,393,158
Acquisitions		14,152			—			14,152
Disposals		(501	)		114			(387	)
Depreciation		—			(77,282	)		(77,282	)
Balance December 31, 2009	$	1,453,391		$	(123,750	)	$	1,329,641

As of December 31, 2009, all of the Company’s vessels and drilling rigs have been pledged as collateral to secure the bank loans, (Note 9).

7. Acquisition of Ocean Rig:

On December 20, 2007, the Company acquired 51,778,647 or 30.4% of the issued shares in Ocean Rig. Ocean Rig, incorporated on September 26, 1996 and at that time domiciled in Norway, was a public limited company whose shares previously traded on the Oslo Stock Exchange.

The Company accounted for its investment in Ocean Rig for the year ended December 31, 2007, and for the period from January 1, 2008 to May 14, 2008 using the equity method of accounting. The Company’s equity in the loss of Ocean Rig is shown in the accompanying consolidated statements of operations for the year ended December 31, 2007 and 2008 as “Equity in loss of investee” and amounted to a loss of $299 and $6,893, respectively.

After acquiring 33% of Ocean Rig’s outstanding shares on April 22, 2008, the Company, as required by Norwegian Law, launched a mandatory bid for the remaining shares of Ocean Rig at a price of NOK45 per share ($8.89 per share). The Company acquired additional shares of Ocean Rig, resulting in the Company gaining control over Ocean Rig on May 14, 2008. The results of operations related to the acquisition are included in the consolidated financial statements since May 15, 2008. The mandatory bid expired on June 11, 2008. As of July 10, 2008, the total shares held by the Company in Ocean Rig amounted to 100% (163.6 million shares). Out of the total shares acquired as discussed above, 4.4% of the share capital of Ocean Rig was purchased from companies controlled by George Economou (Note 4).

The Company had recorded a non-controlling minority interest on its balance sheet as of June 30, 2008 in accordance with guidance related to classification and measurement of redeemable securities. The resulting non-controlling interest carrying value of $21,457 was recorded at redemption value, which was higher than the amount that would result from applying consolidation accounting under guidance relating to consolidation, resulting in an additional $15,050 allocated to non-controlling interest recorded in the consolidated statement of operations for the year ended December 31, 2008. The transaction was completed in 2008.

Impairment Charge

At December 31, 2008, the Company performed its annual impairment testing for Goodwill. As a result of its impairment testing, the Company determined that the Goodwill associated with its Drilling Rigs reporting unit was impaired. Accordingly, the Company recognized an impairment charge for the full carrying amount of the Goodwill associated with this reporting unit in the amount of $700,457, which had no tax effect.

F-30

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

7. Acquisition of Ocean Rig-(continued):

The Goodwill balance and changes in the Goodwill is as follows:

Balance May 14, 2008	$	700,457
Goodwill impairment charge		(700,457	)
Balance December 31, 2008	$	—

8. Intangible Assets and Liabilities:

The Company identified finite-lived intangible assets associated with the trade names, software, and above- and below-market acquired time charters that are being amortized over their useful lives. In the case of the trade names and software, the useful lives are 10 years. The useful lives of above- and below-market acquired time charters depend on the contract term remaining at the date of acquisition. Trade names and software are included in “Intangible assets, net” in the accompanying consolidated balance sheets net of accumulated amortization. Above-market and below-market acquired time charters are presented separately in the accompanying consolidated balance sheets, net of accumulated amortization.

					Amortization Schedule
	Amount Acquired		Accumulated amortization as of December 31, 2008	Amortization for the year ended December 31, 2009	2010	2011	2012	2013	2014	thereafter
Trade names	$	9,145	541	915	915	915	915	915	915	$	3,114
Software		5,888	349	590	589	589	589	589	589		2,004
Total Intangible Assets, net	$	15,033	890	1,505	1,504	1,504	1,504	1,504	1,504		5,118
Above-market acquired time charters	$	15,053	2,093	10,912	1,294	754	—	—	—		—
Below-market acquired time charters	$	65,844	37,838	20,374	6,778	854	—	—	—	$	—

F-31

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

9. Long-term Debt:

The amount of long-term debt shown in the accompanying consolidated balance sheets is analyzed as follows:

	December 31, 2008			December 31, 2009
Convertible Senior Notes	$	—		$	460,000
Loan Facilities – Drybulk Segment		1,392,308			1,168,016
Loan Facilities – Drilling Rig Segment		1,805,926			1,224,824
Less: Deferred financing costs		(39,364	)		(168,156	)
Total debt		3,158,870			2,684,684
Less: Current portion		(2,370,556	)		(1,698,692	)
Long-term portion	$	788,314		$	985,992

Convertible Senior Notes and Related Borrow Facility

In November 2009, the Company issued $400,000 aggregate principal amount of 5% Convertible unsecured Senior Notes (the “Notes”), which are due December 1, 2014. The full over allotment option granted was exercised and an additional $60,000 Notes were purchased. Accordingly, $460,000 in aggregate principal amount of Notes were sold, resulting in aggregate net proceeds of approximately $447,810 after the underwriter commissions.

The holders may convert their Notes at any time on or after June 1, 2014 but prior to maturity. However, holders may also convert their Notes prior to June 1, 2014 under the following circumstances: (1) if the closing price of the common stock reaches and remains at or above 130% of the conversion price of $7.19 per share of common stock or 139.0821 share of common stock per $1,000 aggregate principal amount of Notes, in effect on that last trading day for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs; (2) during the ten consecutive trading-day period after any five consecutive trading-day period in which the trading price per $1,000 principal amount of the Notes for each day of that period was less than 98% of the closing price of our common stock multiplied by then applicable conversion rate; or (3) if specified distributions to holders of our common stock are made or specified corporate transactions occur. The Notes are unsecured and pay interest semi-annually at a rate of 5% per annum commencing June 1, 2010. Since the Company’s stock price was below the Notes conversion price of $7.19 as of December 31, 2009, the if-converted value did not exceed the principal amount of the Notes.

As the Notes contain a cash settlement option upon conversion at the option of the issuer, the Company has applied the guidance for “Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)”,and therefore, on the day of the Note issuance, bifurcated the $460,000 principal amount of the Notes into liability and the equity components of $341,156 and $118,844, respectively, by first determining the carrying amount of the liability component of the Notes by measuring the fair value of a similar liability that does not have an associated equity component. The equity component was calculated by deducting the fair value of the liability component from the total proceeds received at issuance. Additionally, the guidance requires the Company to accrete the discount of $118,844 to the principal amount of the Notes over the term of the Notes. The Company’s interest expense associated with this Note accretion is based on an effective interest rate of 12%. The total interest expense related to the convertible notes in the Company’s Consolidated Statement of Operations for the year ended December 31, 2009 was $4,037, of which $1,769 is non-cash amortization of the discount on the liability component and $2,268 is the contractual interest to be paid semi-annually at a coupon rate of 5% per year. At December 31, 2009 the net carrying amount of the liability component and unamortized discount were $342,925 and $117,075, respectively.

In conjunction with the public offering of the 5% Notes described above, the Company also entered into a share lending agreement with an affiliate of the underwriter of the offering, or the share borrower, pursuant to which the Company loaned the share borrower approximately 26.1 million shares of our common stock. Under the share lending agreement, the share borrower is required to return the borrowed shares when the notes are no longer outstanding. The Company did not receive any proceeds from the sale of the borrowed shares by the share borrower, but the Company did receive a nominal lending fee of $0.01 per share from the share borrower for the use of the borrowed shares.

F-32

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

9. Long-term Debt-(continued):

The fair value of the outstanding loaned shares as of December 31, 2009 was $151,902. On the day of the Note issuance the fair value of the share lending agreement was determined to be $9,900 based on a 5.5% interest rate of the Notes without the share lending agreement and was recorded as debt issuance cost. Amortization of the issuance costs associated with the share lending agreement recorded as interest expense during the year ended December 31, 2009 was $195, resulting in an unamortized amount of $9,705 at December 31, 2009.

Loan Facilities—Drybulk Segment

a) On December 4, 2007, as amended, the Company entered into a $101,150 term loan facility to partially finance the acquisition cost of vessels Saldanha and Avoca. The loan bears interest at LIBOR plus 1%-1.2%, depending on the equity ratio, and is repayable in twenty-eight quarterly installments plus a balloon payment through January 2015. The facility contains various covenants, including: i) market-adjusted equity ratio greater than or equal to 30%; and ii) market value to loan amount greater than or equal to 125%.

On June 11, 2009, the Company entered into a supplemental agreement on waiver terms for this facility, which provides, among other things that through May 19, 2011; (i) the lender will waive the financial covenants contained in the corporate guarantee; and (ii) the lender will waive the required prepayment in the event of a security value shortfall. Furthermore, the applicable margin was amended to 2% until maturity of the loan.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $91,775 and $70,318, respectively.

b) On March 31, 2006, as amended, the Company concluded certain senior and junior facilities with the same bank to partially finance the acquisition cost of certain vessels. Both the senior and junior facilities bear interest at LIBOR plus a margin (senior: 0.85%-1.1%, depending on market adjusted equity ratio; junior: 2.2%-2.53%, depending on market adjusted equity ratio) and are repayable in 37 quarterly installments with a balloon payment payable together with the last installment on May 31, 2016. The facilities contain various covenants, including: (i) market-adjusted equity ratio greater than or equal to 40%; (ii) market value adjusted net worth greater than or equal to $800,000, and (iii) market value to loan amount greater than or equal to 130% (senior and junior combined) and 200% (senior only).

On November 17, 2009 the Company entered into a supplemental agreement waiving and amending terms of the above loan facilities. These supplemental agreements, among other things, amend the (i) market adjusted equity ratios to 15%; (ii) market value adjusted net worth to $100 million; (iii) applicable margins on the facilities from December 22, 2008 until September 30, 2010 to 1.9% for the senior loan and 3% for the junior loan; and (vi) security cover requirements during the waiver period to be between 80%-100%, depending on the facility.

As of December 31, 2008 and 2009, the aggregate amount outstanding under these facilities was $673,408 and $598,237, respectively.

c) On March 13, 2008, as amended, the Company concluded a loan agreement of up to $130,000 for working capital and general corporate purposes. This facility is collateralized by the vessels Toro and Delray. The loan bears interest at 1.1%-1.2%, depending on the leverage ratio, and is repayable in twenty-eight quarterly installments plus a balloon payment through March 2015. The facility contains various covenants, including: (i) market-adjusted equity ratio greater than or equal to 30%; (ii) market value adjusted net worth greater than or equal to $225,000; and (iii) market value to loan amount greater than or equal to 125%.

On July 30, 2009, the Company entered into a covenant waiver and amendment agreement with respect to its $130,000 credit facility, providing for the waiver of certain covenants. This covenant waiver and amendment agreement, among other things, (i) increases the applicable margin on the facility to 2% per annum from April 1, 2009 until March 31, 2011, to 1.75% from March 31, 2011 to March 31, 2012, and to 1.5% per annum from March 31, 2012 until the final maturity date; (ii) requires that until March 31, 2011, proceeds from the sale or loss of the collateral vessels be applied to the outstanding advance of the facility; (iii) requires additional security and a restricted cash account equaling a minimum of the next four quarterly principal installments; (iv) waives the minimum required security cover until March 31, 2011; and (v) waives the financial covenants of DryShips until March 31, 2011. During the year ended December 31, 2009, the Company repaid an amount of $28,552 against the outstanding loan balance for the vessel Paragon upon her sale.

F-33

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

9. Long-term Debt-(continued):

On 25 January, 2010 the Company entered into a vessel substitution agreement for MVs Toro and Delray. This agreement provides, among other things that after the end of the waiver period the applicable margin of the loan facility shall be reduced from 2% to 1.75% for a period of 12 months and thereafter to be reduced to 1.5% until the final maturity date.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $84,025 and $48,961, respectively.

d) On May 5, 2008, as amended, the Company concluded a loan agreement of up to $90,000 in order to partly finance the acquisition cost of the vessel Mystic. The loan bears interest at LIBOR plus 1.2% and is repayable in fifteen semi-annual installments, plus a balloon payment, payable with the last installment in December 2015. The facility contains various covenants, including: (i) market-adjusted equity ratio greater than or equal to 20%; (ii) market value adjusted net worth greater than or equal to $250,000; and (iii) market value to loan amount greater than or equal to 125%.

On October 22, 2009, the Company reached an agreement on waiver and amendment terms on this facility, providing for a waiver of certain covenants through September 30, 2010. This agreement, among other things: (i) amends the security cover to 80% for the duration of the waiver period and further; and (ii) amends the minimum requirements for the market adjusted equity ratio, market value adjusted net worth of the group and the interest leverage ratio. Furthermore, the waiver agreement increases the interest margin for the duration of the waiver period to 1.85%.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $80,000 and $60,000, respectively.

e) On May 13, 2008, as amended, the Company concluded a loan agreement of up to $125,000 in order to partly finance the acquisition cost of the vessels Capri and Positano. The loan bears interest at LIBOR plus 1.15% and is repayable in thirty two quarterly installments, plus a balloon payment through June 2016. The facility contains various covenants, including: (i) market-adjusted equity ratio greater than or equal to 30% (ii) market value adjusted net worth greater than or equal to $225 million and (iii) market value to loan amount greater or equal to 125%.

On February 25, 2010, the Company entered into a supplemental agreement for a waiver of certain covenants. These covenant waivers and amendment agreement, among other things, (i) increase the applicable margin on the facilities from January 1, 2009 until December 31, 2010 to 1.9%; (ii) amends security cover to 77% until June 30, 2010 and to 91% for the duration to the end of the waiver period; and (iii) amend our financial covenants as guarantor until midnight on December 31, 2010.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $112,000 and $86,000, respectively.

f) On June 20, 2008, the Company concluded a loan agreement of up to $103,200 in order to partly finance the acquisition cost of the vessels Sorrento and Iguana. The loan bears interest at LIBOR plus 1.2% and is repayable in thirty-two quarterly installments plus a balloon payment through July 2016 for the vessel Sorento and twenty quarterly installments through June 2013 for vessel Iguana. The facility contains various covenants, including: (i) market-adjusted equity ratio greater than or equal to 20%; (ii) market value adjusted net worth greater than or equal to $250,000; and (iii) market value to loan amount greater than or equal to 135%.

On October 8, 2009, the Company entered into a supplemental agreement on waiver and amendment terms on this loan facility providing for a waiver of certain covenants. This supplemental agreement, among other things, waives (i) the security cover provisions; (ii) market adjusted equity ratio; (iii) market value adjusted net worth; and (iv) some of our financial covenants as guarantor through April 8, 2011. Furthermore, the margin was increased to 2% throughout the waiver period.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $78,350 and $63,350, respectively.

F-34

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

9. Long-term Debt-(continued):

g) On July 23, 2008, as amended, the Company concluded a facility agreement for an amount of $126,400 in order to partly finance the acquisition of a secondhand vessel, to be named Flecha. The loan bears interest at LIBOR plus 1.25%-1.35%, depending on the tranche, and is repayable in forty quarterly installments, plus a balloon payment, payable with the last installment in July 2018. The facility contains various covenants, including maintaining a market value to loan amount equal to or greater than 125%.

On October 12, 2009, the Company entered into a supplemental agreement on waiver and amendment terms on this loan facility providing for a waiver of certain covenants, including the security cover provisions, through October 9, 2011. Furthermore, the margin was increased to 1.85% throughout the waiver period.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $123,750 and $113,150, respectively.

(h) On October 2, 2007, as amended, the Company concluded a loan agreement of up to $ 35,000 in order to partly finance the acquisition cost of the second-hand vessel Paros (ex. Clipper Gemini). The loan bears interest at LIBOR plus 0.9% and will be repaid in thirty-six quarterly installments through October 2016. The facility contains various covenants, including a market value to loan amount greater than or equal to 125%.

On February 25, 2010, we entered into a supplemental agreement for a waiver of certain covenants. These covenant waivers and amendment agreement, among other things: (i) increase the applicable margin on the facilities from January 1, 2009 until December 31, 2010 to 1.9%; (ii) amends the minimum security cover to 83% over the waiver period; and (iii) amend our financial covenants as guarantor until midnight on December 31, 2010.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $29,000 and $25,000, respectively.

(i) On October 5, 2007, as amended, the Company concluded a loan agreement of up to $90,000 in order to partly finance the acquisition cost of the second-hand vessels Samatan and VOC Galaxy. The loan bears interest at LIBOR plus 0.95%-1.05%, depending on the leverage ratio, and will be repaid in thirty-two quarterly installments through November 2015. The facility contains various covenants, including: (i) market-adjusted equity ratio greater than or equal to 30%; (ii) market value adjusted net worth greater than or equal to $225,000; and (iii) market value to loan amount greater than or equal to 125%.

On July 30, 2009, the Company entered into a covenant waiver and amendment agreement with respect to its $90,000 credit facility providing for the waiver of certain covenants. This covenant waiver and amendment agreement, among other things: (i) increases the applicable margin on the facility to 2% per annum from April 1, 2009 until March 31, 2011 and 1.5% per annum from March 31, 2011 until the final maturity date; (ii) requires that until March 31, 2011, proceeds from the sale or loss of the collateral vessels be applied to the outstanding advance of the facility; (iii) requires additional security; (iv) waives the minimum required security cover until March 31, 2011; and (v) waives the financial covenants of DryShips as guarantor until March 31, 2011.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $82,000 and $74,000, respectively.

(j) On November 16, 2007 the Company concluded a loan agreement of up to $ 47,000 in order to partly finance the acquisition cost of the vessel Oregon. The loan bears interest at LIBOR plus 0.85% and will be repaid in thirty-two quarterly installments through December 2015. The facility contains various covenants, including: (i) market-adjusted equity ratio greater than or equal to 20%; (ii) market value adjusted net worth greater than or equal to $225,000; and (iii) market value to loan amount greater than or equal to 130%.

In February 2009, the Company entered in a supplemental agreement on waiver and amendment terms on a $47,000 loan facility, providing for a waiver of certain covenants through December 31, 2009. On November 11, 2009, the Company entered into an agreement to confirm that the conditions in such waivers remain satisfied, and that the waivers extend to certain financial covenants in our guarantee of this loan facility through December 31, 2009.

F-35

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

9. Long-term Debt-(continued):

In February 2010, we signed a waiver letter providing for certain covenant amendments including the waiver of our financial covenants until January 01, 2011. The waiver letter increases the applicable margin on this facility to 3%.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $38,000 and $29,000, respectively.

Loan Facilities—Drilling Rig Segment

a) On May 9, 2008, the Company concluded a guarantee facility of NOK 5.0 billion (approximately $974,500) and a term loan of $800,000 in order to guarantee the purchase price of the Ocean Rig shares to be acquired through the mandatory offering, to finance the acquisition cost of the Ocean Rig shares and to refinance existing debt. The term loan is repayable in four quarterly installments of $75,000 followed by four quarterly installments of $50,000 plus a balloon payment payable together with the last installment on May 12, 2010. As of December 31, 2008, the Company drew down the total amount of $800,000 and repaid $150,000. The facility contains various covenants, including a market-adjusted equity ratio greater than or equal to 30%.

During the first quarter of 2009 and in April 2009, the Company repaid $190,000 and $160,000, respectively, of its existing $800,000 facility. The remaining outstanding balance of $300,000 was fully repaid in May 2009, of which $150,000 was paid with the Company’s new credit facility discussed below.

On May 13, 2009, the Company entered into a new one-year credit facility for the amount of up to $300,000 in order to refinance the Company’s existing loan indebtedness discussed above. In May 2009, the Company drew down $150,000 of the loan in order to refinance the $150,000 outstanding debt at the date of the drawdown of the above facility. This new credit facility was fully repaid in May 2009 using the Company’s proceeds of its at-the-market offerings and the undrawn amount was fully cancelled.

b) On July 18, 2008, the Company concluded two facility agreements for an aggregate amount of $1,125,000 in order to partly finance the construction cost of Drillship Hulls 1865 and 1866. The loans bear interest at LIBOR plus 1.6%-2.0%, depending on the period (pre-completion or post-completion) and depending on the lender (commercial lender or export agency) and are repayable in eighteen semi-annual installments through November 2020. The first installment is payable six months after the delivery of the vessels, which is expected to be in the third quarter of 2011. The facility contains various covenants, including: (i) market-adjusted equity ratio greater than or equal to 25%; and (ii) market value adjusted net worth greater than or equal to $500,000.

On June 5, 2009, the Company entered into agreements with a bank, as facility agent, and certain other lenders on waiver and amendment terms with respect to each of the two $562,500 credit facility agreements providing for a waiver of certain financial covenants through January 31, 2010. These agreements provide for, among other things; (i) a waiver of the required market adjusted equity ratio; (ii) a waiver of the required market value adjusted net worth; and (iii) a required payment from us to each lender and the facility agent.

On January 28, 2010, we signed two supplemental agreements provided for certain non-financial covenant amendments. In addition these agreements revoked all the waivers obtained.

As of December 31, 2008 and 2009, the amount outstanding under these facilities was $173,426 and $186,274, respectively.

c) On September 17, 2008, Ocean Rig entered into a new five-year secured credit facility for the amount of up to $1.04 billion in order to refinance Ocean Rig’s existing loan indebtedness and for general corporate purposes. In September and October, 2008, Ocean Rig drew down $1.02 billion of the new credit facility. The drawdown proceeds were used to repay all other Ocean Rig outstanding debt at the date of the drawdown amounting to $776,000 including the $250,000 loan discussed above. The credit facility consists of a guarantee facility, three revolving credit facilities (A, B and C) and a term loan.

The aggregate amount of the term loan is up to $400,000 and the aggregate amount under the revolving credit facility A is up to $350,000. The aggregate amount under the revolving credit facility B is up to $250,000 and under the revolving credit facility C is up to $20,000. The guarantee facility provides Ocean Rig with a credit facility of up to $20,000.

F-36

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

9. Long-term Debt-(continued):

The commitment under credit facility A was reduced by $17,500 on December 17, 2008 and will continue to be reduced by $17,500 quarterly thereafter until September 17, 2013, which is 60 months after the date of the agreement. The loan bears interest at LIBOR plus a margin and is repayable in twenty quarterly installments. The term loan will be repaid by one balloon payment of $400,000 on September 17, 2013. The commitment under credit facility B will be reduced quarterly by 12 unequal quarterly installments with a final maturity date of not later than the earlier of the expiry of the time charter of the drilling rig the Eirik Raude, which is scheduled to expire in October 2011 and September 17, 2011.

As of December 31, 2008 and 2009, the amount outstanding under this facility was $982,500 and $808,550, respectively.

d) In connection with the acquisition of Drillships Holdings on May 15, 2009, the Company assumed two $115,000 loan facilities that were entered into in September 2007, in order to finance the construction of Hulls 1837 and 1838. The loans bear interest at LIBOR plus a 1.25% and are repayable upon the delivery of Hull 1837 in December 2010 and Hull 1838 in March 2011. Borrowings under these loans are subject to certain financial covenants and restrictions on dividend payments, assignment of the relevant shipbuilding contracts, refund guarantees and other related items. In addition to the customary security and guarantees issued to the borrower, this facility was collateralized by certain vessels owned by certain related parties, corporate guarantees of certain related parties and a personal guarantee from Mr. Economou. As of December 31, 2009, the amount outstanding under these facilities was $230,000.

In connection with the acquisition of Drillships Holdings on May 15, 2009, the Company also assumed two $15,551 fixed-rate term notes that were entered into in January 2009, in order to finance the construction of Hulls 1837 and 1838. The term notes were fully repaid in July 2009.

The above loans are secured by a first priority mortgage over the vessels, corporate guarantee, a first assignment of all freights, earnings, insurances and requisition compensation. The loans contain covenants including restrictions, without the bank’s prior consent, as to changes in management and ownership of the vessels, additional indebtedness and mortgaging of vessels, change in the general nature of the Company’s business, and maintaining an established place of business in the United States or the United Kingdom. In addition, the vessel owning companies are not permitted to pay any dividends to DryShips Inc. nor DryShips Inc. to its shareholders without the lender’s prior consent. The loans also contain certain financial covenants relating to the Company’s financial position, operating performance and liquidity.

The vessel-owning subsidiary companies with outstanding loans had restricted net assets amounting to $727,038 and $1,340,501 as of December 31, 2008 and 2009, respectively.

Total interest incurred on long-term debt, including capitalized interest, for the years ended December 31, 2007, 2008 and 2009 amounted to $50,887, $106,200, and $99,979 respectively. These amounts net of capitalized interest are included in “Interest and finance costs” in the accompanying consolidated statements of operations. The Company’s weighted average interest rate (including the margin) as of December 31, 2007, 2008, and 2009 was 6.48%, 4.28% and 3.92% respectively.

The principal payments to be made after December 31, 2009, for the loans discussed above, are as follows:

2010	$	1,721,923
2011		148,417
2012		70,000
2013		452,500
2014		460,000
Total principal payments		2,852,840
Less: Financing fees		(168,156	)
Total debt	$	2,684,684

As of December 31, 2008 and 2009 the Company’s unutilized line of credit, which is subject to certain conditions including the contemporaneous employment of both drillships under suitable revenue contracts, as defined in the loan agreements, totaled $951,574 and $938,726 respectively and the Company is required to pay a quarterly commitment fee of 0.60% per annum of the unutilized portion of the unutilized line of credit.

F-37

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

9. Long-term Debt-(continued):

The Company was in breach of certain of its financial covenants as of December 31, 2008. Furthermore, as of December 31, 2009, the Company was deemed to be in breach of one financial covenant and deemed to be in theoretical breach of certain of its financial covenants during 2010 (Note 3). In accordance with guidance related to classification of obligation that are callable by the creditor, the Company has classified all of its long-term debt in breach amounting to $1.8 billion and $1.3 billion as current at December 31, 2008 and 2009 respectively.

10. Financial Instruments and Fair Value Measurements:

All derivatives are carried at fair value on the consolidated balance sheet at each period end. Balances as of December 31, 2008 and 2009 are as follows:

	December 31, 2008								December 31, 2009
	Interest Rate Swaps			Forward Freight Agreements	Foreign Currency Forward Contracts		Total		Interest Rate Swaps		Forward Freight Agreements		Foreign Currency Forward Contracts	Total
Current assets	$	779		—	—		779				559		434	$	993
Current liabilities		(43,206	)	—	(1,589	)	(44,795	)	(65,129	)	(7,708	)	—		(72,837	)
Non current liabilities		(208,961	)	—	—		(208,961	)	(103,765	)	(998	)	—		(104,763	)
	$	(251,388	)	—	(1,589	)	(252,977	)	(168,894	)	(8,147	)	434	$	(176,607	)

10.1 Interest rate swaps, cap and floor agreements: As of December 31, 2008 and 2009, the Company had outstanding 34 interest rate swap, cap and floor agreements, of $2.6 billion and $2.5 billion respectively, maturing from June 2011 through November 2017. These agreements are entered into in order to hedge its exposure to interest rate fluctuations with respect to the Company’s borrowings. Of these contracts, 31 do not qualify for hedge accounting and as such changes in their fair values are included in the accompanying consolidated statement of operations, while 3 contracts are designated for hedge accounting and as such changes in their fair values are included in other comprehensive loss. The fair value of these agreements equates to the amount that would be paid by the Company if the agreements were cancelled at the reporting date, taking into account current interest rates and creditworthiness of the Company.

As of December 31, 2008 and 2009, security deposits (margin calls) of $15,700 and $20,200 for Hull 1865, respectively, and $15,900 and $20,500 for Hull 1866, respectively, were paid and were recorded as “Other non current assets” in the accompanying consolidated balance sheets. These deposits are required by the counterparty due to the market loss in the swap agreements for the year ended December 31, 2008 and 2009.

10.2 Forward freight agreements: The Company trades in the FFA market effective from May 2009, with both an objective to utilize the FFAs as economic hedging instruments that are effective at reducing the risk of specific vessels and to take advantage of short term fluctuations in the market prices. FFA trading generally has not qualified as hedge accounting and as such the trading of FFAs could lead to material fluctuations in the Company’s reported results from operations on a period to period basis.

As of December 31, 2009, the Company had sixteen open FFAs. None of the “mark to market” positions of the open FFA contracts qualified for hedge accounting treatment.

10.3 Foreign currency forward contracts: As of December 31, 2009 and 2008, the Company had outstanding ten forward contracts, to sell $20,000 for NOK 118.8 million and eleven forward contracts to sell $16,500 for NOK 104.3 million. These agreements are entered into in order to hedge its exposure to foreign currency fluctuations. Such fair value at December 31, 2008 and December 31, 2009 was a liability of $1,589 and an asset of $434, respectively.

F-38

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

10. Financial Instruments and Fair Value Measurements-(continued):

10.3. Foreign currency forward contracts-(continued):

The change in the fair value of such agreements for the year ended December 31, 2008 and December 31, 2009 amounted to a loss of $2,512 and a gain of $2,023, respectively and is reflected under “Other, net” in the accompanying consolidated statement of operations.

Tabular disclosure of financial instruments is as follows:

Fair Values of Derivative Instruments in the Statement of Financial Position:

		Asset Derivatives				Liability Derivatives
Derivatives designated as     hedging instruments	Balance Sheet Location	December 31, 2008 Fair value		December 31, 2009 Fair value	Balance Sheet Location	December 31, 2008 Fair value	December 31, 2009 Fair value
Interest rate swaps	Financial instruments	$	—	—	Financial instruments non current liabilities	47,168	$	31,028
Total derivatives designated as hedging instruments			—	—		47,168		31,028
Derivatives not designated as     hedging instruments
Interest rate swaps	Financial instruments-current assets		779	—	Financial instruments-current liabilities	43,206		65,129
Interest rate swaps	Financial instruments-non current assets		—	—	Financial instruments-non current liabilities	161,793		72,737
Forward freight agreements	Financial instruments-current assets		—	559	Financial instruments current liabilities	—		7,708
Forward freight agreements	Financial instruments-non current assets		—	—	Financial instruments non current liabilities	—		998
Foreign currency forward contracts	Financial instruments-current assets		—	434	Financial instruments current liabilities	1,589		—
Total derivatives not designated as hedging instruments			779	993		206,588		146,572
Total derivatives		$	779	993	Total derivatives	253,756	$	177,600

F-39

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

10. Financial Instruments and Fair Value Measurements - (continued):

The Effect of Derivative Instruments on the Statement of Financial Performance:

	Amount of Gain/(Loss) Recognized in OCI on Derivative (Effective Portion)
Derivatives designated for cash flow hedging relationships	Year Ended December 31, 2008			Year Ended December 31, 2009
Interest rate swaps	$	(46,548	)	$	16,140
Total	$	(46,548	)	$	16,140

No portion of the cash flow hedges shown above was ineffective during the year. In addition, the Company did not transfer any gains/losses on the hedges from accumulated OCI into statement of operations.

		Amount of Gain/(Loss)
Derivatives not designated as hedging instruments	Location of Gain or (Loss) Recognized	Year Ended December 31, 2008			Year Ended December 31, 2009
Interest rate swaps	Gain/(loss) on interest rate swaps	$	(207,936	)	$	23,160
Forward freight agreements	Other, net		—			(9,970	)
Foreign currency forward contracts	Other, net		(2,512	)		2,023
Total		$	(210,448	)	$	15,213

The relevant guidance for derivatives requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the statement of financial position. In accordance with the guidance, the Company designates all the contracts as cash flow hedges, if they qualify for that treatment, with the last contract expiring in November 2017.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in the accompanying consolidated statement of operations. Changes in the fair value of derivative instruments that have not been designated as hedging instruments are reported in the accompanying consolidated statement of operations.

The Company enters into interest rate swap transactions to manage interest costs and risk associated with changing interest rates with respect to its variable interest rate loans and credit facilities. The Company enters into FFAs and foreign currency forward contracts in order to manage risks associated with future hire rates and fluctuations in foreign currencies, respectively.

The carrying amounts of cash and cash equivalents, restricted cash and trade accounts receivable reported in the consolidated balance sheets approximate their respective fair values because of the short term nature of these accounts. The fair value of revolving credit facilities is estimated based on current rates offered to the Company for similar debt of the same remaining maturities. Additionally, the Company considers its creditworthiness in determining the fair value of the revolving credit facilities. The carrying value approximates the fair market value for the floating rate loans. The fair value of the interest rate swaps was determined using a discounted cash flow method based on market-based LIBOR swap yield curves, taking into account current interest rates and the creditworthiness of both the financial instrument counterparty and the Company. The fair value of the forward freight agreements was determined based on quoted rates. The fair value of foreign currency forward contracts was based on the forward exchange rates. The fair value of the convertible notes was $469,200 at December 31, 2009.

F-40

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

10. Financial Instruments and Fair Value Measurements - (continued):

The guidance for fair value measurements applies to all assets and liabilities that are being measured and reported on a fair value basis. This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market- based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The following table summarizes the valuation of assets and liabilities measured at fair value on a recurring basis as of the valuation date.

	December 31, 2009			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)
Recurring measurements:
Interest rate swaps – asset position	$	—		$	—		$	—		$	—
Interest rate swaps-liability position		(168,894	)		—			(168,894	)		—
Forward freight agreements – asset position		559			559			—			—
Forward freight agreements – liability position		(8,706	)		(8,706	)		—			—
Foreign currency forward contracts – asset position		434			—			434			—
Total	$	(176,607	)	$	(8,147	)	$	(168,460	)	$	—

F-41

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

10. Financial Instruments and Fair Value Measurements - (continued):

The following table summarizes the valuation of our assets measured at fair value on a non-recurring basis as of the valuation date.

	December 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Unobservable Inputs (Level 3)	Gains/ (Losses)
Non- Recurring measurements:
Long- lived assets held and used	$	23,350	—	23,350	—	$	(1,578	)
Total	$	23,350	—	23,350	—	$	(1,578	)

In accordance with the provisions of relevant guidance, long-lived asset held and used with a carrying amount of $24,928 was written down to their fair value of $23,350, resulting in an impairment charge of $1,578, which was included in accompanying consolidated statement of operations for December 31, 2009.

11. Common Stock and Additional Paid-in Capital:

Net Income Attributable to Dryships Inc. and Transfers from the Noncontrolling Interest:

The following table represents effects of any changes in Dryships Inc. ownership interest in a subsidiary on the equity attributable to the shareholders of Dryships Inc.

	Year Ended December 31,
	2008			2009
Net loss attributable to Dryships Inc.	$	(361,282	)	$	(32,378	)
Transfers from the noncontrolling interest:
Increase in Dryships Inc. equity for acquisition of non controlling interest		—			352,814
Decrease in Dryships Inc. equity for issuance of subsidiary shares		—			(37,511	)
Increase in Dryships Inc. retained earnings for Redemption of noncontrolling interest		(15,050	)		—
Net transfers to/from the non controlling interest		(15,050	)		315,303
Net income/ (loss) attributable to Dryships Inc. and transfers to/from the noncontrolling interest	$	(376,332	)	$	282,925

F-42

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

11. Common Stock and Additional Paid-in Capital-(continued):

Issuance of common shares

In October 2007, the Company filed a universal shelf registration statement on Form F-3 relating to the offer and sale of up to 6,000,000 common shares. From October through December 2007, an amount of 1,191,000 shares of common stock were issued The net proceeds, after underwriting commissions ranging between 2% to 2.5% and other issuance fees, amounted to $127,104. From January through March 2008, an amount of 4,759,000 shares of common stock were issued. The net proceeds, after underwriting commissions ranging between 1.5% to 2% and other issuance fees, amounted to $352,748.

In March 2008, the Company filed a prospectus supplement relating to the offer and sale of up to 6,000,000 shares of common stock, par value $0.01 per share. On May 6 and 7, 2008, the Company issued 1,109,903 shares of common stock. The net proceeds, after underwriting commissions of 1.75% and other issuance fees, amounted to $101,574. In October 2008, the Company issued 2,069,700 shares of common stock. The net proceeds, after underwriting commissions of 1.75% and other issuance fees, amounted to $41,891.

In November 2008, the Company filed a prospectus supplement relating to the offer and sale of up to 25,000,000 common shares. In November and December 2008, the Company issued 24,980,300 shares of common stock. The net proceeds, after underwriting commissions of 2.5% to 3% and other issuance fees, amounted to $167,057.

On January 15, 2009, the Company agreed to transfer its interests in the ship-owning companies of three Capesize newbuildings to an entity that is not affiliated with the Company. As consideration for liabilities assumed by the purchasers, on March 19, 2009, the Company issued a total of 11,990,405 common shares to the nominees of Central Mare Inc. (Note 5).

During 2009, the Company effected two at-the-market equity offerings. Under these offerings, the Company issued 165,054,595 shares of common stock. The total net proceeds, after commissions, amounted to $952,369.

In November 2009, concurrently with the offering of the Notes, the Company entered into a share lending agreement and issued 26,100,000 shares of common stock, which it subsequently loaned to the underwriter pursuant to the share lending agreement. The Company received a one time loan fee of $0.01 per share (Note 9).

Issuance of Series A preferred stock

On July 15, 2009, the Company issued 52,238,806 shares of its Series A Convertible Preferred Stock under its agreement to acquire the remaining 25% of the total issued and outstanding capital stock of Ocean Rig UDW (Note 4). The aggregate face value of these shares was $280,000 and the fair value of the Preferred Stock was determined by management to be $268,000.

The Company determined that the fair value of the 25% of the total issued and outstanding capital stock of Ocean Rig UDW is more reliably measurable than the fair value of the preferred stock issued. The Company determined that $318,000 is the fair value of the 25% of the outstanding common shares of Ocean Rig UDW in accordance with fair value guidance by weighting the fair values derived using the following three valuation methods: (i) Fair value of the net assets of Ocean Rig UDW; (ii) Discounted cash flow method; and (iii) Comparable company approach. Based on the foregoing, the Company recorded the preferred stock at $268,000, which was calculated as the fair value of the 25% of the total issued and outstanding capital stock of Ocean Rig UDW of $318,000 less cash consideration of $50,000.

The changes in the Company’s ownership interest in Ocean Rig UDW did not represent a change in control and therefore the Company accounted for this transaction as an equity transaction with no gain or loss recorded in the statement of operations or comprehensive income. The difference between the fair value of the 25% of the total issued and outstanding capital stock of Ocean Rig UDW and the amount the non-controlling interest was recognized as equity attributable to the parent.

F-43

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

11. Common Stock and Additional Paid-in Capital-(continued):

Issuance of Series A preferred stock-(continued):

The Series A Convertible Preferred Stock accrues cumulative dividends on a quarterly basis at an annual rate of 6.75% of the aggregate face value. Dividends are payable in preferred stock or cash, if cash dividends have been declared on common stock. Such accrued dividends are payable in additional shares of preferred stock immediately prior to any conversion.

As of December 31, 2009, the fair value of the accrued stock dividends amounted to $7,497. Each share of this instrument mandatorily converts into shares of the Company’s common stock proportionally, upon the contractual delivery of each of the four newbuilding ultra deepwater drillships at a premium of 127.5% of the original purchase price. Furthermore, each share of this instrument can also be converted into shares of the Company’s common stock at any time at the option of the holder at a conversion rate of 1.0:0.7.

The Series A Convertible Preferred Stock ranks senior to all other series of the Company’s preferred stock as to the payment of dividends and the distribution of assets. Finally, the holders of this stock and the holders of shares of common stock vote together as one class on all matters submitted to a vote of the stockholders of the Company.

Series A Convertible Preferred Stock shall not be redeemable unless upon any liquidation, dissolution or winding up of the Company, or sale of all or substantially all of the Company’s assets, in which case a one-to-one redemption takes place plus any accrued and unpaid dividends.

Stockholders Rights Agreement

As of January 18, 2008, the Company entered into a Stockholders Rights Agreement (the “Agreement”). Under the Agreement, our BOD declared a dividend payable of one preferred share purchase right, (“Right”), to purchase one one-thousandth of a share of the Company’s Series A Participating Preferred Stock for each outstanding common share. Each right entitles the registered holder, upon the occurrence of certain events, to purchase from us one one-thousandth of a share of Series A Participating Preferred Stock. As of December 31, 2009, no exercise of any purchase right has occurred.

As of July 9, 2009, an amendment has been effected to the Agreement to reflect the issuance of Series A Convertible Preferred Stock.

12. Equity incentive plan

On January 16, 2008, the Company’s Board of Directors approved the 2008 Equity Incentive Plan (the “Plan”). Under the Plan, officers, key employees, and directors are eligible to receive awards of stock options, stock appreciation rights, restricted stock, restricted stock units, phantom stock units and unrestricted stock.

On March 5, 2008, 1,000,000 shares of non-vested common stock out of the 1,834,055 shares reserved under the Plan were granted to Fabiana, an entity that offers consultancy services to the Chief Executive Officer, George Economou. The shares vest quarterly in eight equal installments with the first installment of 125,000 common shares vested on May 28, 2008. The stock-based compensation is being recognized to expenses over the vesting period and based on the fair value of the shares on the grant date of $75.09 per share.

On October 2, 2008, the Company’s Board of Directors and Compensation Committee approved grants for the non-executive directors of the Company. On October 2, 2008, 9,000 shares of non-vested common stock and 9,000 shares of vested common stock were granted to the non-executive directors.

The non-vested common stock will vest evenly over a three-year period with the first vesting date commencing on January 1, 2009. For the director vested and non-vested stock, the fair value of each share on the grant date was $33.59.

F-44

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

12. Equity incentive plan-(continued):

On March 12, 2009, 70,621 shares of non-vested common stock out of the 1,834,055 shares reserved under Plan were granted to an executive of the Company. The shares will vest in annual installments of 42,373 and 28,248 shares on March 1, 2010 and 2011, respectively. The fair value of each share on the grant date was $3.54.

A summary of the status of the Company’s non vested shares as of December 31, 2008, and movement during the year ended December 31, 2009, is presented below. There were no shares awards in 2007 and no shares were forfeited in 2008 and 2009.

	Number of non vested shares		Weighted average grant date fair value per non vested shares
Balance as at January 1, 2008	—			—
Granted	1,018,000		$	74.36
Vested	(384,000	)		74.12
Balance December 31, 2008	634,000			74.50
Granted	70,621			3.54
Vested	(501,650	)		74.95
Balance December 31, 2009	202,971		$	48.69
	Number of vested shares		Weighted average grant date fair value per non vested shares
Balance as at January 1, 2008	—		$	—
Granted	9,000			33.59
Non vested shares granted and vested 2008	375,000			75.09
As at December 31, 2008	384,000			74.12
Non vested shares granted in prior years and vested 2009	501,650			74.95
As at December 31, 2009	885,650		$	74.59

Dividends of $0.60 per share were declared and paid to the non-vested shares during 2008.

As of December 31, 2008 and 2009, there was $44,192 and $6,372, respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of two years. The amounts of $31,502 and $38,071 are recorded in “General and administrative expenses”, in the accompanying consolidated statement of operations for the year ended December 31, 2008 and 2009, respectively. The total fair value of shares vested during the years ended December 31, 2008 and 2009 were $21,860 and $2,826, respectively.

13. Other non-current liabilities:

Other non-current liabilities in the accompanying consolidated balance sheets are analyzed as follows:

	December 31, 2008		December 31, 2009
Pension and retirement benefit obligation	$	712	$	—
Other		67		43
Total	$	779	$	43

The Company has three retirement benefit plans for employees managed and funded through Norwegian life insurance companies. As of December 31, 2009 the pension plans cover 264 employees. The pension scheme is in compliance with the Norwegian law on required occupational pension.

The Company uses a January 1 measurement date for net periodic benefit cost and a December 31 measurement date for benefit obligations and plan assets.

F-45

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

13. Other non-current liabilities-(continued):

The change in projected benefit obligation, change in plan assets, funded status and the amounts recognized in the accompanying consolidated balance sheets are shown in the table below:

	May 14 – December 31, 2008			Year ended, December 31, 2009
Change in plan assets
Fair value of plan assets at beginning	$	6,904		$	6,321
Expected return on plan assets		270			378
Actual return on plan assets		(1,222	)		(1,395	)
Employer contributions		2,600			3,138
Settlement		(105	)		(624	)
Foreign currency exchange rate changes		(2,126	)		1,468
Fair value of plan assets at end of year	$	6,321		$	9,286
	December 31, 2008			December 31, 2009
Unfunded projected benefit obligation/(receivable)	$	712		$	(388	)

The unfunded projected benefit obligation is reflected in “Other non-current liabilities” in the accompanying consolidated balance sheets as of December 31, 2008 and in “Other non-current assets” in the accompanying consolidation balance sheet December 31, 2009.

	May 14 – December 31, 2008			Year ended, December 31, 2009
Change in projected benefit obligation
Projected benefits earned at beginning	$	9,374		$	7,033
Service cost for benefits earned		1,989			4,121
Interest cost		155			280
Settlement		(298	)		(1,983	)
Actuarial losses		(1,210	)		(1,587	)
Benefits paid		—			(42	)
Payroll tax of employer contribution		(367	)		(442	)
Foreign currency exchange rate changes		(2,610	)		1,518
Projected benefit obligation at end of year	$	7,033		$	8,898

Net periodic benefit cost included the following components:

	May 14 – December 31, 2008			Year ended, December 31, 2009
Components of net periodic benefit cost
Expected return on plan assets	$	(140	)	$	(378	)
Service cost		883			4,121
Interest cost		120			280
Amortization of prior service cost		190			—
Amortization of actuarial loss		77			168
Settlement		—			(539	)
Net periodic benefit cost	$	1,130		$	3,652
	December 31, 2008			December 31, 2009
Decrease in minimum pension liability included in other comprehensive loss	$	1,701		$	570

F-46

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

13. Other non-current liabilities-(continued):

Pension obligations are actuarially determined and are affected by assumptions including expected return on plan assets. As of December 31, 2009 contributions amounting to $3,138 have been made to the pension plan.

The Company evaluates assumptions regarding the estimated long-term rate of return on plan assets based on historical experience and future expectations on investment returns, which are calculated by an unaffiliated investment advisor utilizing the asset allocation classes held by the plan’s portfolios. Changes in these and other assumptions used in the actuarial computations could impact the Company’s projected benefit obligations, pension liabilities, pension expense and other comprehensive income.

The Company bases its determination of pension expense on a market-related valuation of assets that reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets.

The following are the weighted–average assumptions used to determine net periodic benefit cost:

	December 31, 2008		December 31, 2009
Weighted average assumptions
Expected return on plan assets	5.80	%	5.70	%
Discount rate	3.80	%	4.50	%
Compensation increases	4.25	%	4.50	%

The Company reviews its investments and policies annually. In determining its asset allocation strategy, the Company reviews models presenting many different asset allocation scenarios to assess the most appropriate target allocation to produce long-term gains without taking on undue risk.

The following pension benefits payments are expected to be paid by the Company during the years ending:

December 31, 2010	$	82
December 31, 2011		76
December 31, 2012		77
December 31, 2013		58
December 31, 2014		76
Thereafter		989
Total pension payments	$	1,358

The Company’s pension funds are managed by an independent life-insurance company that invests the Company’s funds according to Norwegian law. The law requires a low risk profile; hence the majority of the funds are invested in government bonds and high-rated corporate bonds. The major categories of plan assets as a percentage of the fair value of plan assets are as follows:

	As of December 31,
	2009		2008
Shares and other equity instruments	13	%	17	%
Bonds	67	%	64	%
Properties and real estate	16	%	12	%
Other	4	%	7	%
Total	100	%	100	%

The Company’s estimated contribution to the pension plan for the fiscal year 2010 is $2,510.

F-47

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

14. Commitments and Contingencies:

14.1 Legal proceedings

Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business.

In addition, losses may arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Company’s vessels. Except as described below, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the accompanying consolidated financial statements.

The Company accrues the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Currently, management is not aware of any such claims or contingent liabilities which should be disclosed, or for which a provision should be established in the accompanying consolidated financial statements. A minimum of up to $1.0 billion of the liabilities associated with the individual vessels actions, mainly for sea pollution, are covered by the Protection and Indemnity (P&I) Club insurance.

On July 17, 2008, the Company entered into an agreement to sell the MV Toro, a 1995-built 73,034 dwt Panamax drybulk carrier, to Samsun Logix Corporation, or Samsun, for the price of approximately $63,400. On January 29, 2009, the Company reached an agreement with the buyers whereby the price was reduced to $36,000. As part of the agreement, the buyers released the deposit of $6,300 to the Company immediately and were required to make a new deposit of $1,500 towards the revised purchase price. On February 13, 2009, the Company proceeded with the cancellation of the sale agreement due to the buyers’ failure to pay the new deposit of $1,500. In February 2009, Samsun was placed in corporate rehabilitation.

In February 2010 Samsun’s plan of reorganization was approved by its creditors. As part of this plan the Company will recoup a certain percentage of the agreed-upon purchase price. As this is contingent on the successful implementation of the plan of reorganization, the Company is unable to estimate the impact on the Company’s financial statements (Note 6).

On March 5, 2009, a complaint against the Company’s board of directors and a former director was filed in the High Court of the Republic of the Marshall Islands for an unspecified amount of damages alleging that such directors had breached their fiduciary duty of good faith in connection with the termination of the acquisition of four Panamax drybulk carriers and nine Capesize drybulk carriers. The complaint, which was amended on August 14, 2009, also seeks the disgorgement of all payments made in connection with the termination of these acquisitions. The Company filed a motion for an early dismissal of this complaint. This motion to dismiss the complaint was granted by the High Court in February 2010. On March 16, 2010, the claimant filed with the Supreme Court of the Republic of the Marshall Islands a Notice of Appeal against the Order of the High Court. This appeal is to be heard by the Supreme Court on a future unknown date. The Company believes that this case is without merit and that an unfavorable outcome is remote. Furthermore, no estimate of a possible loss, if any, can be made.

Ocean Rig’s Leiv Eiriksson operated in Angola in the period 2002 to 2007. Ocean Rig understands that the Angolan government may retroactively levy import/export duties for the period 2002 to 2007. As Ocean Rig has not received any formal claim in relation to the potential duties, no provision has been made. The maximum amount is estimated to be between $5-10 million.

.

F-48

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

14. Commitments and Contingencies (continued):

14.2 Purchase obligations:

The following table sets forth the Company’s contractual obligations and their maturity dates as of December 31, 2009:

Obligations:	Total		1st year		2nd year
Drillship Shipbuilding contracts		1,892,277		1,005,984		886,293
Total obligations	$	1,892,277	$	1,005,984	$	886,293

14.3 Contractual charter revenue

Future minimum contractual charter revenue, based on vessels and rigs committed to non-cancelable, long-term time and bareboat charter contracts as of December 31, 2009, will be $868,531 during 2010, $780,036 during 2011, $412,023 during 2012, $111,963 during 2013 and $57,872 during 2014 and thereafter. These amounts do not include any assumed off-hire.

14.4 Rental payments

The Company leases office space in Athens, Greece, from George Economou. As of December 31, 2009, the future obligations amount to $13 for 2010, and $10 for 2011. The contract expires in 2011. Ocean Rig entered into a five year office lease agreement with Vestre Svanholmen 6 AS which commenced on July 1, 2007. This lease includes an option for an additional five years term which must be exercised at least six months prior to the end of the term of the contract which expires in June 2012. As of December 31, 2009, the future obligations amount to $1,527 for 2010, $1,072 for 2011 and $441 for 2012.

15. Voyage and Vessel and Drilling Rig Operating Expenses:

The amounts in the accompanying consolidated statements of operations are analyzed as follows:

	Year ended December 31,
Vessel Voyage Expenses	2007			2008			2009
Port charges	$	748		$	1,041		$	1,078
Bunkers		717			5,952			4,601
Gain on sale of bunkers		(7,467	)		(9,473	)		(2,146	)
Commissions charged by third parties		24,450			39,181			19,809
Charter in – hire expense		6,040			5,935			—
		24,488			42,636			23,342
Commissions charged by a related party		7,159			10,536			5,437
Total	$	31,647		$	53,172		$	28,779

F-49

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

15. Voyage and Vessel and Drilling Rig Operating Expenses-(continued):

	Year ended December 31,
Vessel Operating Expenses	2007		2008	2009
Crew wages and related costs	$	28,187	36,723	$	36,560
Insurance		5,636	7,596		7,695
Repairs and maintenance		10,247	18,278		12,897
Spares and consumable stores		18,856	16,599		18,137
Tonnage taxes		299	515		316
Total	$	63,225	79,711	$	75,605

Rig Operating Expenses	Year ended December 31, 2007		For the period from May 15, 2008 to December 31, 2008	Year ended December 31, 2009
Crew wages and related costs	$	—	51,890	$	69,983
Insurance		—	12,686		7,869
Repairs and maintenance		—	21,604		48,430
Total	$	—	86,180	$	126,282

16. Interest and finance Costs:

The amounts in the accompanying consolidated statements of operations are analyzed as follows:

	Year ended December 31,
	2007			2008	2009
Interest on long-term debt	$	48,583		93,142	$	76,503
Long-term debt commitment fees		223		3,208		5,869
Bank charges		238		817		503
Amortization and write-off of financing fees		2,190		15,848		12,745
Amortization of convertible notes discount		—		—		1,769
Amortization of share lending agreement- note issuance costs		—		—		195
Other		(3	)	179		15
Total		51,231		113,194		97,599

17. Segment information:

The Company has two reportable segments from which it derives its revenues: Drybulk carrier and Drilling Rig segments. The reportable segments reflect the internal organization of the Company and are a strategic business that offers different products and services. The Drybulk business segment consists of transportation and handling of Drybulk cargoes through ownership and trading of vessels. The Drilling Rig business segment consists of trading of the drilling rigs through ownership and trading of such drilling rigs.

The table below presents information about the Company’s reportable segments as of and for the year ended December 31, 2008 and 2009. During 2009, the Company changed the composition of its reportable segments due to the reorganization of the accounting functions and therefore, where necessary, the comparable information for the prior period has been restated.

The accounting policies followed in the preparation of the reportable segments are the same with those followed in the preparation of the Company’s consolidated financial statements.

F-50

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

17. Segment information-(continued):

The Company measures segment performance based on net income. Summarised financial information concerning each of the Company’s reportable segments is as follows:

	Drybulk Segment				Drilling Rigs Segment				Total
	As of and for the year ended December 31,				As of and for the year ended December 31,				As of and for the year ended December 31,
	2008		2009		2008		2009		2008		2009
Revenues from external customers	$	861,296	444,385		219,406		375,449		1,080,702		$	819,834
Vessel and rig operating expenses		79,711	75,605		86,180		126,282		165,891			201,887
Depreciation and amortization		110,507	117,522		47,472		78,787		157,979			196,309
Income tax expenses		—	—		2,844		12,797		2,844			12,797
Net income/(loss) (comparable period restated)		427,544	(138,874	)	(788,826	)	106,496		(361,282	)		(32,378	)
Interest and finance cost (comparable period restated)		49,700	40,528		63,494		57,071		113,194			97,599
Interest income (comparable period restated)		7,425	2,995		5,660		7,419		13,085			10,414
Change in fair value of derivatives		139,537	(33,950	)	65,427		(26,280	)	204,964			(60,230	)
Equity in loss of investee		—	—		6,893		—		6,893			—
Goodwill impairment charge		—	—		700,457		—		700,457			—
Total assets (comparable period restated)	$	2,419,159	2,680,421		2,423,521		3,118,667		4,842,680		$	5,799,088

18. Earnings per share:

The Company calculates basic and diluted earnings per share as follows:

	For the year ended December 31,
	2007				2008					2009
	Income (numerator)		Weighted- average number of outstanding shares (denominator)	Amount per share	Income (numerator)		Weighted- average number of outstanding shares (denominator)	Amount per share		Income (numerator)		Weighted- average number of outstanding shares (denominator)	Amount per share
Net income/(loss) attributable to DryShips Inc.	$	478,325	—	—	(361,282	)	—	—		(32,378	)	—	—
Less: Series A Convertible Preferred stock dividends		—	—	—	—		—	—		(7,497	)	—	—
Less: Non-vested common stock dividends declared and undistributed earnings		—	—	—	(527	)	—	—		—		—	—
Basic and diluted EPS
Income/(loss) available to common stockholders	$	478,325	35,700,182	13.40	(361,809	)	44,598,585	(8.11	)	(39,875	)	209,331,737	(0.19	)

On July 15, 2009, the Company issued 52,238,806 shares of its Series A Convertible Preferred Stock under its agreement to acquire the remaining 25% of the total issued and outstanding capital stock of Ocean Rig UDW (Note 4). The aggregate face value of these shares was $280,000. The Series A Convertible Preferred Stock accrues cumulative dividends on a quarterly basis at an annual rate of 6.75% of the aggregate face value. Such accrued dividends are payable in additional shares of preferred stock immediately prior to any conversion. As of December 31, 2009, the fair value of the stock dividends amounted to $7,497.

Non-vested share-based payment awards that contain rights to receive non forfeitable dividends or dividend equivalents (whether paid or unpaid) and participate equally in undistributed earnings are participating securities and, thus, are included in the two-class method of computing earnings per share. This method was adopted on January 1, 2009 and was applied retroactively to all periods presented.

F-51

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

18. Earnings per share-(continued):

For the year ended December 31, 2009, Series A Convertible Preferred Stock was not included in the computation of diluted earnings per share because the effect is anti-dilutive.

Non-vested, participating restricted common stock does not have a contractual obligation to share in the losses and was therefore, excluded from the basic loss per share calculation for the year ended December 31, 2008 and 2009 due to the losses in 2008 and 2009. As of December 31, 2007 no non-vested common stock existed.

In relation to the Notes described in Note 9, none of the shares were dilutive since the average share price for the period the Notes were issued until December 31, 2009 did not exceed the conversion price. Concurrently with the offering of the Notes, the 26,100,000 loaned shares of common stock are excluded in computing earnings per share as no default has occurred as set out in the share lending agreement.

19. Income Taxes:

19.1 Drybulk Carrier Segment

Neither the Marshall Islands nor Malta imposes a tax on international shipping income earned by a “non-resident” corporation thereof. Under the laws of the Marshall Islands and Malta, the countries in which the vessels owned by subsidiaries of the Company are registered, the Company’s subsidiaries (and their vessels) are subject to registration fees and tonnage taxes, as applicable, which have been included in Vessels’ operating expenses in the accompanying consolidated statements of operations.

Pursuant to Section 883 of the United States Internal Revenue Code (the “Code”) and the regulations there under, a foreign corporation engaged in the international operation of ships is generally exempt from U.S. federal income tax on its U.S.-source shipping income if the foreign corporation meets both of the following requirements: (a) the foreign corporation is organized in a foreign country that grants an “equivalent exemption” to corporations organized in the United States for the types of shipping income (e.g., voyage, time, bareboat charter) earned by the foreign corporation and (b) more than 50% of the value of the foreign corporation’s stock is owned, directly or indirectly, by individuals who are “residents” of the foreign corporation’s country of organization or of another foreign country that grants an “equivalent exemption” to corporations organized in the United States (the “50% Ownership Test”). For purposes of the 50% Ownership Test, stock owned in a foreign corporation by a foreign corporation whose stock is “primarily and regularly traded on an established securities market” in the United States (the “Publicly-Traded Test”) will be treated as owned by individuals who are “residents” in the country of organization of the foreign corporation that satisfies the Publicly-Traded Test.

The Marshall Islands and Malta, the jurisdictions where the Company’s ship-owning subsidiaries are incorporated, each grants an “equivalent exemption” to United States corporations with respect to each type of shipping income earned by the Company’s ship-owning subsidiaries. Therefore, the ship-owning subsidiaries will be exempt from United States federal income taxation with respect to U.S.-source shipping income if they satisfy the 50% Ownership Test.

The Company believes that it satisfied the Publicly-Traded Test for its 2007, 2008 and 2009 Taxable Years and therefore 100% of the stock of its Marshall Islands and Malta ship-owning subsidiaries will be treated as owned by individuals “resident” in the Marshall Islands. As such, each of the Company’s Marshall Islands and Malta ship-owning subsidiaries will be entitled to exemption from U.S. federal income tax in respect of their U.S. source shipping income. The Company’s ship-owning subsidiaries intend to take such position on their U.S. federal income tax returns for the 2009 taxable year.

F-52

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

19. Income Taxes-(continued):

19.2 Drilling Rig Segment

Ocean Rig UDW, the holding company of the drilling segment, is incorporated in the Marshall Islands. Some of its subsidiaries are incorporated and domiciled in Norway, and as such, are in general subject to Norwegian income tax of 28%. In addition, the Norwegian entities are subject to the Norwegian participation exemption model which implies that only 3% of dividend income and capital gains are subject to tax. In effect this gives an effective tax of total income under the participation exemption of 0.84% (3% * 28%).

The participation exemption normally applies to equity investments in the EEA (European Economic Area) except investments in low-tax countries. The model may also apply to investments outside of the EEA (except low-tax countries) to the extent the investment for the last two years have constituted at least 10% of the capital and votes in the entity in question.

Ocean Rig UDW operates through its various subsidiaries in a number of countries throughout the world. Income taxes have been provided based upon the tax laws and rates in the countries in which operations are conducted and income is earned. The countries in which Ocean Rig UDW operates have taxation regimes with varying nominal rates, deductions, credits and other tax attributes. Consequently, there is an expected relationship between the provision for/or benefit from income taxes and income or loss before income taxes.

Up to December 15, 2009, when a reorganization occurred, Ocean Rig’s drilling operations were consolidated in Ocean Rig ASA, a company incorporated and domiciled in Norway.

The components of Ocean Rig’s provision/(benefit) for income taxes are as follows:

	Year Ended
	December 31, 2008			December 31, 2009
Current provisions	$	2,844		$	12,797
Deferred provision/(benefit)		—
Income tax provision	$	2,844		$	12,797
Effective tax rate		(16	)%		13	%

Reconciliation of total tax cost:

	As restated*
	May 15 to			January 1 to
	December 31, 2008			December 31, 2009
Domestic tax rate multiplied by profit/(loss) before tax	$	(80,252	)	$	138,672
Change in valuation allowance		115,407			(93,362	)
Differences in tax rates		3,344			193
Effect of permanent differences		(74,929	)		21,317
Effect of exchange rate differences		39,274			(65,468	)
Withholding tax		—			11,445
Total	$	2,844		$	12,797

Ocean Rig is subject to changes in tax laws, treaties, regulations and interpretations in and between the countries in which its subsidiaries operate. A material change in these tax laws, treaties, regulations and interpretations could result in a higher or lower effective tax rate on worldwide earnings.

F-53

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

19. Income Taxes-(continued):

19.2 Drilling Rig Segment (continued):

Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company’s assets and liabilities at the applicable tax rates in effect. The significant components of deferred tax assets and liabilities are as follow:

	Year Ended
Temporary differences – tax effects	As Restated* December 31, 2008			December 31, 2009
Deferred tax assets
Net operation loss carry forwards	$	67,109		$	65,045
Outside basis in subsidiaries		91,447			—
Accrued expenses		13,656			728
Accelerated depreciation of assets		—			9
Pension		199			—
Total deferred tax assets		172,411		$	65,782
Deferred tax liabilities
Depreciation and amortization		(3,712	)		(122	)
Rig contracts		(9,789	)		—
Pension assets		—			(108	)
Total deferred tax liabilities		(13,501	)		(230	)
Net deferred tax asset		158,910			65,552
Valuation allowance		(158,910	)		(65,552	)
Long-term portion of net deferred tax asset		158,910			65,552
Long-term portion of valuation allowance	$	158,910		$	65,552

* In the course of preparing our 2009 tax note, we determined that a number had been incorrectly included in our 2008 disclosure with the opposite accounting convention. As a result, the deferred tax asset for net operating loss carry forwards was overstated by USD 59,124 with a corresponding and offsetting amount in the valuation allowance. Accordingly, the net deferred tax asset after valuation allowance for 2008 recorded in our balance sheet was not impacted. Based on an assessment of relevant qualitative and quantitative factors, management concluded the reclassification was immaterial to the previously issued consolidated financial statements for 2008. The table above reflects the stated figures for the net operating loss carry forward and valuation allowance respectively for 2008.

Deferred taxes have not been provided for in circumstances where the Company does not expect the operations in a jurisdiction to give rise to future tax consequences, due to the structure of operations and applicable law. Should its expectations change regarding the expected future tax consequences, the Company may be required to record additional deferred taxes that could have a material adverse effect on its consolidated statement of financial position, results of operations or cash flows.

The Company has not provided for deferred taxes on the unremitted earnings of certain subsidiaries that the Company considers to be permanently reinvested. Should the Company make a distribution of the unremitted earnings of these subsidiaries, it may be required to record additional taxes. Because the Company cannot predict when, if it at all, it will make distribution of these unremitted earnings, it is unable to make a determination of the amount of unrecognized deferred tax liability.

Ocean Rig ASA filed for liquidation in 2009 and on December 15, 2009 it distributed all significant assets to Primelead Ltd., a subsidiary of Dryships, as a liquidation dividend, including the shares in all its subsidiaries. The company does not expect any adverse tax effects from this transaction, but it cannot rule out the possibility that the tax authorities will challenge elements of the transaction.

F-54

DRYSHIPS INC.

Notes to Consolidated Financial Statements—(Continued)

As of and for the Years Ended December 31, 2007, 2008 and 2009

(Expressed in thousands of United States Dollars – except for share and per share data, unless otherwise stated)

19. Income Taxes-(continued):

19.2 Drilling Rig Segment (continued):

A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. The Company provides a valuation allowance to offset deferred tax assets for net operating losses (“NOL”) incurred during the year in certain jurisdictions and for other deferred tax assets where, in the Company’s opinion, it is more likely than not that the financial statement benefit of these losses will not be realized. The Company provides a valuation allowance for foreign tax loss carryforward to reflect the possible expiration of these benefits prior to their utilization. As of December 31, 2009, the valuation allowance for non-current deferred tax assets is reduced from $158,910 in 2008 to $65,552 in 2009. The decrease is primarily a result of the reduction of deferred tax asset due to effects of the rig export.

The Company has tax losses, which arose in Norway of $183,998 and $192,700 at December 31, 2009 and 2008, respectively, that are available indefinitely for offset against future taxable profits of the companies in which the losses arose. However, all of these amounts are related to Ocean Rig ASA, Ocean Rig Norway AS, Ocean Rig 1 AS and Ocean Rig 2 AS that are under liquidation. Upon liquidation the tax losses will not be available.

The Company had tax losses, which arose in Canada of $23,896 and $24,419 at December 31, 2008 and 2009, respectively, that are available indefinitely for offset against future taxable profits of the company in which the losses arose. The tax loss in Canada may be deducted in the future only against income and proceeds of disposition derived from resource properties owned at the time of the acquisition of control, or the Weymouth well. Thus the possibility for utilization of this tax position is in practice expired for the period after the change of control in Ocean Rig on May 14, 2008.

The Company had tax losses, which arose in Cyprus of $45,189 and $57,112 at December 31, 2008 and 2009, respectively that are available indefinitely for offset against future taxable profits of the company in which the losses arose. A 100% valuation allowance in the assets resulting from the loss carryforward has been provided for as the Company is not profitable.

The Company’s income tax returns are subject to review and examination in the various jurisdictions in which the Company operates. Currently one tax audit is open. The Company may contest any tax assessment that deviates from its tax filing. However, this review is not expected to incur any tax payables.

The Company accrues for income tax contingencies that it believes are more likely than not exposures in accordance with the provisions of guidance related to accounting for uncertainty in income taxes.

The Company accrues interest and penalties related to its liabilities for unrecognized tax benefits as a component of income tax expense. During the year ended December 31, 2009, the Company did not incur any interest or penalties.

Ocean Rig UDW, and/or one of its subsidiaries, filed federal and local tax returns in several jurisdictions throughout the world. With few exceptions, they are no longer subject to examinations of the Company’s U.S. and non-U.S. tax matters for years prior to 1999. The amount of current tax benefit recognized during the years ended December 31, 2009, December 31, 2008 and December 31, 2007 from the settlement of disputes with tax authorities and the expiration of statute of limitations was insignificant.

20. Subsequent Events:

20.1 On February 17, 2010, we placed an order for two (2) 76,000 dwt Panamax dry bulk vessels, with a quality Chinese shipyard, for a price of $33.05 million each. Delivery of the two vessels is expected to take place in Q4 of 2011 and Q1 of 2012, respectively.

F-55

Schedule I- Condensed Financial Information of Dryships Inc. (Parent Company Only)

Balance Sheets

December 31, 2008 and 2009

(Expressed in thousands of U.S. Dollars – except for share and per share data)

	2008			2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,039		$	208
Restricted cash		14,326			25,851
Due from related parties		17,480			27,576
Financial instruments		—			559
Other current assets		324			432
Total current assets		33,169			54,626
NON-CURRENT ASSETS:
Investments in subsidiaries*		2,692,706			4,092,629
Total non-current assets		2,692,706			4,092,629
Total assets	$	2,725,875		$	4,147,255
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	669,834		$	593,578
Due to subsidiaries*		637,064			331,856
Financial instruments		31,921			54,089
Other current liabilities		14,916			7,166
Total current liabilities		1,353,735			986,689
NON-CURRENT LIABILITIES
Long term debt, net of current portion		—			323,630
Financial instruments		80,568			32,301
Total non-current liabilities		80,568			355,931
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 500,000,000 shares authorized at December 31, 2008 and 2009; none issued and outstanding		—			—
Series A Convertible preferred stock, $0.01 par value; 100,000,000 shares authorized and 52,238,806 issued and outstanding at December 31, 2009		—			522
Common stock, $0.01 par value; 1,000,000,000 shares authorized at December 31, 2008 and 2009; 70,600,000 and 280,326,271 shares issued and outstanding at December 31, 2008 and 2009, respectively		706			2,803
Accumulated other comprehensive loss		(44,847	)		(28,137	)
Additional paid-in capital		1,148,365			2,681,974
Retained earnings		187,348			147,473
Total stockholders’ equity		1,291,572			2,804,635
Total liabilities and stockholders’ equity	$	2,725,875		$	4,147,255

* Eliminated in consolidation

1

Schedule I- Condensed Financial Information of Dryships Inc. (Parent Company Only)

Statements of Operations

For the years ended December 31, 2007, 2008 and 2009

(Expressed in thousands of U.S. Dollars – except for share and per share data)

	2007			2008			2009
EXPENSES:
Contract termination fees	$	—			—		$	212,586
Loss on contract cancellation		—			—			69
General and administrative expenses		5,069			56,351			54,433
Operating loss		5,069			56,351			267,088
OTHER INCOME / (EXPENSES):
Interest and finance costs		(49,065	)		(31,489	)		(26,395	)
Interest income		2,197			2,556			74
Gain/(loss) on interest rate swaps		(3,638	)		(115,613	)		4,139
Other, net		1,222			90			(9,787	)
Total other expenses, net		(49,284	)		(144,456	)		(31,969	)
Equity in earnings/(loss) of subsidiaries*		532,678			(160,475	)		266,679
Net income/(loss)	$	478,325		$	(361,282	)	$	(32,378	)
Earnings/(loss) per share, basic and diluted		13.40			(8.11	)		(0.19	)
Weighted average number of shares, basic and diluted		35,700,182			44,598,585			209,331,737

* Eliminated in consolidation

2

Schedule I- Condensed Financial Information of Dryships Inc. (Parent Company Only)

Statements of Cash Flows

For the years ended December 31, 2007, 2008 and 2009

(Expressed in thousands of U.S. Dollars)

	2007			2008			2009
Net Cash Provided by/(Used in) Operating Activities	$	128,978		$	934,909		$	(443,323	)
Cash Flows from Investing Activities:
Proceeds of sale of subsidiary		—			—			100
Investments in subsidiaries		(359,388	)		(1,450,562	)		(817,565	)
Restricted cash		—			(2,227	)		(11,525	)
Net Cash Used in Investing Activities		(359,388	)		(1,452,789	)		(828,990	)
Cash Flows from Financing Activities:
Restricted cash		4,566			—			—
Proceeds from long-term debt		319,697			49,400			—
Proceeds from short-term credit facility		30,076			—			—
Proceeds from issuance of convertible notes		—			—			447,810
Payment of short term credit facility		—			(30,076	)		—
Principal payments of long-term debt		(228,278	)		(128,996	)		(75,171	)
Net proceeds from common stock issuance		127,104			662,664			950,555
Proceeds from share-lending arrangement		—			—			261
Acquisition of noncontrolling interests		—			—			(50,000	)
Dividends paid		(28,392	)		(33,244	)		—
Payment of financing costs		(2,640	)		(1,405	)		(1,973	)
Net Cash Provided by Financing Activities		222,133			518,343			1,271,482
Net increase/(decrease) in cash and cash equivalents		(8,277	)		463			(831	)
Cash and cash equivalents at beginning of year		8,853			576			1,039
Cash and cash equivalents at end of year	$	576		$	1,039		$	208

3

Schedule I- Condensed Financial

Information of Dryships Inc. (Parent Company Only)

In the condensed financial information of the Parent Company, the Parent Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries. The Parent Company, during the years ended December 31, 2007, 2008 and 2009, received cash dividends from its subsidiaries of $28,392, $33,244 and $0,respectively, which are included in equity in earnings/(loss) of subsidiaries in the condensed statements of operations.

The Parent Company is a joint and several borrower under certain secured loan facilities and guarantor under the remaining loans outstanding at December 31, 2008 and 2009.

In November 2009, the Parent Company issued $400,000 aggregate principal amount of 5% Convertible unsecured Senior Notes (the “Notes”), which are due December 1, 2014. The full over allotment option granted was exercised and an additional $60,000 Notes were purchased. Accordingly, $460,000 in aggregate principal amount of Notes were sold, resulting in aggregate net proceeds of approximately $447,810 after underwriter commissions.

The principal payments required to be made after December 31, 2009 for the loans discussed above are as follows:

Year ending December 31,	Amount
2010	$	598,237
2011		—
2012		—
2013		—
2014		460,000
Less-Financing fees		(141,029	)
	$	917,208

As of December 31, 2008, the Parent Company was not in compliance with certain of its financial covenants under its secured loan facilities. During 2009 the Parent Company obtained waivers for its secured loan facilities resulting in the Company’s compliance with its financial covenants under its secured loan facilities as of December 31, 2009. However, since the relevant waivers expire during 2010, the Parent Company has deemed itself to be in technical breach and has classified all of its secured long-term debt as current liabilities as of December 31, 2009.

The Company is in process of negotiating further waivers or to restructure this debt upon waiver expiry in 2010.

See Note 9 “Long-term Debt” to the consolidated financial statements for further information.

The condensed financial information of the Parent Company should be read in conjunction with the Company’s consolidated financial statements.

4

EX-2.2

Exhibit 2.2

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO DRYSHIPS INC. (THE “COMPANY”) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

DRYSHIPS INC.

CUSIP: 262498AB4 No. 1

5.00% CONVERTIBLE SENIOR NOTES DUE DECEMBER 1, 2014

DryShips Inc., a Company organized in the Marshall Islands (the “Company”, which term shall include any successor corporation under the Indenture referred to on the reverse hereof), promises to pay to Cede & Co. (2), or registered assigns, the principal sum of FOUR HUNDRED SIXTY MILLION DOLLARS ($460,000,000) on December 1, 2014 or such greater or lesser amount as is indicated on the Schedule of Exchanges of Securities on the other side of this Security, and any Additional Tax Amounts payable thereon.

This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security.

[Signature Page Follows]

2

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on the date written below.

DRYSHIPS INC.

By:

Name:

Title:

By:

Name:

Title:

Trustee’s Certificate of Authentication: This is one of the Securities referred to in the within-mentioned Indenture.

LAW DEBENTURE TRUST COMPANY OF NEW YORK,

as Trustee

By:

Authorized Signatory

Dated: November 25, 2009

3

DRYSHIPS INC.

5.00% CONVERTIBLE SENIOR NOTES DUE DECEMBER 1, 2014

1. INTEREST AMOUNTS

DryShips Inc., a company organized in the Marshall Islands (the “Company,” which term shall include any successor corporation under the Indenture hereinafter referred to), will pay interest at a rate of 5.00% per annum, on the principal amount of this Security payable as provided in the Indenture, together with any additional interest required to be paid under Section 6.02(b) of the Base Indenture, and any Additional Tax Amounts thereon.

2. METHOD OF PAYMENT

The Company shall pay any interest on this Security to the person who is the Holder of this Security at the close of business on May 15 or November 15, as the case may be, next preceding the related interest payment date. The Holder must surrender this Security to a Paying Agent to collect payment of principal. Interest on the Security will be paid at a rate of 5.00% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, or if any such day is not a Business Day, the immediately following Business Day, commencing June 1, 2010. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. In the event of the maturity, conversion or purchase of the Security by the Company at the option of the Holder, interest shall cease to accrue on the Security. However, the Company will pay interest on the maturity date to a Holder of record of the Security on the record date immediately preceding the stated maturity date regardless of whether such Holder converts the Security.

The Company will make all payments in respect of a Global Security registered in the name of the Depository or its nominee to the Depository or its nominee, as the case may be, by wire transfer of immediately available funds to the account of the Depository or its nominee. The Company will make all payments in respect of a Certificated Security (including principal and interest) in U.S. dollars at the office of the Trustee. At the Company’s option, the Company may make such payments by mailing a check to the registered address of each Holder thereof as such address shall appear on the register or, if requested by a Holder of more than $1,000,000 in aggregate principal amount of Securities, by wire transfer of immediately available funds to the account specified by such Holder.

3. PAYING AGENT, REGISTRAR AND CONVERSION AGENT

Initially, Deutsche Bank Trust Company Americas will act as Paying Agent, Registrar and Conversion Agent. The Company may appoint and change any Paying Agent, Conversion Agent or Registrar without notice, other than notice to the Trustee; provided that the Company will maintain at least one Paying Agent in the United States of America. The Company or any of its Subsidiaries may, subject to certain limitations set forth in the Indenture, act as Paying Agent or Registrar.

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4. INDENTURE, LIMITATIONS

This Security is one of a duly authorized issue of Securities of the Company designated as its 5.00% Convertible Senior Notes due December 1, 2014 (the “Securities”), issued under an Indenture, dated as of November 17, 2009 (together with the supplemental indenture dated November 25, 2009 and any other supplemental indentures thereto, the “Indenture”), between the Company and the Trustee. The terms of this Security include those stated in the Indenture and those required by or made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect on the date of the Indenture. This Security is subject to all such terms, and the Holder of this Security is referred to the Indenture and said Act for a statement of them.

The Securities are senior unsecured obligations of the Company limited, except as set forth in the Indenture, to up to $460,000,000 aggregate principal amount. The Indenture does not limit other debt of the Company or any of its Subsidiaries.

5. PURCHASE OF SECURITIES AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE

At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or any part specified by the Holder (so long as the principal amount of such part is $1,000 or an integral multiple of $1,000 in excess thereof) of the Securities held by such Holder on a date, determined by the Company in its sole discretion, that is not less than 20 Business Days and not more than 30 Business Days after the occurrence of a Fundamental Change, at a purchase price equal to 100% of the principal amount thereof, together with any accrued interest up to, but excluding, the Fundamental Change Purchase Date, unless the Fundamental Change Purchase Date is after a Record Date and on or prior to the related Interest Payment Date, in which case interest accrued to the Interest Payment Date will be paid to Holders of the Securities as of the preceding Record Date and the Fundamental Change Purchase Price payable to any Holder surrendering such Holder’s Security for purchase pursuant to Article 3 of the Indenture shall be equal to the principal amount of Securities subject to purchase and will not include any accrued and unpaid interest. The Fundamental Change Purchase Price shall be payable in cash. The Holder shall have the right to withdraw any Fundamental Change Purchase Notice (in whole or in a portion thereof that is $1,000 or an integral multiple of $1,000 in excess thereof) at any time prior to 5:00 p.m., New York City time, on the Business Day immediately preceding the Fundamental Change Purchase Date by delivering a written notice of withdrawal to the Paying Agent in accordance with the terms of the Indenture.

6. CONVERSION

A Holder of a Security may convert the principal amount of such Security (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into cash, shares of Common Stock, or a combination thereof, at the Company’s election, at any time prior to the close of business on December 1, 2014, subject to the conditions, if any, set forth in Section 6.01 of the Supplemental Indenture; provided, however, that, if the Security is subject to purchase upon a Fundamental Change, the conversion right will terminate at the close of

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business on the Business Day immediately preceding the Fundamental Change Purchase Date for such Security or such earlier date as the Holder presents such Security for purchase (unless the Company shall default in making the Fundamental Change Purchase Price when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Security is purchased).

The initial Conversion Price is $7.19 per share of Common Stock, and the initial Conversion Rate is 139.0821 shares of Common Stock, in each case subject to adjustment under certain circumstances as provided in the Indenture. No fractional shares will be issued upon conversion; in lieu thereof, the Company will pay cash in an amount determined by multiplying the Daily VWAP of a full share of Common Stock on the last Trading Day of such Conversion Period by the fractional amount and rounding the product to the nearest whole cent. Whether fractional shares are issuable upon a conversion will be determined on the basis of the total number of Securities that the Holder is then converting into cash and Common Stock, if any, and the aggregate number of shares, if any, of Common Stock issuable upon such conversion.

To convert a Security, a Holder must (a) complete and manually sign the conversion notice set forth below and deliver such notice to a Conversion Agent, (b) surrender the Security to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent and (d) pay any transfer or similar tax, if required. A Holder may convert a portion of a Security equal to $1,000 or any integral multiple thereof. In the case of a Security held by the Depository, such conversion shall be done in accordance with the applicable rules and procedures of the Depository.

A Security in respect of which a Holder had delivered a Fundamental Change Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if the Fundamental Change Purchase Notice is withdrawn in accordance with the terms of the Indenture.

7. DENOMINATIONS, TRANSFER, EXCHANGE

The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes or other governmental charges that may be imposed in relation thereto by law or permitted by the Indenture.

8. PERSONS DEEMED OWNERS

The Holder of a Security may be treated as the owner of it for all purposes.

9. UNCLAIMED MONEY

If money for the payment of principal, or interest, if any, remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its written request, subject to applicable unclaimed property law. After that, Holders entitled to money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person.

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10. AMENDMENT, SUPPLEMENT AND WAIVER

Subject to certain exceptions set forth in the Indenture, the Securities and the Indenture may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and an existing default or Event of Default with respect to the Securities and its consequence or compliance with any provision of the Securities or the Indenture may be waived in a particular instance with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without the consent of or notice to any Holder, the Company and the Trustee may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any Holder.

11. CALCULATIONS IN RESPECT OF SECURITIES

Except to the extent provided therein, the Company will be responsible for making all calculations called for under the Indenture and the Securities. These calculations include, but are not limited to, determinations of the Closing Sale Price of the Common Stock, adjustments to the Conversion Price, any accrued interest payable on the Securities, the Conversion Price and the Conversion Rate. The Company will make these calculations in good faith and, absent manifest error, the calculations will be final and binding on Holders of the Securities. The Company will provide to each of the Trustee, the Paying Agent and the Conversion Agent a schedule of its calculations, and the Trustee, the Paying Agent and the Conversion Agent are entitled to rely conclusively upon the accuracy of such calculations without independent verification. The Trustee will forward the Company’s calculations to any Holder of the Securities upon the request of such Holder.

12. SUCCESSOR ENTITY

When a successor corporation assumes all the obligations of its predecessor under the Securities and the Indenture in accordance with the terms and conditions of the Indenture, the predecessor corporation (except in certain circumstances specified in the Indenture) shall be released from those obligations.

13. DEFAULTS AND REMEDIES

Under the Indenture, an “Event of Default” with respect to Securities shall occur if:

(a) the Company defaults in the payment of any principal of any Security at Maturity (including, following a Fundamental Change), including any Additional Tax Amounts (if any) thereon;

(b) the Company defaults in the payment of any interest on any Security, including any Additional Tax Amounts (if any) thereon, when it becomes due and payable, and continuance of such default for a period of 30 days (unless the entire amount of such payment is deposited by the Company with the Trustee or with a Paying Agent that is not an affiliate of the Company prior to the expiration of such period of 30 days);

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(c) the Company fails to pay the cash and deliver the shares of Common Stock, if any, representing the Conversion Obligation (including any Additional Shares and any Additional Tax Amounts (if any) thereon) upon conversion of any Security within the time period required by the provisions of this Indenture;

(d) the Company fails to perform or comply with any of its other covenants or agreements contained in the Securities or in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is specifically dealt with in clauses (i), (ii) or (iii) of this definition) and the default continues for 60 days after notice is given as specified below;

(e) any indebtedness under any Instrument with a principal amount then, individually or in the aggregate, outstanding in excess of $50,000,000, whether such indebtedness now exists or shall hereafter be created, is not paid at Maturity or when otherwise due or is accelerated, and such indebtedness is not discharged, or such default in payment or acceleration is not cured or rescinded, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the outstanding Securities of that Series a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such default to be cured or waived or such acceleration to be rescinded or annulled and stating that such notice is a “Notice of Default” hereunder. A payment obligation (other than indebtedness under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or any Subsidiary or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any Subsidiary) shall not be deemed to have matured, come due, or been accelerated to the extent that it is being disputed by the relevant obligor or obligors in good faith;

(f) the Company or any Subsidiary fails to pay one or more final and non-appealable judgments entered by a court or courts of competent jurisdiction, the aggregate uninsured or unbonded portion of which is in excess of $50,000,000, if the judgments are not paid, discharged, waived or stayed within 30 days;

(g) the Company defaults in the payment of the purchase price of any Security when the same becomes due and payable, including any Additional Tax Amounts (if any) thereon;

(h) the Company fails to provide a Fundamental Change Purchase Notice when required by Section 4.01 of the Supplemental Indenture;

(i) the Company or any Subsidiary of the Company, pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors; or (v) or generally is unable to pay its debts as the same become due; or

(j) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Subsidiaries in an involuntary case or

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proceeding; (ii) appoints a Custodian of the Company or any of its Subsidiaries for all or substantially all of the property of the Company or any such Subsidiary; or (iii) orders the liquidation of the Company or any of its Subsidiaries; and the case of each of clause (i), (ii) and (iii), the order or decree remains unstayed and in effect for 60 consecutive days.

A default under clause (d) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding notify the Company and the Trustee, in writing of the default, and the Company does not cure the default within 60 days after receipt of such notice. If an Event of Default with respect to the Securities (other than as a result of certain events of bankruptcy, insolvency or reorganization specified in the Indenture) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding may declare all unpaid principal of, and accrued and unpaid interest on to the date of acceleration, the Securities of that Series then outstanding (if not then due and payable) to be due and payable upon any such declaration, and the same shall become and be immediately due and payable. If an Event of Default specified in clause (i) or (j) above occurs, all unpaid principal of the Securities then outstanding, and all accrued and unpaid interest thereon to the date of acceleration, shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or any interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of default.

Under the terms of the Indenture, at the election of the Company in its sole discretion, the sole remedy for an Event of Default relating to the failure to comply with Section 4.02 of the Base Indenture, and for any failure to comply with the requirements of Section 314(a)(1) of the TIA, will consist, for the 180 days after the occurrence of such an Event of Default, exclusively of the right to receive additional interest on the notes at a rate equal to 0.50% per annum of the aggregate principal amount of the Securities then outstanding up to, but not including, the 181st day thereafter (or, if applicable, the earlier date on which the Event of Default relating to the reporting obligations is cured or waived). Any such additional interest will be paid and calculated in the manner set forth in the Indenture.

14. TRUSTEE DEALINGS WITH THE COMPANY

Law Debenture Trust Company of New York, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Company or an Affiliate of the Company and may otherwise deal with the Company or an Affiliate of the Company, as if it were not the Trustee.

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15. NO RECOURSE AGAINST OTHERS

A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. The Holder of this Security by accepting this Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Security.

16. AUTHENTICATION

This Security shall not be valid until the Trustee or an authenticating agent manually signs the certificate of authentication on the other side of this Security.

17. ABBREVIATIONS AND DEFINITIONS

Customary abbreviations may be used in the name of the Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and UGMA (= Uniform Gifts to Minors Act).

All terms defined in the Indenture and used in this Security but not specifically defined herein are used herein as so defined.

18. INDENTURE TO CONTROL; GOVERNING LAW

In the case of any conflict between the provisions of this Security and the Indenture, the provisions of the Indenture shall control. This Security shall be governed by, and construed in accordance with, the laws of the State of New York.

The Company will furnish to any Holder, upon written request and without charge, a copy of the Indenture. Requests may be made to the address of the Company set forth in Section 12.02 of the Base Indenture.

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EX-4.1

Exhibit 4.1

DRYSHIPS INC.

2008 EQUITY INCENTIVE PLAN,

AS AMENDED AND RESTATED

ARTICLE I.

General

1.1. Purpose

The DryShips Inc. 2008 Equity Incentive Plan (the “Plan”) is designed to provide certain key persons, whose initiative and efforts are deemed to be important to the successful conduct of the business of DryShips Inc. (the “Company”), with incentives to (a) enter into and remain in the service of the Company or its Affiliates (as defined below), (b) acquire a proprietary interest in the success of the Company, (c) maximize their performance and (d) enhance the long-term performance of the Company.

Upon adoption of the Plan, no further awards will be issued under the Company’s 2005 Stock Incentive Plan.

1.2. Administration

(a) Administration. The Plan shall be administered by the Company’s Board of Directors (referred to herein as the “Board”) or such committee of the Board as may be designated by the Board to administer the Plan (the Board or such committee, as applicable, the ”Administrator”); provided that (i) in the event the Company is subject to Section 16 of the U.S. Securities Exchange Act of 1934, as amended (the “1934 Act”), the Administrator shall be composed of two or more directors, each of whom is a “Non-Employee Director” under Rule 16b-3 (as promulgated and interpreted by the Securities and Exchange Commission under the 1934 Act, or any successor rule or regulation thereto as in effect from time to time), and (ii) to the extent the Administrator, in its discretion, determines that the limitations of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), may be relevant to Awards under the Plan, the Administrator shall be composed solely of two or more directors who are “outside” directors for purposes of Section 162(m) of the Code. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Administrator by the Plan, the Administrator shall have the full power and authority to: (1) designate the persons to receive Awards (as defined below) under the Plan; (2) determine the types of Awards granted to a participant under the Plan; (3) determine the number of shares to be covered by, or with respect to which payments, rights or other matters are to be calculated with respect to, Awards; (4) determine the terms and conditions of any Awards; (5) determine whether, and to what extent, and under what circumstances, Awards may be settled or exercised in cash, shares, other securities, other Awards or other property, or cancelled, forfeited or suspended, and the methods by which Awards may be settled, exercised, cancelled, forfeited or suspended; (6) determine whether, to what extent, and under what circumstances cash, shares, other securities, other Awards, other property and other amounts payable with respect to an Award shall be deferred, either automatically or at the election of the holder thereof or the

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Administrator; (7) construe, interpret and implement the Plan and any Award Agreement (as defined below); (8) prescribe, amend, rescind or waive rules and regulations relating to the Plan, including rules governing its operation; (9) make all determinations necessary or advisable in administering the Plan; (10) correct any defect, supply any omission and reconcile any inconsistency in the Plan or any Award Agreement; and (11) make any other determination and take any other action that the Administrator deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Administrator, may be made at any time and shall be final, conclusive and binding upon all persons.

(b) General Right of Delegation. Except to the extent prohibited by applicable law, the applicable rules of a stock exchange or any charter, by-laws or other agreement governing the Administrator, the Administrator may delegate all or any part of its responsibilities to any person or persons selected by it and may revoke any such allocation or delegation at any time.

(c) Indemnification. No member of the Board, the Administrator or any employee of the Company or its Affiliates (each such person, a ”Covered Person”) shall be liable for any action taken or omitted to be taken or any determination made in good faith with respect to the Plan or any Award hereunder. Each Covered Person shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan or any Award Agreement and (ii) any and all amounts paid by such Covered Person, with the Company’s approval, in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person; provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Articles of Incorporation or Bylaws. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them harmless.

(d) Delegation of Authority to Senior Officers. The Administrator may delegate, on such terms and conditions as it determines, to one or more senior officers of the Company the authority to make grants of Awards to key employees (other than officers) of the Company and its Subsidiaries (including any such prospective key employee) and consultants of the Company and its Subsidiaries.

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(e) Awards to Non-Employee Directors. Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant Awards to Non-Employee Directors or administer the Plan with respect to such Awards. In any such case, the Board shall have all the authority and responsibility granted to the Administrator herein.

1.3. Persons Eligible for Awards

The persons eligible to receive Awards under the Plan are those officers, directors, and key employees (including any such prospective officer or employee) of the Company and its Subsidiaries and Affiliates and consultants and service providers (including individuals who are employed by or provide services to any entity that is itself such a consultant or service provider) to the Company and its Subsidiaries an Affiliates (collectively, “Key Persons”) as the Administrator shall select.

1.4. Types of Awards

Awards may be made under the Plan in the form of (a) stock options, (b) stock appreciation rights, (c) restricted stock, (d) restricted stock units, (e) phantom stock units and (f) unrestricted stock, all as more fully set forth in the Plan. The term “Award” means any of the foregoing that are granted under the Plan.

1.5. Shares Available for Awards; Adjustments for Changes in Capitalization

(a) Maximum Number. Subject to adjustment as provided in Section 1.5(c), the aggregate number of shares of common stock of the Company, par value $0.01 (“Common Stock”), with respect to which Awards may at any time be granted under the Plan shall be 21,834,055 (Twenty One Million Eight Hundred Thirty Four Thousand Fifty Five). The following shares of Common Stock shall again become available for Awards under the Plan: (i) any shares that are subject to an Award under the Plan and that remain unissued upon the cancellation or termination of such Award for any reason whatsoever; (ii) any shares of restricted stock forfeited pursuant to the Plan or the applicable Award Agreement; provided that any dividend equivalent rights with respect to such shares that have not theretofore been directly remitted to the grantee are also forfeited; and (iii) any shares in respect of which a stock appreciation right, restricted stock unit or phantom stock unit is settled for cash.

(b) Source of Shares; Certificate Legends. Shares issued pursuant to the Plan may be authorized but unissued Common Stock or treasury shares. The Administrator may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares.

(c) Adjustments. (i) In the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Company shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Company shares or other securities of the Company, issuance of warrants

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or other rights to purchase Company shares or other securities of the Company, or other corporate transaction or event affects the Company shares such that an adjustment is determined by the Administrator to be appropriate or desirable, then the Administrator shall, in such manner as it may deem equitable or desirable, adjust the number of shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted under the Plan.

(ii) The Administrator is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including the events described in Section 1.5(c)(i) or the occurrence of a Change in Control (as defined below)) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles or law, whenever the Administrator determines that such adjustments are appropriate or desirable, including providing for (A) adjustment to (1) the number of shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards or to which outstanding Awards relate and (2) the Exercise Price (as defined below) with respect to any Award and (B) a substitution or assumption of Awards, accelerating the exercisability or vesting of, or lapse of restrictions on, Awards, or accelerating the termination of Awards by providing for a period of time for exercise prior to the occurrence of such event, or, if deemed appropriate or desirable, providing for a cash payment to the holder of an outstanding Award in consideration for the cancellation of such Award (it being understood that, in such event, (x) any option or stock appreciation right having a per share Exercise Price equal to, or in excess of, the Fair Market Value (as defined below) of a share subject to such option or stock appreciation right may be cancelled and terminated without any payment or consideration therefor and (y) any phantom stock unit that by its terms may be cancelled without payment therefor may be cancelled and terminated without any payment or consideration therefor to the extent so provided in the applicable Award Agreement).

(iii) In the event of (A) a dissolution or liquidation of the Company, (B) a sale of all or substantially all the Company’s assets or (C) a merger, reorganization or consolidation involving the Company or one of its Subsidiaries (as defined below), the Administrator shall have the power to:

(1) provide that outstanding options, stock appreciation rights, phantom stock units and/or restricted stock units (including any related dividend equivalent right) shall either continue in effect, be assumed or an equivalent award shall be substituted therefor by the successor corporation or a parent corporation or subsidiary corporation;

(2) cancel, effective immediately prior to the occurrence of such event, options, stock appreciation rights, phantom stock units and/or restricted stock units (including each dividend equivalent right related thereto) outstanding immediately prior to such event (whether or not then exercisable) and, in full consideration of such cancellation, pay to the holder of such Award a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Administrator) of the shares subject to such Award over the aggregate Exercise Price of such Award (it being understood that, in such event, (x) any option or stock appreciation right having a

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per share Exercise Price equal to, or in excess of, the Fair Market Value of a share subject to such option or stock appreciation right may be cancelled and terminated without any payment or consideration therefor and (y) any phantom stock unit that by its terms may be cancelled without payment therefor may be cancelled and terminated without any payment or consideration therefor to the extent so provided in the applicable Award Agreement); or

(3) notify the holder of an option or stock appreciation right in writing or electronically that each option and stock appreciation right shall be fully vested and exercisable for a period of 30 days from the date of such notice, or such shorter period as the Administrator may determine to be reasonable, and the option or stock appreciation right shall terminate upon the expiration of such period (which period shall expire no later than immediately prior to the consummation of the corporate transaction).

1.6. Definitions of Certain Terms

(a) The “Fair Market Value” of a share of Common Stock on any day shall be the closing price on the Nasdaq National Market (or the Over-the-Counter Bulletin Board or such other market on which the Common Stock is trading, if not trading on the Nasdaq National Market), as reported for such day in The Wall Street Journal. If no quotation is made for the applicable day, the Fair Market Value of a share of Common Stock on such day shall be determined in the manner set forth in the preceding sentence for the next preceding trading day. Notwithstanding the foregoing, if there is no reported closing price that satisfies the preceding sentences, or if otherwise deemed necessary or appropriate by the Administrator, the Fair Market Value of a share of Common Stock on any day shall be determined by such methods and procedures as shall be established from time to time by the Administrator. The “Fair Market Value” of any property other than Common Stock shall be the fair market value of such property determined by such methods and procedures as shall be established from time to time by the Administrator.

(b) Unless otherwise set forth in an Award Agreement, in connection with a termination of employment or service or a dismissal from Board membership, for purposes of the Plan, the term “for Cause” shall be defined as follows:

(i) if there is an employment, severance, consulting, service, change in control or other agreement governing the relationship between the grantee, on the one hand, and the Company or a Subsidiary or Affiliate, on the other hand, that contains a definition of “cause” (or similar phrase), for purposes of the Plan, the term “for Cause” shall mean those acts or omissions that would constitute “cause” under such agreement; or

(ii) if the preceding clause (i) is not applicable to the grantee, for purposes of the Plan, the term “for Cause” shall mean any of the following:

(A) any failure by the grantee substantially to perform the grantee’s employment or consultancy/service or Board membership duties;

(B) any excessive unauthorized absenteeism by the grantee;

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(C) any refusal by the grantee to obey the lawful orders of the Board or any other person to whom the grantee reports;

(D) any act or omission by the grantee that is or may be injurious to the Company or any Affiliate, whether monetarily, reputationally or otherwise;

(E) any act by the grantee that is inconsistent with the best interests of the Company or any Affiliate;

(F) the grantee’s gross negligence that is injurious to the Company or any Affiliate, whether monetarily, reputationally or otherwise;

(G) the grantee’s material violation of any of the policies of the Company, a Subsidiary or Affiliate, as applicable, including, without limitation, those policies relating to discrimination or sexual harassment;

(H) the grantee’s material breach of his or her employment or service contract with the Company or any Affiliate;

(I) the grantee’s unauthorized (1) removal from the premises of the Company or an Affiliate of any document (in any medium or form) relating to the Company or an Affiliate or the customers or clients of the Company or an Affiliate or (2) disclosure to any person or entity of any of the Company’s, or any Affiliate’s, confidential or proprietary information;

(J) the grantee’s being convicted of, or entering a plea of guilty or nolo contendere to, any crime that constitutes a felony or involves moral turpitude; and

(K) the grantee’s commission of any act involving dishonesty or fraud.

Any rights the Company or its Affiliates may have under the Plan in respect of the events giving rise to a termination or dismissal “for Cause” shall be in addition to any other rights the Company or its Affiliates may have under any other agreement with a grantee or at law or in equity. Any determination of whether a grantee’s employment, consultancy/service relationship or Board membership is (or is deemed to have been) terminated “for Cause” shall be made by the Administrator. If, subsequent to a grantee’s voluntary termination of employment or consultancy/service relationship or voluntarily resignation from the Board or involuntary termination of employment or consultancy/service relationship without Cause or removal from the Board other than “for Cause”, it is discovered that the grantee’s employment or consultancy/service relationship or Board membership could have been terminated “for Cause”, the Administrator may deem such grantee’s employment or consultancy/service relationship or Board membership to have been terminated “for Cause” upon such discovery and determination by the Administrator.

(c) “Affiliate” shall mean (i) any entity that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Administrator.

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(d) “Subsidiary” shall mean any entity in which the Company, directly or indirectly, has a 50% or more equity interest.

(e) “Exercise Price” shall mean (i) in the case of options, the price specified in the applicable Award Agreement as the price-per-share at which such share can be purchased pursuant to the option or (ii) in the case of stock appreciation rights, the price specified in the applicable Award Agreement as the reference price-per-share used to calculate the amount payable to the grantee.

ARTICLE II.

Awards Under The Plan

2.1. Agreements Evidencing Awards

Each Award granted under the Plan shall be evidenced by a written certificate (“Award Agreement”), which shall contain such provisions as the Administrator may deem necessary or desirable and which may, but need not, require execution or acknowledgment by a grantee. The Award shall be subject to all of the terms and provisions of the Plan and the applicable Award Agreement.

2.2. Grant of Stock Options and Stock Appreciation Rights

(a) Stock Option Grants. The Administrator may grant stock options (“options”) to purchase shares of Common Stock from the Company to such Key Persons, and in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall determine, subject to the provisions of the Plan. No option will be treated as an “incentive stock option” for purposes of the Code. The Administrator shall not grant an Award in the form of stock options to an individual who is then subject to the requirements of Section 409A of the Code with respect to such Award if the Common Stock (as defined below) underlying such Award does not then qualify as “service recipient stock” for purposes of Section 409A.

(b) Option Exercise Price. Each Award Agreement with respect to an option shall set forth the Exercise Price of such Award and, unless otherwise specifically provided in the Award Agreement, the Exercise Price of an option shall equal the Fair Market Value of a share of Common Stock on the date of grant; provided that in no event may such Exercise Price be less than the greater of (i) the Fair Market Value of a share of Common Stock on the date of grant and (ii) the par value of a share of Common Stock.

(c) Stock Appreciation Right Grants; Types of Stock Appreciation Rights. The Administrator may grant stock appreciation rights to such Key Persons, and in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall determine, subject to the provisions of the Plan. The terms of a stock appreciation right may provide that it shall be automatically exercised for a payment upon the happening of a specified event that is outside the control of the grantee and that it shall not be otherwise exercisable. Stock appreciation rights may be granted in connection with all or any part of, or independently of, any option granted under the Plan. The Administrator shall not grant an Award in the form

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of stock appreciation rights to an individual who is then subject to the requirements of Section 409A of the Code with respect to such Award if the Common Stock (as defined below) underlying such Award does not then qualify as “service recipient stock” for purposes of Section 409A.

(d) Nature of Stock Appreciation Rights. The grantee of a stock appreciation right shall have the right, subject to the terms of the Plan and the applicable Award Agreement, to receive from the Company an amount equal to (i) the excess of the Fair Market Value of a share of Common Stock on the date of exercise of the stock appreciation right over the Exercise Price of the stock appreciation right, multiplied by (ii) the number of shares with respect to which the stock appreciation right is exercised. Each Award Agreement with respect to a stock appreciation right shall set forth the Exercise Price of such Award and, unless otherwise specifically provided in the Award Agreement, the Exercise Price of a stock appreciation right shall equal the Fair Market Value of a share of Common Stock on the date of grant; provided that in no event may such Exercise Price be less than the greater of (A) the Fair Market Value of a share of Common Stock on the date of grant and (B) the par value of a share of Common Stock. Payment upon exercise of a stock appreciation right shall be in cash or in shares of Common Stock (valued at their Fair Market Value on the date of exercise of the stock appreciation right) or any combination of both, all as the Administrator shall determine. Upon the exercise of a stock appreciation right granted in connection with an option, the number of shares subject to the option shall be reduced by the number of shares with respect to which the stock appreciation right is exercised. Upon the exercise of an option in connection with which a stock appreciation right has been granted, the number of shares subject to the stock appreciation right shall be reduced by the number of shares with respect to which the option is exercised.

2.3. Exercise of Options and Stock Appreciation Rights

Subject to the other provisions of this Article II and the Plan, each option and stock appreciation right granted under the Plan shall be exercisable as follows:

(a) Timing and Extent of Exercise. Options and stock appreciation rights shall be exercisable at such times and under such conditions as determined by the Administrator and set forth in the corresponding Award Agreement, but in no event shall any portion of such Award be exercisable subsequent to the tenth anniversary of the date on which such Award was granted. Unless the applicable Award Agreement otherwise provides, an option or stock appreciation right may be exercised from time to time as to all or part of the shares as to which such Award is then exercisable.

(b) Notice of Exercise. An option or stock appreciation right shall be exercised by the filing of a written notice with the Company or the Company’s designated exchange agent (the “Exchange Agent”), on such form and in such manner as the Administrator shall prescribe.

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(c) Payment of Exercise Price. Any written notice of exercise of an option shall be accompanied by payment for the shares being purchased. Such payment shall be made: (i) by certified or official bank check (or the equivalent thereof acceptable to the Company or its Exchange Agent) for the full option Exercise Price; (ii) with the consent of the Administrator, which consent shall be given or withheld in the sole discretion of the Administrator, by delivery of shares of Common Stock having a Fair Market Value (determined as of the exercise date) equal to all or part of the option Exercise Price and a certified or official bank check (or the equivalent thereof acceptable to the Company or its Exchange Agent) for any remaining portion of the full option Exercise Price; or (iii) at the sole discretion of the Administrator and to the extent permitted by law, by such other provision, consistent with the terms of the Plan, as the Administrator may from time to time prescribe (whether directly or indirectly through the Exchange Agent).

(d) Delivery of Certificates Upon Exercise. Subject to Sections 3.2, 3.4 and 3.13, promptly after receiving payment of the full option Exercise Price, or after receiving notice of the exercise of a stock appreciation right for which the Administrator determines payment will be made partly or entirely in shares, the Company or its Exchange Agent shall (i) deliver to the grantee, or to such other person as may then have the right to exercise the Award, a certificate or certificates for the shares of Common Stock for which the Award has been exercised or, in the case of stock appreciation rights, for which the Administrator determines will be made in shares or (ii) establish an account evidencing ownership of the stock in uncertificated form. If the method of payment employed upon an option exercise so requires, and if applicable law permits, an optionee may direct the Company or its Exchange Agent, as the case may be, to deliver the stock certificate(s) to the optionee’s stockbroker.

(e) No Stockholder Rights. No grantee of an option or stock appreciation right (or other person having the right to exercise such Award) shall have any of the rights of a stockholder of the Company with respect to shares subject to such Award until the issuance of a stock certificate to such person for such shares. Except as otherwise provided in Section 1.5(c), no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued.

2.4. Termination of Employment; Death Subsequent to a Termination of Employment

(a) General Rule. Except to the extent otherwise provided in paragraphs (b), (c), (d), (e) or (f) of this Section 2.4 or Section 3.5(b)(iii), a grantee who incurs a termination of employment or consultancy/service relationship or dismissal from the Board may exercise any outstanding option or stock appreciation right on the following terms and conditions: (i) exercise may be made only to the extent that the grantee was entitled to exercise the Award on the date of termination of employment or consultancy/service relationship or dismissal from the Board, as applicable; and (ii) exercise must occur within three months after termination of employment or consultancy/service relationship or dismissal from the Board but in no event after the original expiration date of the Award.

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(b) Dismissal “for Cause”. If a grantee incurs a termination of employment or consultancy/service relationship or dismissal from the Board “for Cause”, all options and stock appreciation rights not theretofore exercised shall immediately terminate upon the grantee’s termination of employment or consultancy/service relationship or dismissal from the Board.

(c) Retirement. If a grantee incurs a termination of employment or consultancy/service relationship or dismissal from the Board as the result of his or her retirement (as defined below), then any outstanding option or stock appreciation right shall, to the extent exercisable at the time of such retirement, remain exercisable for a period of three years after such retirement; provided that in no event may such option or stock appreciation right be exercised following the original expiration date of the Award. For this purpose, “retirement” shall mean a grantee’s resignation of employment or consultancy/service relationship or dismissal from the Board, with the Company’s or Affiliate’s prior consent, on or after (i) his or her 65th birthday, (ii) the date on which he or she has attained age 60 and completed at least five years of service with the Company or Affiliate (using any method of calculation the Administrator deems appropriate) or (iii) if approved by the Administrator, on or after his or her having completed at least 20 years of service with the Company or Affiliate (using any method of calculation the Administrator deems appropriate).

(d) Disability. If a grantee incurs a termination of employment or consultancy/service relationship or a dismissal from the Board by reason of a disability (as defined below), then any outstanding option or stock appreciation right shall, to the extent exercisable at the time of such termination or dismissal, remain exercisable for a period of one year after such termination or dismissal of employment; provided that in no event may such option or stock appreciation right be exercised following the original expiration date of the Award. For this purpose, “disability” shall mean any physical or mental condition that would qualify the grantee for a disability benefit under the long-term disability plan maintained by the Company or a Subsidiary or Affiliate, as applicable, or, if there is no such plan, a physical or mental condition that prevents the grantee from performing the essential functions of the grantee’s position (with or without reasonable accommodation) for a period of six consecutive months. The existence of a disability shall be determined by the Administrator.

(e) Death.

(i) Termination of Employment as a Result of Grantee’s Death. If a grantee incurs a termination of employment or consultancy/service relationship or leaves the Board as the result of his or her death, then any outstanding option or stock appreciation right shall, to the extent exercisable at the time of such death, remain exercisable for a period of one year after such death; provided that in no event may such option or stock appreciation right be exercised following the original expiration date of the Award.

(ii) Restrictions on Exercise Following Death. Any such exercise of an Award following a grantee’s death shall be made only by the grantee’s executor or administrator or other duly appointed representative reasonably acceptable to the Administrator, unless the grantee’s will specifically disposes of such Award, in which case such exercise shall be made only by the recipient of such specific disposition. If a grantee’s personal representative or the recipient of a specific disposition under the

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grantee’s will shall be entitled to exercise any Award pursuant to the preceding sentence, such representative or recipient shall be bound by all the terms and conditions of the Plan and the applicable Award Agreement which would have applied to the grantee.

(f) Administrator Discretion. The Administrator, in the applicable Award Agreement, may waive or modify the application of the foregoing provisions of this Section 2.4.

2.5. Transferability of Options and Stock Appreciation Rights

Except as otherwise provided in an applicable Award Agreement evidencing an option or stock appreciation right, during the lifetime of a grantee, each such Award granted to a grantee shall be exercisable only by the grantee, and no such Award shall be assignable or transferable other than by will or by the laws of descent and distribution. The Administrator may, in any applicable Award Agreement evidencing an option or stock appreciation right, permit a grantee to transfer all or some of the options or stock appreciation rights to (a) the grantee’s spouse, children or grandchildren (“Immediate Family Members”), (b) a trust or trusts for the exclusive benefit of such Immediate Family Members or (c) other parties approved by the Administrator. Following any such transfer, any transferred options and stock appreciation rights shall continue to be subject to the same terms and conditions as were applicable immediately prior to the transfer.

2.6. Grant of Restricted Stock

(a) Restricted Stock Grants. The Administrator may grant restricted shares of Common Stock to such Key Persons, in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions as the Administrator shall determine, subject to the provisions of the Plan. A grantee of a restricted stock Award shall have no rights with respect to such Award unless such grantee accepts the Award within such period as the Administrator shall specify by accepting delivery of a restricted stock Award Agreement in such form as the Administrator shall determine.

(b) Issuance of Stock Certificate. Promptly after a grantee accepts a restricted stock Award in accordance with Section 2.6(a), subject to Sections 3.2, 3.4 and 3.13, the Company or its Exchange Agent shall issue to the grantee a stock certificate or stock certificates for the shares of Common Stock covered by the Award or shall establish an account evidencing ownership of the stock in uncertificated form. Upon the issuance of such stock certificates, or establishment of such account, the grantee shall have the rights of a stockholder with respect to the restricted stock, subject to: (i) the nontransferability restrictions and forfeiture provision described in the Plan (including paragraphs (d) and (e) of this Section 2.6); (ii) in the Administrator’s sole discretion, a requirement, as set forth in the Award Agreement, that any dividends paid on such shares shall be held in escrow and, unless otherwise determined by the Administrator, shall remain forfeitable until all restrictions on such shares have lapsed; and (iii) any other restrictions and conditions contained in the applicable Award Agreement.

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(c) Custody of Stock Certificate. Unless the Administrator shall otherwise determine, any stock certificates issued evidencing shares of restricted stock shall remain in the possession of the Company until such shares are free of any restrictions specified in the applicable Award Agreement. The Administrator may direct that such stock certificates bear a legend setting forth the applicable restrictions on transferability.

(d) Nontransferability. Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of prior to the lapsing of all restrictions thereon, except as otherwise specifically provided in this Plan or the applicable Award Agreement. The Administrator at the time of grant shall specify the date or dates (which may depend upon or be related to the attainment of performance goals and other conditions) on which the nontransferability of the restricted stock shall lapse.

(e) Consequence of Termination of Employment. A grantee’s termination of employment or consultancy/service relationship or dismissal from the Board for any reason (including death) shall cause the immediate forfeiture of all shares of restricted stock that have not yet vested as of the date of such termination of employment or consultancy/service relationship or dismissal from the Board. Unless otherwise determined by the Administrator, all dividends paid on such shares that have not theretofore been directly remitted to the grantee shall also be forfeited, whether by termination of any escrow arrangement under which such dividends are held or otherwise. The Administrator, in the applicable Award Agreement, may waive or modify the application of the foregoing provisions of this Section 2.6(e).

2.7. Grant of Restricted Stock Units

(a) Restricted Stock Unit Grants. The Administrator may grant restricted stock units to such Key Persons, and in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall determine, subject to the provisions of the Plan. A restricted stock unit granted under the Plan shall confer upon the grantee a right to receive from the Company, upon the occurrence of such vesting event as shall be determined by the Administrator and specified in the Award Agreement, the number of such grantee’s restricted stock units that vest upon the occurrence of such vesting event multiplied by the Fair Market Value of a share of Common Stock on the date of vesting. Payment upon vesting of a restricted stock unit shall be in cash or in shares of Common Stock (valued at their Fair Market Value on the date of vesting) or both, all as the Administrator shall determine.

(b) Dividend Equivalents. The Administrator may include in any Award Agreement with respect to a restricted stock unit a dividend equivalent right entitling the grantee to receive amounts equal to the ordinary dividends that would be paid, during the time such Award is outstanding and unvested, on the shares of Common Stock underlying such Award if such shares were then outstanding. In the event such a provision is included in a Award Agreement, the Administrator shall determine whether such payments shall be (i) paid to the holder of the Award, as specified in the Award Agreement, either (A) at the same time as the underlying dividends are paid, regardless of the fact that the restricted stock unit has not theretofore vested, or (B) at the time at which the Award’s vesting event occurs, conditioned upon the occurrence of the vesting event, (ii) made in cash, shares of Common Stock or other property and (iii) subject to such other vesting and forfeiture provisions and other terms and conditions as the Administrator shall deem appropriate and as shall set forth in the Award Agreement.

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(c) Consequence of Termination of Employment. A grantee’s termination of employment or consultancy/service relationship or dismissal from the Board for any reason (including death) shall cause the immediate forfeiture of all restricted stock units that have not yet vested as of the date of such termination of employment or consultancy/service relationship or dismissal from the Board. Unless otherwise determined by the Administrator, any dividend equivalent rights that have not theretofore been directly remitted to the grantee shall also be forfeited, whether by termination of any escrow arrangement under which such dividends are held or otherwise. The Administrator, in the applicable Award Agreement, may waive or modify the application of the foregoing provisions of this Section 2.7(c).

(d) No Stockholder Rights. No grantee of a restricted stock unit shall have any of the rights of a stockholder of the Company with respect to such Award unless and until a stock certificate is issued with respect to such Award upon the vesting of such Award (it being understood that the Administrator shall determine whether to pay any vested restricted stock unit in the form of cash or Company shares or both), which issuance shall be subject to Sections 3.2, 3.4 and 3.13. Except as otherwise provided in Section 1.5(c), no adjustment to any restricted stock unit shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate, if any, is issued.

(e) Transferability of Restricted Stock Units. Except as otherwise provided in an applicable Award Agreement evidencing a restricted stock unit, no restricted stock unit granted under the Plan shall be assignable or transferable. The Administrator may, in any applicable Award Agreement evidencing a restricted stock unit, permit a grantee to transfer all or some of the restricted stock units to (i) the grantee’s Immediate Family Members, (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members or (iii) other parties approved by the Administrator. Following any such transfer, any transferred restricted stock units shall continue to be subject to the same terms and conditions as were applicable immediately prior to the transfer.

2.8. Grant of Unrestricted Stock

The Administrator may grant (or sell at a purchase price at least equal to par value) shares of Common Stock free of restrictions under the Plan to such Key Persons and in such amounts and subject to such forfeiture provisions as the Administrator shall determine. Shares may be thus granted or sold in respect of past services or other valid consideration.

2.9. Grant of Phantom Stock Units

(a) Phantom Stock Unit Grants. The Administrator may grant phantom stock units to such Key Persons, in such amounts, and subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall determine, subject

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to the provisions of the Plan. Each phantom stock unit shall represent a notional share of Common Stock. No grantee of a phantom stock unit shall have any rights of stockholder of the Company with respect to such Award unless and until the Award is cancelled in exchange for shares of Common Stock, which issuance of shares shall be subject to Sections 3.2, 3.4 and 3.13. Holders of phantom stock units shall not (i) be entitled to any voting rights with respect to any phantom stock units and (ii) be entitled, by reason of holding any phantom stock unit, to any distributions payable to shareholders of Common Stock; provided, however, that the Administrator may provide that the phantom stock unit shall be entitled to receive dividend equivalent rights, on such terms and conditions as the Administrator shall determine. The Administrator may determine that the phantom stock unit may be cancelled on such terms and conditions as set forth in the applicable Award Agreement, including (1) for no payment, (2) in exchange for a cash payment or (3) in exchange for shares of Common Stock.

(b) Other Provisions. Phantom stock units may be made independently of or in connection with any other Award under the Plan. A grantee of a phantom stock unit Award shall have no rights with respect to such Award unless such grantee accepts the Award within such period as the Administrator shall specify by accepting delivery of a phantom stock unit Award Agreement in such form as the Administrator shall determine.

(c) Nontransferability. Phantom stock units may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as otherwise specifically provided in this Plan or the applicable phantom stock unit Award Agreement.

(d) Grants to U.S. Taxpayers. No grant of a phantom stock unit Award to an individual who is then subject to the requirements of Section 409A of the Code shall be made under the Plan unless the Award, by its terms, is exempt from Section 409A of the Code or otherwise complies with Section 409A.

ARTICLE III.

Miscellaneous

3.1. Amendment of the Plan; Modification of Awards

(a) Amendment of the Plan. The Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations under any Award theretofore made under the Plan without the consent of the grantee (or, upon the grantee’s death, the person having the right to exercise the Award). For purposes of this Section 3.1, any action of the Board or the Administrator that in any way alters or affects the tax treatment of any Award shall not be considered to materially impair any rights of any grantee.

(b) Stockholder Approval Requirement. The Company is a “foreign private issuer” as defined in the rules of the SEC. Unless the Company continues to be a “foreign private issuer,” stockholder approval shall be required with respect to any amendment to the Plan that (i) expands the types of Awards available under the Plan, (ii) materially increases the number of shares which may be issued under the Plan, except as permitted pursuant to Section 1.5(c), (iii) materially increases the benefits to

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participants under the Plan, including any material change to (A) permit, or that has the effect of, a “re-pricing” of any outstanding Award, (B) reduce the price at which shares or options to purchase shares may be offered or (C) extends the duration of the Plan or (iv) materially expands the class of persons eligible to receive Awards under the Plan.

(c) Modification of Awards. The Administrator may cancel any Award under the Plan. The Administrator also may amend any outstanding Award Agreement, including, without limitation, by amendment which would: (i) accelerate the time or times at which the Award becomes unrestricted, vested or may be exercised; (ii) waive or amend any goals, restrictions or conditions set forth in the Award Agreement; or (iii) waive or amend the operation of Section 2.4, 2.6(e) or 2.7(c) with respect to the termination of the Award upon termination of employment or consultancy/service relationship or dismissal from the Board. However, any such cancellation or amendment that materially impairs the rights or materially increases the obligations of a grantee under an outstanding Award shall be made only with the consent of the grantee (or, upon the grantee’s death, the person having the right to exercise the Award). In making any modification to an Award (e.g., an amendment resulting in a direct or indirect reduction in the Exercise Price or a waiver or modification under Section 2.4(f), 2.6(e) or 2.7(c)), the Administrator may consider the implications under Section 409A of the Code from such modification.

3.2. Consent Requirement

(a) No Plan Action Without Required Consent. If the Administrator shall at any time determine that any Consent (as defined below) is necessary or desirable as a condition of, or in connection with, the granting of any Award under the Plan, the issuance or purchase of shares or other rights thereunder, or the taking of any other action thereunder (each such action being hereinafter referred to as a “Plan Action”), then such Plan Action shall not be taken, in whole or in part, unless and until such Consent shall have been effected or obtained to the full satisfaction of the Administrator.

(b) Consent Defined. The term “Consent” as used herein with respect to any Plan Action means (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (ii) any and all written agreements and representations by the grantee with respect to the disposition of shares, or with respect to any other matter, which the Administrator shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and (iii) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies.

3.3. Nonassignability

Except as provided in Section 2.4(e), 2.5, 2.6(d), 2.7(e) or 2.9(c), (a) no Award or right granted to any person under the Plan or under any Award Agreement shall be assignable or transferable other than by will or by the laws of descent and distribution and (b) all rights granted under the Plan or any Award Agreement shall be exercisable during the life of the grantee only by the grantee or the grantee’s legal representative or the grantee’s permissible successors or assigns (as authorized and determined by the Administrator). All terms and conditions of the Plan and the applicable Award Agreements will be binding upon any permitted successors or assigns.

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3.4. Taxes

(a) Withholding. A grantee or other Award holder under the Plan shall be required to pay, in cash, to the Company, and the Company and Affiliates shall have the right and are hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to such grantee or other Award holder, the amount of any applicable withholding taxes in respect of an Award, its grant, its exercise, its vesting, or any payment or transfer under an Award or under the Plan, and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for payment of such taxes. Whenever shares of Common Stock are to be delivered pursuant to an Award under the Plan, with the approval of the Administrator, which the Administrator shall have sole discretion whether or not to give, the grantee may satisfy the foregoing condition by electing to have the Company withhold from delivery shares having a value equal to the amount of minimum tax required to be withheld. Such shares shall be valued at their Fair Market Value as of the date on which the amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash. Such a withholding election may be made with respect to all or any portion of the shares to be delivered pursuant to an Award as may be approved by the Administrator in its sole discretion.

(b) Liability for Taxes. Grantees and holders of Awards are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with Awards (including, without limitation, any taxes arising under Section 409A of the Code) and the Company shall not have any obligation to indemnify or otherwise hold any such person harmless from any or all of such taxes. The Administrator shall have the discretion to organize any deferral program, to require deferral election forms, and to grant or, notwithstanding anything to the contrary in the Plan or any Award Agreement, to unilaterally modify any Award in a manner that (i) conforms with the requirements of Section 409A of the Code (to the extent applicable), (ii) voids any participant election to the extent it would violate Section 409A of the Code (to the extent applicable) and (iii) for any distribution event or election that could be expected to violate Section 409A of the Code, make the distribution only upon the earliest of the first to occur of a “permissible distribution event” within the meaning of Section 409A of the Code or a distribution event that the participant elects in accordance with Section 409A of the Code. Notwithstanding anything to the contrary contained in the Plan or in any Award Agreement, to the extent the Administrator determines that the Plan or any Award is subject to Section 409A of the Code and fails to comply with the requirements of Section 409A of the Code, the Administrator reserves the right to amend or terminate the Plan and/or amend, restructure, terminate or replace the Award in order to cause the Award to either not be subject to Section 409A of the Code or to comply with the applicable provisions of such section. The Administrator shall have the sole discretion to interpret the requirements of the Code, including, without limitation, Section 409A, for purposes of the Plan and all Awards.

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3.5. Change in Control

(a) Change in Control Defined. For purposes of the Plan, “Change in Control” shall mean the occurrence of any of the following:

(i) any “person” (as defined in Section 13(d)(3) of the 1934 Act), corporation or other entity (other than (A) the Company, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an Affiliate, (C) any company or other entity owned, directly or indirectly, by the holders of the voting stock of the Company in substantially the same proportions as their ownership of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company or (D) George Economou or any entity which George Economou directly or indirectly “controls” (as defined in Rule 12b-2 under the 1934 Act)) acquires “beneficial ownership” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of more than 50% of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company;

(ii) the sale of all or substantially all the Company’s assets in one or more related transactions to any “person” (as defined in Section 13(d)(3) of the 1934 Act), other than such a sale (A) to a Subsidiary which does not involve a change in the equity holdings of the Company, (B) to an entity which George Economou directly or indirectly controls or (C) to an entity which has acquired all or substantially all the Company’s assets (any such entity described in clause (A), (B) or (C), the “Acquiring Entity”) if, immediately following such sale, 50% or more of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Acquiring Entity (or, if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of more than 50% of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Acquiring Entity) is beneficially owned by the holders of the voting stock of the Company, and such voting power among the persons who were holders of the voting stock of the Company immediately prior to such sale is, immediately following such sale, held in substantially the same proportions as the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company immediately prior to such sale;

(iii) any merger, consolidation, reorganization or similar event of the Company or any Subsidiary as a result of which the holders of the voting stock of the Company immediately prior to such merger, consolidation, reorganization or similar event do not directly or indirectly hold 50% or more of the aggregate voting power of the capital stock of the surviving entity (or, if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of more than 50% of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the surviving entity) and such voting power among the persons who were holders of the voting stock of the Company immediately prior to such sale is, immediately following such sale, held in substantially the same proportions as the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company immediately prior to such sale;

(iv) the approval by the Company’s stockholders of a plan of complete liquidation or dissolution of the Company; or

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(v) during any period of 24 consecutive calendar months, individuals:

(A) who were directors of the Company on the first day of such period, or

(B) whose election or nomination for election to the Board was recommended or approved by at least a majority of the directors then still in office who were directors of the Company on the first day of such period, or whose election or nomination for election were so approved,

shall cease to constitute a majority of the Board.

Notwithstanding the foregoing, for each Award subject to Section 409A of the Code, a Change in Control shall be deemed to occur under this Plan with respect to such Award only if a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A, provided that such limitation shall apply to such Award only to the extent necessary to avoid adverse tax effects under Section 409A of the Code.

(b) Effect of a Change in Control. Unless the Administrator provides otherwise in a Award Agreement, upon the occurrence of a Change in Control:

(i) notwithstanding any other provision of this Plan, any Award then outstanding shall become fully vested and any Award in the form of an option or stock appreciation right shall be immediately exercisable;

(ii) to the extent permitted by law and not otherwise limited by the terms of the Plan, the Administrator may amend any Award Agreement in such manner as it deems appropriate;

(iii) a grantee who incurs a termination of employment or consultancy/service relationship or dismissal from the Board for any reason, other than a termination or dismissal “for Cause”, concurrent with or within one year following the Change in Control may exercise any outstanding option or stock appreciation right, but only to the extent that the grantee was entitled to exercise the Award on the date of his or her termination of employment or consultancy/service relationship or dismissal from the Board, until the earlier of (A) the original expiration date of the Award and (B) the later of (x) the date provided for under the terms of Section 2.4 without reference to this Section 3.5(b)(iii) and (y) the first anniversary of the grantee’s termination of employment or consultancy/service relationship or dismissal from the Board.

(c) Miscellaneous. Whenever deemed appropriate by the Administrator, any action referred to in paragraph (b)(ii) of this Section 3.5 may be made conditional upon the consummation of the applicable Change in Control transaction.

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3.6. Operation and Conduct of Business

Nothing in the Plan or any Award Agreement shall be construed as limiting or preventing the Company or any Affiliate from taking any action with respect to the operation and conduct of their business that they deem appropriate or in their best interests, including any or all adjustments, recapitalizations, reorganizations, exchanges or other changes in the capital structure of the Company or any Affiliate, any merger or consolidation of the Company or any Affiliate, any issuance of Company shares or other securities or subscription rights, any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or other securities or rights thereof, any dissolution or liquidation of the Company or any Affiliate, any sale or transfer of all or any part of the assets or business of the Company or any Affiliate, or any other corporate act or proceeding, whether of a similar character or otherwise.

3.7. No Rights to Awards

No Key Person or other person shall have any claim to be granted any Award under the Plan.

3.8. Right of Discharge Reserved

Nothing in the Plan or in any Award Agreement shall confer upon any grantee the right to continue his or her employment with the Company or any of its Affiliates, his or her consultancy/service relationship with the Company or any of its Affiliates, or his or her position as a director of the Company or any of its Affiliates, or affect any right that the Company or any of its Affiliates may have to terminate such employment or consultancy/service relationship or service as a director.

3.9. Non-Uniform Determinations

The Administrator’s determinations and the treatment of Key Persons and grantees and their beneficiaries under the Plan need not be uniform and may be made and determined by the Administrator selectively among persons who receive, or who are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Administrator shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Award Agreements, as to (a) the persons to receive Awards under the Plan, (b) the types of Awards granted under the Plan, (c) the number of shares to be covered by, or with respect to which payments, rights or other matters are to be calculated with respect to, Awards and (d) the terms and conditions of Awards.

3.10.  Other Payments or Awards

Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.

3.11.  Headings

Any section, subsection, paragraph or other subdivision headings contained herein are for the purpose of convenience only and are not intended to expand, limit or otherwise define the contents of such subdivisions.

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3.12.  Effective Date and Term of Plan

(a) Adoption; Stockholder Approval. The Plan was adopted by the Board on January 16, 2008. The Board may, but need not, make the granting of any Awards under the Plan subject to the approval of the Company’s stockholders.

(b) Termination of Plan. The Board may terminate the Plan at any time. All Awards made under the Plan prior to its termination shall remain in effect until such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Award Agreements. No Awards may be granted under the Plan following the tenth anniversary of the date on which the Plan was adopted by the Board.

3.13.  Restriction on Issuance of Stock Pursuant to Awards

The Company shall not permit any shares of Common Stock to be issued pursuant to Awards granted under the Plan unless such shares of Common Stock are fully paid and non-assessable under applicable law. Notwithstanding anything to the contrary in the Plan or any Award Agreement, at the time of the exercise of any Award, at the time of vesting of any Award, at the time of payment of shares of Common Stock in exchange for, or in cancellation of, any Award, or at the time of grant of any unrestricted shares under the Plan, the Company and the Administrator may, if either shall deem it necessary or advisable for any reason, require the holder of an Award (a) to represent in writing to the Company that it is the Award holder’s then-intention to acquire the shares with respect to which the Award is granted for investment and not with a view to the distribution thereof or (b) to postpone the date of exercise until such time as the Company has available for delivery to the Award holder a prospectus meeting the requirements of all applicable securities laws; and no shares shall be issued or transferred in connection with any Award unless and until all legal requirements applicable to the issuance or transfer of such shares have been complied with to the satisfaction of the Company and the Administrator. The Company and the Administrator shall have the right to condition any issuance of shares to any Award holder hereunder on such person’s undertaking in writing to comply with such restrictions on the subsequent transfer of such shares as the Company or the Administrator shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and all share certificates delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Company or the Administrator may deem advisable under the Plan, the applicable Award Agreement or the rules, regulations and other requirements of the SEC, any stock exchange upon which such shares are listed, and any applicable securities or other laws, and certificates representing such shares may contain a legend to reflect any such restrictions. The Administrator may refuse to issue or transfer any shares or other consideration under an Award if it determines that the issuance or transfer of such shares or other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the 1934 Act, and any payment tendered to the Company by a grantee or other Award holder in connection with the exercise of such Award shall be promptly refunded to the relevant grantee or other Award holder. Without limiting the generality of the foregoing, no Award granted under the Plan shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Administrator has determined that any such offer, if made, would be in compliance with all applicable requirements of any applicable securities laws.

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3.14.  Requirement of Notification of Election Under Section 83(b) of the Code

If an Award recipient, in connection with the acquisition of Company shares under the Plan, makes an election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code), the grantee shall notify the Administrator of such election within ten days of filing notice of the election with the U.S. Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code.

3.15.  Severability

If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Administrator, such provision shall be construed or deemed amended to conform to the applicable laws or, if it cannot be construed or deemed amended without, in the determination of the Administrator, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

3.16.  Governing Law

The Plan will be construed and administered in accordance with the laws of the State of New York, without giving effect to principles of conflict of laws.

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EX-4.5

Exhibit 4.5

SUPPLEMENTAL LETTER

To: DryShips Inc.

Trust Company Complex

Ajeltake Road

Ajeltake Island

Majuro

The Marshall Islands MH 96960

From: HSH Nordbank AG

Gerhart-Hauptmann-Platz 50

D-20095 Hamburg

Germany

Dear Sirs

1.	Background.	15 May 2006
(A)	By a loan agreement (“the Senior Loan Agreement”) dated 31 March 2006 and made between (i) DryShips Inc. as borrower (the “Borrower”), (ii) the banks and financial institutions listed therein as lenders (the “Senior Lenders”), (iii) the banks and financial institutions listed therein as swap banks, (iv) ourselves as agent, lead arranger, lead bookrunner and security trustee, (v) ourselves and The Governor and Company of the Bank, of Scotland (“BOS”) as joint underwriters and (vi) BOS as joint bookrunner, it was agreed that the Senior Lenders would make available to the Borrower a term loan and short-term credit facilities of up to US $518,750,000 (the “Senior Loan”) in aggregate.
(B)	By a loan agreement (the “Junior Loan Agreement”) dated 31 March 2006 and made between (i) the Borrower, (ii) the banks and financial institutions listed therein as lenders (the “Junior Lenders” and together with the Senior Lenders, the “Lenders”), (iii) the banks and financial institutions listed therein as swap banks, (iv) ourselves as agent, lead arranger, lead bookrunner and security trustee and (v) BOS as joint bookrunner it was agreed that the Junior Lenders would-make available to the Borrower a term loan and short-term credit facilities of up to US$ 110,000,000 (the “Junior Loan”) in aggregate.
(C)	The Borrower has requested to drawdown an amount of US$26,512,500 representing 79.38 per cent. of the Market Value of vessel “ATACAMA” (tbr “MAGANARI”) (the “Ship”) to part-finance the acquisition of the Ship, which is one of the Additional Ships referred to in each of the Senior Loan Agreement and the Junior Loan Agreement (together, the “Loan Agreements” and each a “Loan Agreement”). Under the terms of the Loan Agreements the amount of the Additional Advances which may be made available under the Loan Agreements to finance the acquisition of an Additional Ship may not exceed 75 per cent. of the Market Value of that Additional Ship.
	Words and expressions defined in the Loan Agreements shall have the same meanings when used in this Letter unless otherwise defined or unless the context otherwise requires.

2.	Agreement and Amendments to the Senior Loan Agreement and the Junior Loan Agreement. Subject to the satisfaction of the conditions of this Letter and your agreement to repay the Additional Advances which shall be used to finance the Additional Ship in the manner referred to in the Schedule to this Letter, we (in our capacity as Agent for the Lenders) agree to give our consent to your request. We also hereby confirm and agree that the terms of Clauses 8.1(a) (u) and 8.1 (b) of each Loan Agreement (dealing with the Repayment Instalments and Balloon Instalments of the Additional Advances), shall not apply to each Additional Advance in respect of the Ship and each such Additional Advance shall be repaid in accordance with the Schedule to this Letter. Clauses 8.1(a)(ii) and 8.1(b) of each Loan Agreement shall, as they relate to the Repayment Instalments and Balloon Instalments and the Balloon Instalment for each Additional Advance in respect of that Ship, be read and construed accordingly.
3.	Representations and Warranties. The Borrower hereby represents and warrants to the Lenders that;
(a)	the representations and warranties contained in each Loan Agreement are true and correct on the date of this Letter as if all references therein to “this Agreement” were references to each of the Senior Loan Agreement and the Junior Loan Agreement as supplemented by this Letter; and
(b)	this Letter comprises the legal, valid and binding obligations of the Borrower enforceable in accordance with its terms.
4.	Conditions. Our agreement contained in paragraph 2 of this Letter shall be expressly subject to the condition that each Additional Advance in respect of the Ship will be repaid in the form set out in the Schedule hereto and that we shall have received in form and substance as may be approved or required by us on or before the signature hereof:
(a)	copies of resolutions passed at a meeting of the board of directors of the Borrower evidencing approval of this Letter and authorising appropriate officers or attorneys to execute the same;
(b)	the original of any power of attorney issued in favour of any person executing this Letter on behalf of the Borrower; and
(c)	copies of all governmental and other consents, licences, approvals and authorisations as may be necessary to authorise the performance by the Borrower of its obligations under this Letter and the execution, validity and enforceability of this Letter.
5.	Senior Loan Agreement, Junior Loan Agreement and Finance Documents. The Borrower hereby agrees with the Lenders that the provisions of each Loan Agreement and the Finance Documents shall be and are hereby re-affirmed and remain in full force and effect.
6.	Notices. Clause 28 (Notices) of each Loan Agreement shall extend and apply to this Letter as if the same were (mutatis mutandis) herein expressly set forth.
7.	Governing Law. This Letter shall be governed by and construed in accordance with English law and Clause 30 (Law and Jurisdiction) of each Loan Agreement shall extend and apply to this Letter as if the same were (mutatis mutandis) herein expressly set forth.

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Please confirm your acceptance to the foregoing terms and conditions by signing the acceptance at the foot of this letter.

Yours faithfully

/s/ George Paleoklassas

for and on behalf of

HSH NORDBANK AG

Accepted and agreed

/s/ Eugenia Papapontikou

for and on behalf of

DRYSHIPS INC.

Dated 15 May 2006

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EX-4.14

Exhibit 4.14

Date 17 November 2009

DRYSHIPS INC.

as Borrower

- and -

THE BANKS AND FINANCIAL INSTITUTIONS

listed in Part A of Schedule 1

as Lenders

- and -

HSH NORDBANK AG

as Agent and Security Trustee

- and -

HSH NORDBANK AG

as Lead Arranger and Lead Bookrunner

- and -

BANK OF SCOTLAND PLC

as Joint Bookrunner

-and-

THE BANKS AND FINANCIAL INSTITUTIONS

listed at Part B of Schedule 1

as Swap Banks

SUPPLEMENTAL AGREEMENT

relating to relating to a term loan and short-term credit facilities

of (originally) US$110,000,000 in aggregate

WATSON, FARLEY & WILLIAMS

Piraeus

INDEX

Clause		Page
1	INTERPRETATION	2
2	AGREEMENT OF THE CREDITOR PARTIES	3
3	CONDITIONS PRECEDENT	3
4	REPRESENTATIONS AND WARRANTIES	4
5	AMENDMENTS TO LOAN AGREEMENT AND OTHER FINANCE DOCUMENTS	4
6	FURTHER ASSURANCES	14
7	FEES AND EXPENSES	15
8	COMMUNICATIONS	15
9	SUPPLEMENTAL	15
10	LAW AND JURISDICTION	15
SCHEDULE 1 PART A		17
LENDERS		17
PART B		17
SWAP BANKS		17
SCHEDULE 2 LIST OF SHIPS		18
EXECUTION PAGES		19

THIS AGREEMENT is made on          November 2009

BETWEEN

(1) DRYSHIPS INC. a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, The Marshall Islands MH 96960 as Borrower;

(2) THE BANKS AND FINANCIAL INSTITUTIONS listed in Part A of Schedule 1, as Lenders;

(3) HSH NORDBANK AG acting through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany, as Agent;

(4) HSH NORDBANK AG acting through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany, as Security Trustee;

(5) HSH NORDBANK AG acting through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany, as Lead Arranger and as Lead Bookrunner;

(6) BANK OF SCOTLAND PLC acting through its office at Pentland House, 8 Lochside Avenue, Edinburgh EH12 9DJ, Scotland, as Joint Bookrunner; and

(7) THE BANKS AND FINANCIAL INSTITUTIONS listed in Part B of Schedule 1, as Swap Banks.

BACKGROUND

(A) By a loan agreement dated 31 March 2006 (as supplemented, amended and restated from time to time, the “Loan Agreement”) and made between (i) the Borrower, (ii) the Lenders, (iii) the Agent, (iv) the Security Trustee, (v) the Lead Arranger, (vi) the Lead Bookrunner, (vii) the Joint Bookrunner and (viii) the Swap Banks, the Lenders agreed to make available to the Borrower both term loan and short-term credit facilities of (originally) up to US$110,000,000 in aggregate.

(B) The Borrower has made a request to the Agent that the Majority Lenders or, as the case may be, that the Lenders give their consent to (inter alia):

(i) reduce the security cover requirements referred to in clause 15.1 of the Loan Agreement during the Waiver Period;

(ii) certain amendments to the financial and corporate undertakings (including, without limitation the Borrower’s charter coverage obligations) set out in clauses 12.4 and 12.10 of the Loan Agreement during the Waiver Period;

(iii) certain amendments to an event of default set out in clause 19.1(1) of the Loan Agreement during the Waiver Period; and

(iv) the amendment and/or variation of certain other provisions of the Loan Agreement.

(C) The Lenders’ consent to the Borrower’s requests referred to in Recital (B) are subject to, inter alia, the following conditions:

(i) the Margin increasing to 3.00 per cent, per annum during the Waiver Period;

(ii) restricting the payment of cash dividends during the Waiver Period;

(iii) maintaining (aa) freely available cash and bank balances in an aggregate amount of at least $35,000,000 during the Waiver Period and (bb) the Applicable Amount (as defined below); and

(iv) upon the request of the Lenders, disclose material information in connection with all material transactions involving the Borrower or any other member of the Group with regard to any existing and future facilities with other banks and financial institutions and the waiver of any covenants or other terms applicable to such financings.

(D) This Agreement sets out the terms and conditions on which the Creditor Parties agree, with effect on and from the Effective Date, to amend the Loan Agreement.

IT IS AGREED as follows:

1 INTERPRETATION

1.1 Defined expressions. Words and expressions defined in the Loan Agreement and the other Finance Documents shall have the same meanings when used in this Agreement unless the context otherwise requires.

1.2 Definitions. In this Agreement, unless the contrary intention appears:

“Applicable Amount Account” means an account in the name of the Borrower with the Agent in Hamburg designated “Dryships Inc. - Applicable Amount Account” or any other account (with that or another office of the Agent) which is designated by the Agent as the Applicable Amount Account for the purposes of the Loan Agreement;

“Applicable Amount Account Pledge” means a pledge agreement creating security in favour of the Creditor Parties in respect of the Applicable Amount Account in such form as the Lenders may approve or require;

“Loan Agreement” means the loan agreement dated 31 March 2006 (as supplemented, amended and restated from time to time) referred to in Recital (A);

“Third Mortgage Amendment” means, in relation to each Mortgage, the third amendment to such Mortgage, to be in such form and on such terms as may be acceptable to the Lenders and, in the plural, means all of them; and

“Waiver Period” means the period commencing on 22 December 2008 (inclusive) and ending on 30 September 2010 (inclusive) or earlier if the Agent (acting with the consent of the Majority Lenders, which they shall be entitled to give or withhold in their sole and absolute discretion) is satisfied that the Borrower is in full compliance with all covenants set out in the Loan Agreement.

1.3 Application of construction and interpretation provisions of Loan Agreement. Clauses 1.2 and 1.5 of the Loan Agreement apply, with any necessary modifications, to this Agreement.

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2 AGREEMENT OF THE CREDITOR PARTIES

2.1 Agreement of the Lenders. The Lenders agree, subject to and upon the terms and conditions of this Agreement.

2.2 Agreement of the Creditor Parties. The Creditor Parties agree, subject to and upon the terms and conditions of this Agreement, to the consequential amendment of the Loan Agreement and the other Finance Documents in connection with the matters referred to in Clause 2.1.

2.3 Effective Date. The agreement of the Lenders and the other Creditor Parties contained in Clauses 2.1 and 2.2 shall have effect on and from the Effective Date.

3 CONDITIONS PRECEDENT

3.1 General. The agreement of the Lenders and the other Creditor Parties contained in Clauses 2.1 and 2.2 is subject to the fulfilment of the conditions precedent in Clause 3.2.

3.2 Conditions precedent. The conditions referred to in Clause 3.1 are that the Agent shall have received the following documents and evidence in all respects in form and substance satisfactory to the Agent and its lawyers on or before the Effective Date:

(a) documents of the kind specified in Schedule 5, Part A, paragraphs 3, 4 and 5 of the Loan Agreement in relation to the Borrower and each Owner in connection with their execution of this Agreement, the relevant Third Mortgage Amendment and the Applicable Amount Account Pledge, updated with appropriate modifications to refer to this Agreement;

(b) an original of this Agreement duly executed by the parties to it and counter-signed by each of the Owners of the Ships listed in Schedule 2 hereto;

(c) in respect of each of the Ships listed in Schedule 2, the original Third Mortgage Amendment in respect of the Mortgage for that Ship duly signed by the relevant Owner and evidence satisfactory to the Agent and its lawyers that the same has been registered as a valid addendum to the relevant Mortgage in accordance with the laws of Malta;

(d) evidence that the Applicable Amount Account has been opened with the Agent and all mandate forms, documentation required by each Creditor Party in relation to the Borrower and any Security Party pursuant to that Creditor Party’s “know your customer” requirements have been received;

(e) a duly executed original of the Applicable Amount Account Pledge;

(f) evidence that the aggregate of the balances standing to the credit of the Applicable Amount Account and the Debt Service Reserve Account (excluding the amount held in the Applicable Amount Account referred to in paragraph (g) below which is to be transferred thereto) is at least $30,000,000;

(g) evidence that the Available Free Cash Flow in respect of the period commencing on 1 April 2009 and ending on the date of this Agreement has been paid to the Applicable Amount Account;

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(h) favourable opinions from lawyers appointed by the Agent on such matters concerning the laws of Marshall Islands and Malta and such other relevant jurisdictions as the Agent may require; and

(i) the fees referred to in Clause 7 of this Agreement have been received in full by the Agent.

4 REPRESENTATIONS AND WARRANTIES

4.1 Repetition of Loan Agreement representations and warranties. The Borrower represents and warrants to the Creditor Parties that the representations and warranties in clause 10 of the Loan Agreement remain true and not misleading if repeated on the date of this Agreement.

4.2 Repetition of Finance Document representations and warranties. The Borrower and each of the other Security Parties represents and warrants to the Creditor Parties that the representations and warranties in the Finance Documents (other than the Loan Agreement) to which it is a party remain true and not misleading if repeated on the date of this Agreement.

5 AMENDMENTS TO LOAN AGREEMENT AND OTHER FINANCE DOCUMENTS

5.1 Specific amendments to Loan Agreement. With effect on and from the Effective Date the Loan Agreement shall be amended as follows:

(a) by inserting in clause 1.2 thereof the definitions of “Applicable Amount Account”, “Applicable Amount Account Pledge”, “Third Mortgage Amendment” and “Waiver Period” set out in Clause 1.2 of this Supplemental Agreement;

(b) by inserting the following new definitions in clause 1.2 thereof:

““Available Free Cash Flow” means, in relation to each 3-month period (commencing with the 3-month period starting on 1 April 2009), the amount (calculated by the Agent in its sole discretion) by which:

(a) the aggregate Earnings of all the Ships subject to a Mortgage during that 3-month period exceed;

(b) the aggregate of:

(i) the operating expenses (including any dry-docking, general and administrative expenses) paid by the Borrower and the Owners in respect of the Ships during that 3-month period; and

(ii) the aggregate amount of principal in respect of, and interest on, and any swap payments relative to, each of the Loan and the Junior Loan payable pursuant to each of this Agreement and the Junior Loan Agreement during that 3-month period;

“Contract Price” means, in relation to a Permitted Ship, the aggregate amount payable by the buyer thereof or, as the case may be, the Borrower to Samsung pursuant to the relevant Permitted Shipbuilding Contract;

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“CSTC” means China Shipbuilding Trading Company Limited, a company organised under the laws of the People’s Republic of China and having its registered office at Fangynon Mansion, 56(Yi), Zhongguancun Nandajie, Beijing, 100044, the People’s Republic of China;

“Debt Service Amount” has the meaning given to it in Clause 11.23(a)(i)(B);

“Debt Service Amount Account” has the meaning given to it in Clause 11.23(a)(i)(B);

“Delivery Date” means, in relation to each Permitted Ship, the date on which title to and possession of that Ship is transferred to the relevant buyer;

“Deutsche Bank Borrowers” means Drillships Skopelos Owners Inc and Drillships Kithira Owners Inc, and in the singular means either of them;

“Deutsche Bank Loan Agreements” means, together:

(a) the loan agreement dated 18 July 2008 (as amended and supplemented from time to time) made between (i) Drillships Skopelos Owners Inc as borrower, (ii) the banks and financial institutions listed as lenders therein, (iii) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch as swap banks, (iv) Deutsche Bank Luxembourg SA as facility agent, (v) Deutsche Bank AG Filiale Deutschlandgeschaft as security trustee, (vi) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch joint mandated lead arrangers and (vii) Deutsche Bank AG, London as bookrunner; and

(b) the loan agreement dated 18 July 2008 (as amended and supplemented from time to time) made between (i) Drillships Kithira Owners Inc as borrower, (ii) the banks and financial institutions listed as lenders therein, (iii) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch as swap banks, (iv) Deutsche Bank Luxembourg SA as facility agent, (v) Deutsche Bank AG Filiale Deutschlandgeschaft as security trustee, (vi) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch joint mandated lead arrangers and (vii) Deutsche Bank AG, London as bookrunner,

and, in the singular, means either of them;

“Drybulk” means, Drybulk S.A., a company incorporated under the laws of the Republic of Liberia, having its registered office at 80 Broad Street, Monrovia, Liberia and having an office established in Greece (under Greek Law 89/1967 as amended) at 80 Kifissias Avenue, Maroussi, Greece;

“Effective Date” means the date on which the conditions precedent in Clause 3 are satisfied;

“Hudong” means Hudong-Zhonghua Shipbuilding (Group) Co. Ltd. a company organised under the laws of the People’s Republic of China with registered office at Pudong Dadao 2851, Shanghai 200129,29 the People’s Republic of China;

“Hull 1837” means the drillship currently under construction by Samsung pursuant to the Hull 1837 Shipbuilding Contract which is scheduled to be delivered in December 2010;

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“Hull 1838” means the drillship currently under construction by Samsung pursuant to the Hull 1838 Shipbuilding Contract which is scheduled to be delivered in March 2011;

“Hull 1865” means the drillship currently under construction by Samsung pursuant to the Hull 1865 Shipbuilding Contract which is scheduled to be delivered in July 2011;

“Hull 1866” means the drillship currently under construction by Samsung pursuant to the Hull 1866 Shipbuilding Contract which is scheduled to be delivered in September 2011;

“Hull 1837 Shipbuilding Contract” means the shipbuilding contract dated 17 September 2007 (as the same may be amended and supplemented from time to time) and executed between Drillship Hydra Owners Inc. and Samsung;

“Hull 1838 Shipbuilding Contract” means the shipbuilding contract dated 17 September 2007 (as the same may be amended and supplemented from time to time) and executed between Drillship Paros Owners Inc, and Samsung;

“Hull 1865 Shipbuilding Contract” means the shipbuilding contract dated 24 January 2008 (as the same may be amended and supplemented from time to time) and executed between Drillship Kithira Owners Inc. and Samsung;

“Hull 1866 Shipbuilding Contract” means the shipbuilding contract dated 24 January 2008 (as the same may be amended and supplemented from time to time) and executed between Drillship Skopelos Owners Inc. and Samsung;

“New Investment” means any investment which is made by the Borrower pursuant to Clause 11.23(b);

“OLIVA” means the panamax bulk carrier of approximately 75,200 metric tons deadweight, currently registered under the laws of Malta with Official Number 9413705 in the name of Monteagle Shipping SA;

“Permitted Investment” means any investment permitted to be made by the Borrower pursuant to Clause 11.23(a);

“Permitted Shipbuilding Contracts” means, together, the Hull 1837 Shipbuilding Contract, the Hull 1838 Shipbuilding Contract, the Hull 1865 Shipbuilding Contract and the Hull 1866 Shipbuilding Contract and, in the singular, means any of them;

“Permitted Ships” means, together, Hull 1837, Hull 1838, Hull 1865, Hull 1866, OLIVA and RAPALLO and, in the singular means, any of them;

“RAPALLO” means the Panamax bulk carrier of approximately 75,123 metric tons deadweight, currently registered under the laws of Malta with Official Number 9413690 in the name of Roscoe Marine Ltd.;

“Samsung” means Samsung Heavy Industries Co. Ltd. a company organised under the laws of Korea with registered office at 34th floor, Samsung Life Insurance Seocho Tower 1321-15, Seocho-Dong, Seocho-Gu, Seoul, Korea;

(c) by deleting the definition of “Margin” in Clause 1.2 thereof in its entirety and replacing it with the following:

““Margin” means:

(a) during the Waiver Period, 3.00 per cent, per annum; and

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(b) any time thereafter when the Market Adjusted Equity Ratio is (as determined by the Agent on each Compliance Date by reference to the compliance certificate delivered to the Agent in accordance with Clause 12.5):

(i) equal to or more than 0.55:1, 2.20 per cent, per annum;

(ii) at least equal to 0.45:1 but less than 0.55.1, 2.43 per cent per annum; and

(iii) less than 0.45:1, 2.53 per cent per annum;”;

(d) by deleting Clause 11.3 thereof in its entirety and replacing it with the following:

“11.3 No disposal of assets. The Borrower will not:

(a) transfer, lease or otherwise dispose of all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not; or

(b) transfer, lease or otherwise dispose of any debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation,

Provided that the Borrower may make any transfer, lease or other disposal referred to in this Clause 11.3 made on normal arm’s length terms if following such transfer, lease or other disposal it shall be able to comply with all the financial covenants referred to in Clause 12.4 and no Event of Default or Potential Event of Default shall arise; and

(c) spin-off or otherwise dispose of the offshore business of the Group unless:

(i) following such spin-off or disposal of the offshore business, the Agent is satisfied that the Borrower and all other members of the Group shall maintain in immediately freely available and unencumbered (save for any Security Interest created in favour of the Creditor Parties pursuant to this Agreement) bank or cash balances equal to at least $80,000,000 in aggregate (including, without limitation, the Applicable Amount); and

(ii) by no later than the Cut Off Date relative to each of Hull 1865 and Hull 1866, it has delivered to the Agent evidence that such Permitted Ship is subject to an Approved Contract of Employment commencing from the actual delivery date of the relevant Permitted Ship; and

(iii) it provides satisfactory evidence to the Agent that it has been released from all its obligations relating to the offshore business of the Group (other than any obligations it has pursuant to two guarantees each dated 18 July 2008 and executed by the Borrower as security for the obligations of the Deutsche Bank Borrowers under the Deutsche Bank Loan Agreements); and

(iv) it satisfies the Agent that the Spin Off will not cause any material adverse change in the financial position, state of affairs or prospects of the Borrower or the Group; and

(v) it satisfies the Agent that it is using its best endeavours to be released from the guarantees referred to in paragraph (iii) above.

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In this Clause 11.3(b) the following terms will have the following meanings:

“Approved Contract of Employment” means, in respect of each of Hull 1865 and Hull 1866, a contract of employment in respect of that Permitted Ship for at least 24 months in duration (commencing from the delivery date of the relevant Permitted Ship) at a hire rate which, when aggregated for the first 24 months of the duration thereof will be in an amount of at least equal to the aggregate of the (a) operating expenses and (b) debt service costs of that Permitted Ship for the first 24 months of the duration of that contract of employment.

“Cut Off Date” means, in respect of each of Hull 1865 and Hull 1866, the date falling 6 months prior to the scheduled delivery date of that Permitted Ship;

“Spin Off” means any reorganisation, spin-off, re-domiciliation or transfer of ownership in respect of any corporate entity whose business primarily consists of activities in the oil, gas and off shore sector.”;

(e) by adding a new paragraph (e) in Clause 11.4 thereof as follows:

“(e) in respect of any (i) Permitted Investments and (ii) New Investments, made in accordance with Clause 11.23 (in both cases only if made during the Waiver Period);”

(f) by adding in clause 11.20 thereof after “$5,000,000”, the following:

“(or, at all times during the Waiver Period, $10,000,000)”;

(g) by adding a new Clause 11.23 in the Loan Agreement as follows:

“11.23 Permitted Investments and New Investments. The Borrower may, at any time during the Waiver Period, incur liabilities and obligations in respect of:

(a) the Permitted Shipbuilding Contracts subject to the following conditions:

(i) in the case of each of the Hull 1837 Shipbuilding Contract and the Hull 1838 Shipbuilding Contract, if the Borrower provides the Agent:

(A) with satisfactory evidence by no later than each Due Date that the buyer of the relevant Permitted Ship or, as the case may be, the Borrower has sufficient funds to fully finance (either by means of Financial Indebtedness or through the use of equity (or a contribution of the two)) the Applicable Instalment; and

(B) not later than the date falling 6 months prior to the scheduled Delivery Date of the relevant Permitted Ship, a contract of employment in respect of that Permitted Ship of at least 36 months in duration (commencing from the Delivery Date in respect of the Permitted Ship) and for a daily hire rate which when aggregated for the entire duration of that contract shall be at least equal to the amount which the buyer of that Permitted Ship or, as the case may be, the Borrower will be required to repay during the same period under any loan agreement (including any applicable interest thereon) (the “Debt Service Amount”) which that buyer or, as the case may be, the Borrower may enter into for the purpose of financing the Contract Price of that Permitted Ship Provided that the Borrower may incur liabilities and obligations in respect of the relevant Shipbuilding Contract referred to in this

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Clause 11.23(a)(i) even if the Permitted Ship which is the subject of that Shipbuilding Contract is not subject to a contract of employment of at least 36 months in duration (commencing from the Delivery Date in respect thereof) if the Borrower provides the Agent with evidence that the net Earnings under the contract of employment will be sufficient to satisfy in full the Debt Service Amount and the buyer of the Permitted Ship or, as the case may be, the Borrower maintains a separate account with the bank or financial institution financing that Permitted Ship (the “Debt Service Amount Account”). The buyer of the Permitted Ship or, as the case may be, the Borrower shall pay to the Debt Service Amount Account every 3 months during the term of the contract of employment (commencing 3 months after the Delivery Date in respect of the Permitted Ship) an amount, which when aggregated with all other transfers to be made to the Debt Service Amount Account during the term of contract of employment, will be sufficient to pay in full the balance of the Debt Service Amount between the date on which the contract of employment expires or is terminated and the date falling 36 months after the Delivery Date in respect of the Permitted Ship and the Borrower undertakes that such amount shall only be used in repaying principal on, and interest in respect of, the facility used to finance the Contract Price in respect of the Permitted Ship. The Borrower shall, promptly following a request of the Agent, provide the Agent with a statement in respect of the Debt Service Amount Account showing the balance standing to the credit of that account and which indicates compliance with the provisions of this Clause 11.23(a)(i)(B).

If a subsequent contract of employment is entered into in respect of the Permitted Ship and the Borrower is able to satisfy the Agent that the net Earnings under that contract of employment will be sufficient to pay in full the balance of the Debt Service Amount between the date on which that contract of employment takes effect and the date falling 36 months after the delivery date in respect of the Permitted Ship the Borrower or, as the case may be, the buyer of the Permitted Ship may, by notice to the Agent, withdraw monies standing to the credit of the Debt Service Amount Account and all the obligations of the Borrower or as the case may be, the buyer of the Permitted Ship to make transfers to the Debt Service Amount Account will cease to apply; and

(b) any other New Investment which the Borrower and/or the Group may make subject to the satisfaction of the following conditions:

(i) the equity portion of any such investment shall have been raised from proceeds of any equity offering by the Borrower;

(ii) the Borrower and all other members of the Group maintain at the time of such investment an aggregate amount of not less than $80,000,000 in immediately freely available and unencumbered (save for any Security Interests created in favour of the Creditor Parties pursuant to this Agreement) bank or cash balances (including, without limitation, the Applicable Amount (as that term is defined in Clause 12.4(d)); and

(iii) any such investments shall be made on normal arms’ length terms and on terms consistent with the conditions applying in the applicable market at the relevant time.

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In this Clause 11.23, the following terms shall have the following meaning:

“Applicable Instalment” means:

(a) in the case of Hull 1837, an amount equal to:

(i) $100,773,300 (the “1837 Third Instalment”);

(ii) $110,422,472 (the “1837 Fourth Instalment”); and

(iii) $291,881,013 (the “1837 Fifth Instalment”); and

(b) in the case of Hull 1838, an amount equal:

(i) $100,773,300 (the “1838 Third Instalment”); or

(ii) $110,422,472 (the “1838 Fourth Instalment” and, together with the 1837 Fourth Instalment the “Fourth Instalments” and each a “Fourth Instalment”); and

(iii) $288,874,107 (the “1838 Fifth Instalment” and, together with the 1838 Fifth Instalment, the “Fifth Instalments” and each a “Fifth Instalment”),

being in each case, the third, fourth and fifth instalments, respectively, payable by the buyer of the relevant Permitted Ship or, as the case may be, the Borrower pursuant to the Permitted Shipbuilding Contract relative to that Permitted Ship.

“Due Date” means in relation to:

(a) the 1837 Third Instalment, 20 July 2009;

(b) the 1837 Fourth Instalment, within 3 Business Days after the date of receipt of Samsung’s invoice and notice certifying that keel laying of Hull 1837 has commenced (which is currently expected to take place during February 2010) but in any event not earlier than the date falling 4 months after the date on which the 1837 Third Instalment is actually paid;

(c) the 1837 Fifth Instalment, 15 September 2010;

(d) the 1838 Third Instalment, within 3 Business Days after the date of receipt of Samsung’s invoice and notice certifying that steel cutting of Hull 1838 has commenced (which is currently expected to take place during October 2009) but in any event not earlier than the date falling 19 months after the date on which the 1838 Second Instalment is actually paid;

(e) the 1838 Fourth Instalment, within 3 Business Days after the date of receipt of Samsung’s invoice and notice certifying that keel laying of Hull 1838 has commenced (which is currently expected to take place during June 2010) but in any event not earlier than the date falling 4 months after the date on which the 1838 Third Instalment is actually paid; and

(f) the 1838 Fifth Instalment, 15 December 2010,

being, in each case, the date on which each Third and Fourth Instalment and the date falling approximately three months before the Fifth Instalment of the Contract Price of each such Permitted Ship is payable pursuant to the Permitted Shipbuilding Contract relative thereto.

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If the Borrower or, as the case may be the buyers of Hull 1837 or Hull 1838, agree with the Builder to defer the Due Dates in respect of the Fourth Instalments and the Fifth Instalments (or any of them), the Borrower shall advise the Agent of such deferral and the new due dates by not later than 3 Business Days prior to the original Due Date of each such Instalment (and all references thereafter in this Clause 11.23 to the Due Date of each Instalment which is deferred shall mean the date on which such Instalment shall be payable following such agreement with the Builder to defer its payment).”;

(h) by adding new clauses 11.24, 11.25 and 11.26 in the Loan Agreement as follows:

“11.24 New Shares. The Borrower shall ensure that Drybulk will not transfer, sell or otherwise dispose of any shares of the Borrower issued to it in the manner contemplated in Clause 19.1(1) until the end of the Security Period.

11.25 Disclosure of material information. The Borrower shall promptly upon the request of the Agent (acting upon the instructions of the Majority Lenders) supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent in respect of:

(a) any Financial Indebtedness, liabilities or obligations incurred or to be incurred by the Borrower or any other member of the Group; and

(b) any material information in connection with all material transactions involving the Borrower or any other member of the Group, with regard to all existing and future facilities with banks and financial institutions or the waiver of any covenants or other terms applicable thereto.

11.26 Available Free Cash Flow. As soon as possible, but in no event later than 10 Business Days after the end of each 3-month period referred to in Clause 12.4(d), reports detailing any information required by the Agent in connection with the Ships so that it may calculate the Available Free Cash Flow for that 3-month period.”;

(i) by adding at the beginning of Clause 12.3(b) thereof the words “(i) during the Waiver Period, declare or pay any dividend or effect any other form of distribution and (ii) at all times thereafter,”;

(j) by adding at the end of Clause 12.3(c) thereof the words “(including, without limitation, the purchase of shares in the Borrower);”;

(k) by deleting Clause 12.4(a) thereof in its entirety and replacing the same with the following:

“(a) the Market Adjusted Equity Ratio shall not be less than, during the period commencing:

(i) on 22 December 2008 and ending on 30 June 2009, 0.00:0;

(ii) on 1 July 2009 and ending on 30 September 2010, 0.15:1 Provided that the Borrower will be in compliance with the provisions of this Clause 12.4 (a) if the Market Adjusted Equity Ratio falls to not less than 0.05:1 and (A) the Agent (acting upon the instructions of the Majority Lenders) considers that such fall in the Market Adjusted Equity Ratio has resulted from a reduction in the Market Value of the Fleet Vessels (including, without limitation, any drillships owned or ordered by members of the Group) or the mark-to-market position of any swap and other derivative transactions entered into by the Borrower and other members of the Group, and (B) the Agent re-calculates the Market Adjusted Equity Ratio

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on the basis of the Market Values of the Fleet Vessels (including, without limitation, any drillships owned or ordered by members of the Group) and the mark-to-market position of all the swap and other derivative transactions referred to above as at 31 December 2008 and such recalculation results in the Market Adjusted Equity Ratio being at least 0.15:1;

(iii) on 1 October 2010 and ending on 31 December 2010, 0.40:1; and

(iv) in each subsequent Financial Year, 0.40:1,

Provided that during the Waiver Period, any new Financial Indebtedness incurred by the Borrower or the Group may only be used in (i) prepaying any Financial Indebtedness secured on the assets of the Group and (ii) financing any New Investments and any Permitted Investments subject to the Borrower’s equity contribution in each New Investments and each Permitted Investment being not less than 32.5 per cent, of that acquisition cost of that New Investment and or, as the case may be, that Permitted Investment;”;

(l) by deleting Clause 12.4(b) thereof in its entirety and substituting the same with:

“(b) the Interest Coverage Ratio shall not be less than:

(i) during the Waiver Period, 2:1; and

(ii) at all other times, 3:1;”;

(m) by deleting Clause 12.4(c) thereof in its entirety and replacing the same with the following:

“(c) the Market Value Adjusted Net Worth of the Group shall not be less than, during:

(i) the period commencing:

(A) on 22 December 2008 and ending on 30 June 2009, $0;

(B) on 1 July 2009 and ending on 31 December 2009, $100,000,000;

(C) on 1 January 2010 and ending on 30 September 2010, the aggregate of (A) $150,000,000 and (B) the aggregate amount of the Net Income appearing in the Applicable Accounts in respect of the first three financial quarters in the Financial Year ending on 31 December 2010.”;

(D) in the financial quarter commencing on 1 October 2010, $800,000,000; and

(E) at all times thereafter, $1,000,000,000”;

(n) by deleting Clause 12.4(d) thereof in its entirety and replacing it with the following:

“(d) subject to Clause 12.10, there is available to the Borrower and all the other members of the Group in immediately freely available and unencumbered bank or cash balances an aggregate amount of:

(i) during the Waiver Period, the aggregate of (A) $35,000,000 and (B) the Applicable Amount (with the Applicable Amount (other than any Available Free Cash Flow which has not yet been transferred to the

12

Applicable Amount Account pursuant to the terms of this Clause 12.4(d)) being held in the Applicable Amount Account and the Debt Service Reserve Account); and

(ii) at all other times, not less than $100,000,000 (including, without limitation, the Applicable Amount (which will be held in the Earnings Account, the Applicable Amount Account, the Debt Service Reserve Account and the Wealth Account)),

Provided that the Borrower shall ensure that any Available Free Cash Flow shall be transferred to the Applicable Amount Account within 10 Business Days of each Available Free Cash Flow Calculation Date (and the Borrower hereby irrevocably and unconditionally authorises the Agent to make such transfers subject to the Agent giving 2 days’ prior notice to the Borrower of the amount(s) to be transferred) during the period commencing as from 1 April 2009 and ending when the Applicable Amount is $55,000,000. The Available Free Cash Flow for the period commencing on 1 April 2009 and ending on the date of the supplemental agreement which amends and supplements this Agreement (including, without limitation, amendments to this Clause 12.4(d)) shall be transferred to the Applicable Amount Account on the date of execution of that supplemental agreement.

In this Clause 12.4(d) the following terms have the following meanings:

“Applicable Amount” means:

(i) subject to the foregoing provisions of this Clause 12.4(d), the lesser of (A) $55,000,000 and (B) the aggregate of $30,000,000 together with any Available Free Cash Flow; and

(ii) $55,000,000, at all other times;”

“Available Free Cash Flow Calculation Date” means 1 July 2009 and the dates falling every 3 months thereafter during the Available Free Cash Flow Calculation Period being the dates on which the Agent shall determine the Available Free Cash Flow for the 3-month period ending on that Available Free Cash Flow Calculation Date; and

“Available Free Cash Flow Calculation Period” means the period commencing on 1 April 2009 and ending on the earlier of (a) 30 September 2010 and (b) the date on which the Applicable Amount reaches $55,000,000”;

(o) by adding the words “(other than at any time during the Waiver Period)” after the date “1 January 2009” in the first line of clause 12.10 thereof;

(p) by adding in the third line at the end of sub-paragraph (b) in clause 15.1 thereof:

“and, additionally during the Waiver Period, the aggregate of the Applicable Amount and any part of the balance on the Retention Account which is to be applied towards the Repayment Instalment;”;

(q) by deleting the definition of “Relevant Percentage” at the end of clause 15.1 thereof and replacing it with the following:

““Relevant Percentage” means:

(i) during the Waiver Period, 80 per cent.; and

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(ii) 160 per cent, during the period commencing on the last financial quarter in the Financial Year of 2010 and ending 31 December 2011; and

(iii) 140 per cent., at all other times;

(r) by adding at the end of clause 19.1(1) thereof the following:

“save that such failure shall not constitute an Event of Default if (i) George Economou owns and controls throughout the Waiver Period at least the same number of shares in the Borrower as those owned and controlled by him on 1 January 2009 and (ii) any outstanding commission fees equal to the amount of $5,000,000 in aggregate (the “Outstanding Commissions”) payable by the Borrower to Drybulk in respect of any chartering and sale and purchase brokerage services performed by Drybulk shall be paid to Drybulk in the form of common shares in the Borrower's issued share capital (the “New Shares”) and not in cash during the period commencing on 1 April 2009 and ending on the later of (A) the last day of the Waiver Period and (B) the date on which Drybulk has received New Shares equal in aggregate value to the amount of the Outstanding Commissions (the value of each New Share shall be the average trading price of each of the Borrower's shares quoted on NASDAQ on the date on which any New Shares are issued to Drybulk)”.

5.2 Amendments to Finance Documents. With effect on and from the Effective Date each of the Finance Documents other than the Loan Agreement shall be, and shall be deemed by this Agreement to have been, amended as follows:

(a) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement and any of the other Finance Documents shall be construed as if the same referred to the Loan Agreement and those Finance Documents as amended and supplemented by this Agreement;

(b) by construing all references in the Loan Agreement and in the Finance Documents to “Mortgage” as references to the Mortgages as amended and supplemented by the Third Mortgage Amendment applicable thereto; and

(c) by construing references throughout each of the Finance Documents to “this Agreement”, “this Deed”, “hereunder and other like expressions as if the same referred to such Finance Documents as amended and supplemented by this Agreement.

5.3 Finance Documents to remain in full force and effect. The Finance Documents shall remain in full force and effect as amended and supplemented by:

(a) the amendments to the Finance Documents contained or referred to in Clauses 5.1 and 5.2; and

(b) such further or consequential modifications as may be necessary to give full effect to the terms of this Agreement.

6 FURTHER ASSURANCES

6.1 Borrower's and each Security Party's obligation to execute further documents etc. The Borrower and each Security Party shall:

(a) execute and deliver to the Security Trustee (or as it may direct) any assignment, mortgage, power of attorney, proxy or other document, governed by the law of England or such other country as the Security Trustee may, in any particular case, specify;

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(b) effect any registration or notarisation, give any notice or take any other step, which the Agent may, by notice to the Borrower, specify for any of the purposes described in Clause 6.2 or for any similar or related purpose.

6.2 Purposes of further assurances. Those purposes are:

(a) validity and effectively to create any Security Interest or right of any kind which the Security Trustee intended should be created by or pursuant to the Loan Agreement or any other Finance Document, each as amended and supplemented by this Agreement, and

(b) implementing the terms and provisions of this Agreement.

6.3 Terms of further assurances. The Security Trustee may specify the terms of any document to be executed by the Borrower or any Security Party under Clause 6.1, and those terms may include any covenants, powers and provisions which the Security Trustee considers appropriate to protect its interests.

6.4 Obligation to comply with notice. The Borrower or any Security Party shall comply with a notice under Clause 6.1 by the date specified in the notice.

7 FEES AND EXPENSES

7.1 Fee. On the date of this Agreement, the Borrower shall pay to the Agent certain facility fees set out in the letter addressed to the Agent from the Borrower and dated the same date as this Agreement.

7.2 Expenses. The provisions of clause 20 (fees and expenses) of the Loan Agreement shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.

8 COMMUNICATIONS

8.1 General. The provisions of clause 28 (notices) of the Loan Agreement, as amended and supplemented by this Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.

9 SUPPLEMENTAL

9.1 Counterparts. This Agreement may be executed in any number of counterparts.

9.2 Third Party rights. A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

10 LAW AND JURISDICTION

10.1 Governing law. This Agreement, including any non-contractual obligations arising out of or in connection with this Agreement, shall be governed by and construed in accordance with English law.

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10.2 Incorporation of the Loan Agreement provisions. The provisions of clause 30 (law and jurisdiction) of the Loan Agreement, as amended and supplemented by this Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.

THIS AGREEMENT has been duly executed as a Deed on the date stated at the beginning of this Agreement.

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SCHEDULE 1

PART A

LENDERS

Lender	Lending Office
HSH Nordbank AG	Gerhart-Hauptmann-Platz 50 D-20095 Hamburg Germany
Bank of Scotland plc	New Uberior House 11 Earl Grey Street Edinburgh EH3 9BN Scotland

PART B

SWAP BANKS

HSH Nordbank AG	Martensdamm 6 D-24103 Kiel Germany
Bank of Scotland plc (formerly known as HBOS Treasury Services Plc)	New Uberior House 11 Earl Grey Street Edinburgh EH3 9BN Scotland

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SCHEDULE 2

LIST OF SHIPS

Number	Name of vessel	Deadweight	Year Built
1	Manasota	171,061	2004
2	Alameda	170,662	2001
3	Mendocino	76,623	2002
4	Coronado	75,706	2000
5	Conquistador	75,607	2000
6	Sonoma	74,786	2001
7	Catalina	74,432	2005
8	Samsara	73,688	1999
9	Padre	73,601	2004
10	Xanadu	72,270	1999
11	La Jolla	72,126	1997
12	Redondo	74,716	2000
13	Ocean Crystal	73,688	1999
14	Maganari	75,941	2001
15	Ligari	75,583	2004
16	Capitola	74,832	2001
17	Bargara	74,814	2002
18	Ecola	73,931	2001
19	Levanto	73,925	2001
20	Brisbane	151,066	1995
21	Majorca	74,477	2005
22	Marbella	72,451	2000
23	Primera	72,495	1998

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EXECUTION PAGES

BORROWER
SIGNED by  for and on behalf of DRYSHIPS INC.	) ) )	/s/ Eugenia Papapontikou
LENDERS
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
BANK OF SCOTLAND PLC	)
AGENT
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
SECURITY TRUSTEE
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
LEAD ARRANGER/LEAD BOOKRUNNER
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)

19

JOINT BOOKRUNNER
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
BANK OF SCOTLAND PLC	)
JOINT UNDERWRITERS
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
BANK OF SCOTLAND PLC	)
SWAP BANKS
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HBOS TREASURY SERVICES PLC	)
Witness to all the	)	/s/ Eugenia Th. Voulika
above signatures	)

Name:
Address:

COUNTERSIGNED this day              of November 2009 for and on behalf of the below companies each of which, by its execution hereof, confirms and acknowledges that it has read and understood

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the terms and conditions of this supplemental letter, that it agrees in all respects to the same and that the Finance Documents to which it is a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrower under the Loan Agreement.

for and on behalf of WEALTH MANAGEMENT INC.	for and on behalf of REA OWNING COMPANY LIMITED
for and on behalf of MALVINA SHIPPING COMPANY LIMITED	for and on behalf of NT LLC INVESTORS LTD
for and on behalf of ARLETA NAVIGATION COMPANY LIMITED	for and on behalf of SELMA SHIPPING COMPANY LIMITED
for and on behalf of SAMSARA SHIPPING COMPANY LIMITED	for and on behalf of PHOEBE OWNING COMPANY LIMITED
for and on behalf of BORSARI SHIPPING COMPANY LIMITED	for and on behalf of ONIL SHIPPING COMPANY LIMITED
for and on behalf of FABIANA NAVIGATION COMPANY LIMITED	for and on behalf of CELINE SHIPPING COMPANY LIMITED

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for and on behalf of KARMEN SHIPPING COMPANY LIMITED	for and on behalf of THELMA SHIPPING COMPANY LIMITED
for and on behalf of ARGO OWNING COMPANY LIMITED	for and on behalf of KRONOS OWNING COMPANY LIMITED
for and on behalf of TETHYS OWNING COMPANY LIMITED	for and on behalf of SELENE OWNING COMPANY LIMITED
for and on behalf of GAIA OWNING COMPANY LIMITED	for and on behalf of TROJAN MARITIME CO.
for and on behalf of DIONE OWNING COMPANY LIMITED	for and on behalf of URANUS OWNING COMPANY LIMITED
for and on behalf of TEMPO MARINE CO.	for and on behalf of STAR RECORD OWNING COMPANY LIMITED

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EX-4.15

Exhibit 4.15

Date 17 November 2009

DRYSHIPS INC.

as Borrower

- and -

THE BANKS AND FINANCIAL INSTITUTIONS

listed in Part A of Schedule 1

as Lenders’

- and -

HSH NORDBANK AG

as Agent and Security Trustee

- and -

HSH NORDBANK AG

as Lead Arranger and Lead Bookrunner

- and -

BANK OF SCOTLAND PLC

as Joint Bookrunner

- and -

HSH NORDBANK AG

and

BANK OF SCOTLAND PLC

as Joint Underwriters

- and -

THE BANKS AND FINANCIAL INSTITUTIONS

listed at Part B of Schedule 1

as Swap Banks

SUPPLEMENTAL AGREEMENT

relating to revolving credit and term loan facilities

of (originally) US$518,750,000 in aggregate

WATSON, FARLEY & WILLIAMS

Piraeus

INDEX

Clause		Page
1	INTERPRETATION	2
2	AGREEMENT OF THE CREDITOR PARTIES	3
3	CONDITIONS PRECEDENT	3
4	REPRESENTATIONS AND WARRANTIES	4
5	AMENDMENTS TO LOAN AGREEMENT AND OTHER FINANCE DOCUMENTS	4
6	FURTHER ASSURANCES	15
7	FEES AND EXPENSES	15
8	COMMUNICATIONS	15
9	SUPPLEMENTAL	15
10	LAW AND JURISDICTION	16
SCHEDULE I PART A		17
LENDERS		17
PART B		18
SWAP BANKS		18
SCHEDULE 2 LIST OF SHIPS		19
EXECUTION PAGES		20

THIS AGREEMENT is made on      November 2009

BETWEEN

(1) DRYSHIPS INC. as Borrower;

(2) THE BANKS AND FINANCIAL INSTITUTIONS listed in Part A of Schedule I of the Loan Agreement, as Lenders;

(3) HSH NORDBANK AG, acting through its office at Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Federal Republic of Germany, as Agent;

(4) HSH NORDBANK AG, acting through its office at Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Federal Republic of Germany, as Security Trustee;

(5) HSH NORBANK AG, acting through its office at Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Federal Republic of Germany, as Lead Arranger;

(6) HSH NORDBANK AG, acting through its office at Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Federal Republic of Germany, as Lead Bookrunner;

(7) BANK OF SCOTLAND PLC, acting through its office at 2nd Floor, New Uberior House, 11 Earl Grey Street, Edinburgh EH3 9BN, as Joint Bookrunner;

(8) HSH NORDBANK AG, acting through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Federal Republic of Germany and BANK OF SCOTLAND PLC, acting through its office at 2nd Floor, New Uberior House, 11 Earl Grey Street, Edinburgh EH3 9BN, as Joint Underwriters; and

(9) THE BANKS AND FINANCIAL INSTITUTIONS listed in Part B of Schedule I of the Loan Agreement, as Swap Banks.

BACKGROUND

(A) By a loan agreement dated 31 March 2006 (as supplemented, amended and restated from time to time, the “Loan Agreement”) and made between (i) the Borrower, (ii) the Lenders, (iii) the Agent, (iv) the Security Trustee, (v) the Lead Arranger, (vi) the Lead Bookrunner, (vii) the Joint Bookrunner, (vii) the Joint Underwriters and (ix) the Swap Banks, the Lenders agreed to make available to the Borrower both term loan and short-term credit facilities of (originally) up to US$518,750,000 in aggregate.

(B) The Borrower has made a request to the Agent that the Majority Lenders or, as the case may be, that the Lenders give their consent to (inter alia):

(i) reduce the security cover requirements referred to in clause 15.1 of the Loan Agreement during the Waiver Period;

(ii) certain amendments to the financial and corporate undertakings (including, without limitation the Borrower’s charter coverage obligations) set out in clauses 12.4 and 12.10 of the Loan Agreement during the Waiver Period;

(iii) certain amendments to an event of default set out in clause 19.1(l) of the Loan Agreement during the Waiver Period; and

(iv) the amendment and/or variation of certain other provisions of the Loan Agreement.

(C) The Lenders’ consent to the Borrower’s requests referred to in Recital (B) are subject to, inter alia, the following conditions:

(i) the Margin increasing to 1.90 per cent. per annum during the Waiver Period;

(ii) restricting the payment of cash dividends during the Waiver Period;

(iii) maintaining (aa) freely available cash and bank balances in an aggregate amount of at least $35,000,000 during the Waiver Period and (bb) the Applicable Amount (as defined below); and

(iv) upon the request of the Lenders, disclose material information in connection with all material transactions involving the Borrower or any other member of the Group with regard to any existing and future facilities with other banks and financial institutions and the waiver of any covenants or other terms applicable to such financings.

(D) This Agreement sets out the terms and conditions on which the Creditor Parties agree, with effect on and from the Effective Date, to amend the Loan Agreement.

IT IS AGREED as follows:

1 INTERPRETATION

1.1 Defined expressions. Words and expressions defined in the Loan Agreement and the other Finance Documents shall have the same meanings when used in this Agreement unless the context otherwise requires.

1.2 Definitions. In this Agreement, unless the contrary intention appears:

“Applicable Amount Account” means an account in the name of the Borrower with the Agent in Hamburg designated “Dryships Inc. - Applicable Amount Account” or any other account (with that or another office of the Agent) which is designated by the Agent as the Applicable Amount Account for the purposes of the Loan Agreement;

“Applicable Amount Account Pledge” means a pledge agreement creating security in favour of the Creditor Parties in respect of the Applicable Amount Account in such form as the Lenders may approve or require;

“Loan Agreement” means the loan agreement dated 31 March 2006 (as supplemented, amended and restated from time to time) referred to in Recital (A);

“Third Mortgage Amendment” means, in relation to each Mortgage, the third amendment to such Mortgage, to be in such form and on such terms as may be acceptable to the Lenders and, in the plural, means all of them; and

“Waiver Period” means the period commencing on 22 December 2008 (inclusive) and ending on 30 September 2010 (inclusive) or earlier if the Agent (acting with the consent of the Majority Lenders, which they shall be entitled to give or withhold in their sole and absolute discretion) is satisfied that the Borrower is in full compliance with all covenants set out in the Loan Agreement.

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1.3 Application of construction and interpretation provisions of Loan Agreement. Clauses 1.2 and 1.5 of the Loan Agreement apply, with any necessary modifications, to this Agreement.

2 AGREEMENT OF THE CREDITOR PARTIES

2.1 Agreement of the Lenders. The Lenders agree, subject to and upon the terms and conditions of this Agreement.

2.2 Agreement of the Creditor Parties. The Creditor Parties agree, subject to and upon the terms and conditions of this Agreement, to the consequential amendment of the Loan Agreement and the other Finance Documents in connection with the matters referred to in Clause 2.1.

2.3 Effective Date. The agreement of the Lenders and the other Creditor Parties contained in Clauses 2.1 and 2.2 shall have effect on and from the Effective Date.

3 CONDITIONS PRECEDENT

3.1 General. The agreement of the Lenders and the other Creditor Parties contained in Clauses 2.1 and 2.2 is subject to the fulfilment of the conditions precedent in Clause 3.2.

3.2 Conditions precedent. The conditions referred to in Clause 3.1 are that the Agent shall have received the following documents and evidence in all respects in form and substance satisfactory to the Agent and its lawyers on or before the Effective Date:

(a) documents of the kind specified in Schedule 5, Part A, paragraphs 3, 4 and 5 of the Loan Agreement in relation to the Borrower and each Owner in connection with their execution of this Agreement, the relevant Third Mortgage Amendment and the Applicable Amount Account Pledge, updated with appropriate modifications to refer to this Agreement;

(b) an original of this Agreement duly executed by the parties to it and counter-signed by each of the Owners of the Ships listed in Schedule 2 hereto;

(c) in respect of each of the Ships listed in Schedule 2, the original Third Mortgage Amendment in respect of the Mortgage for that Ship duly signed by the relevant Owner and evidence satisfactory to the Agent and its lawyers that the same has been registered as a valid addendum to the relevant Mortgage in accordance with the laws of Malta;

(d) evidence that the Applicable Amount Account has been opened with the Agent and all mandate forms, documentation required by each Creditor Party in relation to the Borrower and any Security Party pursuant to that Creditor Party’s “know your customer” requirements have been received;

(e) a duly executed original of the Applicable Amount Account Pledge;

(f) evidence that the aggregate of the balances standing to the credit of the Applicable Amount Account and the Debt Service Reserve Account (excluding the amount held in the Applicable Amount Account referred to in paragraph (g) below which is to be transferred thereto) is at least $30,000,000;

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(g) evidence that the Available Free Cash Flow in respect of the period commencing on 1 April 2009 and ending on the date of this Agreement has been paid to the Applicable Amount Account;

(h) favourable opinions from lawyers appointed by the Agent on such matters concerning the laws of Marshall Islands and Malta and such other relevant jurisdictions as the Agent may require; and

(i) the fees referred to in Clause 7 of this Agreement have been received in full by the Agent.

4 REPRESENTATIONS AND WARRANTIES

4.1 Repetition of Loan Agreement representations and warranties. The Borrower represents and warrants to the Creditor Parties that the representations and warranties in clause 10 of the Loan Agreement remain true and not misleading if repeated on the date of this Agreement.

4.2 Repetition of Finance Document representations and warranties. The Borrower and each of the other Security Parties represents and warrants to the Creditor Parties that the representations and warranties in the Finance Documents (other than the Loan Agreement) to which it is a party remain true and not misleading if repeated on the date of this Agreement.

5 AMENDMENTS TO LOAN AGREEMENT AND OTHER FINANCE DOCUMENTS

5.1 Specific amendments to Loan Agreement. With effect on and from the Effective Date the Loan Agreement shall be amended as follows:

(a) by inserting in clause 1.2 thereof the definitions of “Applicable Amount Account”, “Applicable Amount Account Pledge”, “Third Mortgage Amendment” and “Waiver Period” set out in Clause 1.2 of this Supplemental Agreement;

(b) by inserting the following new definitions in clause 1.2 thereof:

““Available Free Cash Flow” means, in relation to each 3-month period (commencing with the 3-month period starting on 1 April 2009), the amount (calculated by the Agent in its sole discretion) by which:

(a) the aggregate Earnings of all the Ships subject to a Mortgage during that 3-month period exceed

(b) the aggregate of:

(i) the operating expenses (including any dry-docking, general and administrative expenses) paid by the Borrower and the Owners in respect of the Ships during that 3-month period; and

(ii) the aggregate amount of principal in respect of, and interest on, and any swap payments relative to, each of the Loan and the Junior Loan payable pursuant to each of this Agreement and the Junior Loan Agreement during that 3-month period;

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“Contract Price” means, in relation to a Permitted Ship, the aggregate amount payable by the buyer thereof or, as the case may be, the Borrower to Samsung pursuant to the relevant Permitted Shipbuilding Contract;

“CSTC” means China Shipbuilding Trading Company Limited, a company organised under the laws of the People’s Republic of China and having its registered office at Fangynon Mansion, 56(Yi), Zhongguancun Nandajie, Beijing, 100044, the People’s Republic of China;

“Debt Service Amount” has the meaning given to it in Clause 11.23(a)(i)(B);

“Debt Service Amount Account” has the meaning given to it in Clause 11.23(a)(i)(B);

“Delivery Date” means, in relation to each Permitted Ship, the date on which title to and possession of that Ship is transferred to the relevant buyer;

“Deutsche Bank Borrowers” means Drillships Skopelos Owners Inc and Drillships Kithira Owners Inc, and in the singular means either of them;

“Deutsche Bank Loan Agreements” means, together:

(a) the loan agreement dated 18 July 2008 (as amended and supplemented from time to time) made between (i) Drillships Skopelos Owners Inc as borrower, (ii) the banks and financial institutions listed as lenders therein, (iii) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch as swap banks, (iv) Deutsche Bank Luxembourg SA as facility agent, (v) Deutsche Bank AG Filiale Deutschlandgeschaft as security trustee, (vi) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch joint mandated lead arrangers and (vii) Deutsche Bank AG, London as bookrunner; and

(b) the loan agreement dated 18 July 2008 (as amended and supplemented from time to time) made between (i) Drillships Kithira Owners Inc as borrower, (ii) the banks and financial institutions listed as lenders therein, (iii) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch as swap banks, (iv) Deutsche Bank Luxembourg SA as facility agent, (v) Deutsche Bank AG Filiale Deutschlandgeschaft as security trustee, (vi) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch joint mandated lead arrangers and (vii) Deutsche Bank AG, London as bookrunner,

and, in the singular, means either of them;

“Drybulk” means, Drybulk S.A., a company incorporated under the laws of the Republic of Liberia, having its registered office at 80 Broad Street, Monrovia, Liberia and having an office established in Greece (under Greek Law 89/1967 as amended) at 80 Kifissias Avenue, Maroussi, Greece;

“Effective Date” means the date on which the conditions precedent in Clause 3 are satisfied;

“Hudong” means Hudong-Zhonghua Shipbuilding (Group) Co. Ltd. a company organised under the laws of the People’s Republic of China with registered office at Pudong Dadao 2851, Shanghai 200129, 29 the People’s Republic of China;

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“Hull 1837” means the drillship currently under construction by Samsung pursuant to the Hull 1837 Shipbuilding Contract which is scheduled to be delivered in December 2010;

“Hull 1838” means the drillship currently under construction by Samsung pursuant to the Hull 1838 Shipbuilding Contract which is scheduled to be delivered in March 2011;

“Hull 1865” means the drillship currently under construction by Samsung pursuant to the Hull 1865 Shipbuilding Contract which is scheduled to be delivered in July 2011;

“Hull 1866” means the drillship currently under construction by Samsung pursuant to the Hull 1866 Shipbuilding Contract which is scheduled to be delivered in September 2011;

“Hull 1837 Shipbuilding Contract” means the shipbuilding contract dated 17 September 2007 (as the same may be amended and supplemented from time to time) and executed between Drillship Hydra Owners Inc. and Samsung;

“Hull 1838 Shipbuilding Contract” means the shipbuilding contract dated 17 September 2007 (as the same may be amended and supplemented from time to time) and executed between Drillship Paros Owners Inc. and Samsung;

“Hull 1865 Shipbuilding Contract” means the shipbuilding contract dated 24 January 2008 (as the same may be amended and supplemented from time to time) and executed between Drillship Kithira Owners Inc. and Samsung;

“Hull 1866 Shipbuilding Contract” means the shipbuilding contract dated 24 January 2008 (as the same may be amended and supplemented from time to time) and executed between Drillship Skopelos Owners Inc. and Samsung;

“New Investment” means any investment which is made by the Borrower pursuant to Clause 11.23(b);

“OLIVA” means the panamax bulk carrier of approximately 75,200 metric tons deadweight, currently registered under the laws of Malta with Official Number 9413705 in the name of Monteagle Shipping SA;

“Permitted Investment” means any investment permitted to be made by the Borrower pursuant to Clause 11.23(a);

“Permitted Shipbuilding Contracts” means, together, the Hull 1837 Shipbuilding Contract, the Hull 1838 Shipbuilding Contract, the Hull 1865 Shipbuilding Contract and the Hull 1866 Shipbuilding Contract and, in the singular, means any of them;

“Permitted Ships” means, together, Hull 1837, Hull 1838, Hull 1865, Hull 1866, OLIVA and RAPALLO and, in the singular means, any of them;

“RAPALLO” means the Panamax bulk carrier of approximately 75,123 metric tons deadweight, currently registered under the laws of Malta with Official Number 9413690 in the name of Roscoe Marine Ltd.;

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“Samsung” means Samsung Heavy Industries Co. Ltd. a company organised under the laws of Korea with registered office at 34th floor, Samsung Life Insurance Seocho Tower 1321-15, Seocho-Dong, Seocho-Gu, Seoul, Korea;

(c) by deleting the definition of “Margin” in Clause 1.2 thereof in its entirety and replacing it with the following:

““Margin” means:

(a) during the Waiver Period, 1.90 per cent. per annum; and

(b) any time thereafter when the Market Adjusted Equity Ratio is (as determined by the Agent on each Compliance Date by reference to the compliance certificate delivered to the Agent in accordance with Clause 12.5):

(i) equal to or more than 0.55:1, 0.85 per cent. per annum;

(ii) at least equal to 0.45:1 but less than 0.55.1, 1.00 per cent per annum; and

(iii) less than 0.45:1, 1.1 per cent per annum,”,

(d) by deleting Clause 11.3 thereof in its entirety and replacing it with the following:

“11.3 No disposal of assets. The Borrower will not:

(a) transfer, lease or otherwise dispose of all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not; or

(b) transfer, lease or otherwise dispose of any debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation,

Provided that the Borrower may make any transfer, lease or other disposal referred to in this Clause 11.3 made on normal arm’s length terms if following such transfer, lease or other disposal it shall be able to comply with all the financial covenants referred to in Clause 12.4 and no Event of Default or Potential Event of Default shall arise; and

(c) spin-off or otherwise dispose of the offshore business of the Group unless:

(i) following such spin-off or disposal of the offshore business, the Agent is satisfied that the Borrower and all other members of the Group shall maintain in immediately freely available and unencumbered (save for any Security Interest created in favour of the Creditor Parties pursuant to this Agreement) bank or cash balances equal to at least $80,000,000 in aggregate (including, without limitation, the Applicable Amount); and

(ii) by no later than the Cut Off Date relative to each of Hull 1865 and Hull 1866, it has delivered to the Agent evidence that such Permitted Ship is subject to an Approved Contract of Employment commencing from the actual delivery date of the relevant Permitted Ship; and

(iii) it provides satisfactory evidence to the Agent that it has been released from all its obligations relating to the offshore business of the Group (other than any obligations it has pursuant to two guarantees each dated 18 July 2008 and executed by the Borrower as security for the obligations of the Deutsche Bank Borrowers under the Deutsche Bank Loan Agreements); and

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(iv) it satisfies the Agent that the Spin Off will not cause any material adverse change in the financial position, state of affairs or prospects of the Borrower or the Group; and

(v) it satisfies the Agent that it is using its best endeavours to be released from the guarantees referred to in paragraph (iii) above.

In this Clause 11.3(b) the following terms will have the following meanings:

“Approved Contract of Employment” means, in respect of each of Hull 1865 and Hull 1866, a contract of employment in respect of that Permitted Ship for at least 24 months in duration (commencing from the delivery date of the relevant Permitted Ship) at a hire rate which, when aggregated for the first 24 months of the duration thereof will be in an amount of at least equal to the aggregate of the (a) operating expenses and (b) debt service costs of that Permitted Ship for the first 24 months of the duration of that contract of employment.

“Cut Off Date” means, in respect of each of Hull 1865 and Hull 1866, the date falling 6 months prior to the scheduled delivery date of that Permitted Ship;

“Spin Off” means any reorganisation, spin-off, re-domiciliation or transfer of ownership in respect of any corporate entity whose business primarily consists of activities in the oil, gas and off shore sector.”;

(e) by adding a new paragraph (e) in Clause 11.4 thereof as follows:

“(e) in respect of any (i) Permitted Investments and (ii) New Investments, made in accordance with Clause 11.23 (in both cases only if made during the Waiver Period);”

(f) by adding in clause 11.20 thereof after “$5,000,000”, the following:

“(or, at all times during the Waiver Period, $10,000,000)”;

(g) by adding a new Clause 11.23 in the Loan Agreement as follows:

“11.23 Permitted Investments and New Investments. The Borrower may, at any time during the Waiver Period, incur liabilities and obligations in respect of:

(a) the Permitted Shipbuilding Contracts subject to the following conditions:

(i) in the case of each of the Hull 1837 Shipbuilding Contract and the Hull 1838 Shipbuilding Contract, if the Borrower provides the Agent:

(A) with satisfactory evidence by no later than each Due Date that the buyer of the relevant Permitted Ship or, as the case may be, the Borrower has sufficient funds to fully finance (either by means of Financial Indebtedness or through the use of equity (or a contribution of the two)) the Applicable Instalment; and

(B) not later than the date falling 6 months prior to the scheduled Delivery Date of the relevant Permitted Ship, a contract of employment in respect of that Permitted Ship of at least 36 months in duration (commencing from the Delivery Date in respect of the Permitted Ship) and for a daily hire rate which

8

when aggregated for the entire duration of that contract shall be at least equal to the amount which the buyer of that Permitted Ship or, as the case may be, the Borrower will be required to repay during the same period under any loan agreement (including any applicable interest thereon) (the “Debt Service Amount”) which that buyer or, as the case may be, the Borrower may enter into for the purpose of financing the Contract Price of that Permitted Ship Provided that the Borrower may incur liabilities and obligations in respect of the relevant Shipbuilding Contract referred to in this Clause 1l.23(a)(i) even if the Permitted Ship which is the subject of that Shipbuilding Contract is not subject to a contract of employment of at least 36 months in duration (commencing from the Delivery Date in respect thereof) if the Borrower provides the Agent with evidence that the net Earnings under the contract of employment will be sufficient to satisfy in full the Debt Service Amount and the buyer of the Permitted Ship or, as the case may be, the Borrower maintains a separate account with the bank or financial institution financing that Permitted Ship (the “Debt Service Amount Account”). The buyer of the Permitted Ship or, as the case may be, the Borrower shall pay to the Debt Service Amount Account every 3 months during the term of the contract of employment (commencing 3 months after the Delivery Date in respect of the Permitted Ship) an amount, which when aggregated with all other transfers to be made to the Debt Service Amount Account during the term of contract of employment, will be sufficient to pay in full the balance of the Debt Service Amount between the date on which the contract of employment expires or is terminated and the date falling 36 months after the Delivery Date in respect of the Permitted Ship and the Borrower undertakes that such amount shall only be used in repaying principal on, and interest in respect of, the facility used to finance the Contract Price in respect of the Permitted Ship. The Borrower shall, promptly following a request of the Agent, provide the Agent with a statement in respect of the Debt Service Amount Account showing the balance standing to the credit of that account and which indicates compliance with the provisions of this Clause 11.23(a)(i)(B).

If a subsequent contract of employment is entered into in respect of the Permitted Ship and the Borrower is able to satisfy the Agent that the net Earnings under that contract of employment will be sufficient to pay in full the balance of the Debt Service Amount between the date on which that contract of employment takes effect and the date falling 36 months after the delivery date in respect of the Permitted Ship the Borrower or, as the case may be, the buyer of the Permitted Ship may, by notice to the Agent, withdraw monies standing to the credit of the Debt Service Amount Account and all the obligations of the Borrower or as the case may be, the buyer of the Permitted Ship to make transfers to the Debt Service Amount Account will cease to apply; and

(b) any other New Investment which the Borrower and/or the Group may make subject to the satisfaction of the following conditions:

(i) the equity portion of any such investment shall have been raised from proceeds of any equity offering by the Borrower;

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(ii) the Borrower and all other members of the Group maintain at the time of such investment an aggregate amount of not less than $80,000,000 in immediately freely available and unencumbered (save for any Security Interests created in favour of the Creditor Parties pursuant to this Agreement) bank or cash balances (including, without limitation, the Applicable Amount (as that term is defined in Clause 12.4(d)); and

(iii) any such investments shall be made on normal arms’ length terms and on terms consistent with the conditions applying in the applicable market at the relevant time.

In this Clause 11.23, the following terms shall have the following meaning:

“Applicable Instalment” means:

(a) in the case of Hull 1837, an amount equal to:

(i) $100,773,300 (the “1837 Third Instalment”);

(ii) $110,422,472 (the “1837 Fourth Instalment”); and

(iii) $291,881,013 (the “1837 Fifth Instalment”); and

(b) in the case of Hull 1838, an amount equal:

(i) $100,773,300 (the “1838 Third Instalment”); or

(ii) $110,422,472 (the “1838 Fourth Instalment” and, together with the 1837 Fourth Instalment the “Fourth Instalments” and each a “Fourth Instalment”); and

(iii) $288,874,107 (the “1838 Fifth Instalment” and, together with the 1838 Fifth Instalment, the “Fifth Instalments” and each a “Fifth Instalment”),

being in each case, the third, fourth and fifth instalments, respectively, payable by the buyer of the relevant Permitted Ship or, as the case may be, the Borrower pursuant to the Permitted Shipbuilding Contract relative to that Permitted Ship.

“Due Date” means in relation to:

(a) the 1837 Third Instalment, 20 July 2009;

(b) the 1837 Fourth Instalment, within 3 Business Days after the date of receipt of Samsung’s invoice and notice certifying that keel laying of Hull 1837 has commenced (which is currently expected to take place during February 2010) but in any event not earlier than the date falling 4 months after the date on which the 1837 Third Instalment is actually paid;

(c) the 1837 Fifth Instalment, 15 September 2010;

(d) the 1838 Third Instalment, within 3 Business Days after the date of receipt of Samsung’s invoice and notice certifying that steel cutting of Hull 1838 has commenced (which is currently expected to take place during October 2009) but in any event not earlier than the date falling 19 months after the date on which the 1838 Second Instalment is actually paid;

(e) the 1838 Fourth Instalment, within 3 Business Days after the date of receipt of Samsung’s invoice and notice certifying that keel laying of Hull 1838 has

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commenced (which is currently expected to take place during June 2010) but in any event not earlier than the date falling 4 months after the date on which the 1838 Third Instalment is actually paid; and

(f) the 1838 Fifth Instalment, 15 December 2010,

being, in each case, the date on which each Third and Fourth Instalment and the date falling approximately three months before the Fifth Instalment of the Contract Price of each such Permitted Ship is payable pursuant to the Permitted Shipbuilding Contract relative thereto.

If the Borrower or, as the case may be the buyers of Hull 1837 or Hull 1838, agree with the Builder to defer the Due Dates in respect of the Fourth Instalments and the Fifth Instalments (or any of them), the Borrower shall advise the Agent of such deferral and the new due dates by not later than 3 Business Days prior to the original Due Date of each such Instalment (and all references thereafter in this Clause 11.23 to the Due Date of each Instalment which is deferred shall mean the date on which such Instalment shall be payable following such agreement with the Builder to defer its payment)”;

(h) by adding new clauses 11.24, 11.25 and 11.26 in the Loan Agreement as follows:

“11.24 New Shares. The Borrower shall ensure that Drybulk will not transfer, sell or otherwise dispose of any shares of the Borrower issued to it in the manner contemplated in Clause 19.1(l) until the end of the Security Period.

11.25 Disclosure of material information. The Borrower shall promptly upon the request of the Agent (acting upon the instructions of the Majority Lenders) supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent in respect of:

(a) any Financial Indebtedness, liabilities or obligations incurred or to be incurred by the Borrower or any other member of the Group; and

(b) any material information in connection with all material transactions involving the Borrower or any other member of the Group, with regard to all existing and future facilities with banks and financial institutions or the waiver of any covenants or other terms applicable thereto.

11.26 Available Free Cash Flow. As soon as possible, but in no event later than 10 Business Days after the end of each 3-month period referred to in Clause 12.4(d), reports detailing any information required by the Agent in connection with the Ships so that it may calculate the Available Free Cash Flow for that 3-month period.”;

(i) by adding at the beginning of Clause 12.3(b) thereof the words “(i) during the Waiver Period, declare or pay any dividend or effect any other form of distribution and (ii) at all times thereafter,”;

(j) by adding at the end of Clause 12.3(c) thereof the words “(including, without limitation, the purchase of shares in the Borrower);”;

(k) by deleting Clause 12.4(a) thereof in its entirety and replacing the same with the following:

“(a) the Market Adjusted Equity Ratio shall not be less than, during the period commencing:

(i) on 22 December 2008 and ending on 30 June 2009, 0.00:0;

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(ii) on 1 July 2009 and ending on 30 September 2010, 0.15:1 Provided that the Borrower will be in compliance with the provisions of this Clause 12.4 (a) if the Market Adjusted Equity Ratio falls to not less than 0.05:1 and (A) the Agent (acting upon the instructions of the Majority Lenders) considers that such fall in the Market Adjusted Equity Ratio has resulted from a reduction in the Market Value of the Fleet Vessels (including, without limitation, any drillships owned or ordered by members of the Group) or the mark-to-market position of any swap and other derivative transactions entered into by the Borrower and other members of the Group, and (B) the Agent re-calculates the Market Adjusted Equity Ratio on the basis of the Market Values of the Fleet Vessels (including, without limitation, any drillships owned or ordered by members of the Group) and the mark-to-market position of all the swap and other derivative transactions referred to above as at 31 December 2008 and such recalculation results in the Market Adjusted Equity Ratio being at least 0.15:1;

(iii) on 1 October 2010 and ending on 31 December 2010, 0.40:l; and

(iv) in each subsequent Financial Year, 0.40:1,

Provided that during the Waiver Period, any new Financial Indebtedness incurred by the Borrower or the Group may only be used in (i) prepaying any Financial Indebtedness secured on the assets of the Group and (ii) financing any New Investments and any Permitted Investments subject to the Borrower’s equity contribution in each New Investments and each Permitted Investment being not less than 32.5 per cent. of that acquisition cost of that New Investment and or, as the case may be, that Permitted Investment;”;

(l) by deleting Clause 12.4(b) thereof in its entirety and substituting the same with:

“(b) the Interest Coverage Ratio shall not be less than:

(i) during the Waiver Period, 2:1; and

(ii) at all other times, 3:1;”;

(m) by deleting Clause 12.4(c) thereof in its entirety and replacing the same with the following:

“(c) the Market Value Adjusted Net Worth of the Group shall not be less than, during:

(i) the period commencing:

(A) on 22 December 2008 and ending on 30 June 2009, $0;

(B) on 1 July 2009 and ending on 31 December 2009, $100,000,000;

(C) on 1 January 2010 and ending on 30 September 2010, the aggregate of (A) $150,000,000 and (B) the aggregate amount of the Net Income appearing in the Applicable Accounts in respect of the first three financial quarters in the Financial Year ending on 31 December 2010.”;

(D) in the financial quarter commencing on 1 October 2010, $800,000,000; and

(E) at all times thereafter, $1,000,000,000”;

12

(n) by deleting Clause 12.4(d) thereof in its entirety and replacing it with the following:

“(d) subject to Clause 12.10, there is available to the Borrower and all the other members of the Group in immediately freely available and unencumbered bank or cash balances an aggregate amount of:

(i) during the Waiver Period, the aggregate of (A) $35,000,000 and (B) the Applicable Amount (with the Applicable Amount (other than any Available Free Cash Flow which has not yet been transferred to the Applicable Amount Account pursuant to the terms of this Clause 12.4(d)) being held in the Applicable Amount Account and the Debt Service Reserve Account); and

(ii) at all other times, not less than $100,000,000 (including, without limitation, the Applicable Amount (which will be held in the Earnings Account, the Applicable Amount Account, the Debt Service Reserve Account and the Wealth Account)),

Provided that the Borrower shall ensure that any Available Free Cash Flow shall be transferred to the Applicable Amount Account within 10 Business Days of each Available Free Cash Flow Calculation Date (and the Borrower hereby irrevocably and unconditionally authorises the Agent to make such transfers subject to the Agent giving 2 days’ prior notice to the Borrower of the amount(s) to be transferred) during the period commencing as from 1 April 2009 and ending when the Applicable Amount is $55,000,000. The Available Free Cash Flow for the period commencing on 1 April 2009 and ending on the date of the supplemental agreement which amends and supplements this Agreement (including, without limitation, amendments to this Clause 12.4(d)) shall be transferred to the Applicable Amount Account on the date of execution of that supplemental agreement.

In this Clause 12.4(d) the following terms have the following meanings:

“Applicable Amount” means:

(i) subject to the foregoing provisions of this Clause 12.4(d), the lesser of (A) $55,000,000 and (B) the aggregate of $30,000,000 together with any Available Free Cash Flow; and

(ii) $55,000,000, at all other times;”

“Available Free Cash Flow Calculation Date” means 1 July 2009 and the dates falling every 3 months thereafter during the Available Free Cash Flow Calculation Period being the dates on which the Agent shall determine the Available Free Cash Flow for the 3-month period ending on that Available Free Cash Flow Calculation Date; and

“Available Free Cash Flow Calculation Period” means the period commencing on 1 April 2009 and ending on the earlier of (a) 30 September 2010 and (b) the date on which the Applicable Amount reaches $55,000,000”;

(o) by adding the words “(other than at any time during the Waiver Period)” after the date “1 January 2009” in the first line of clause 12.10 thereof;

(p) by adding in the third line at the end of sub-paragraph (b) in clause 15.1 thereof:

“and, additionally during the Waiver Period, the aggregate of the Applicable Amount and any part of the balance on the Retention Account which is to be applied towards the Repayment Instalment;”;

13

(q) by deleting the definition of “Relevant Percentage” at the end of clause 15.1 thereof and replacing it with the following:

“Relevant Percentage” means:

(i) during the Waiver Period, 100 per cent.; and

(ii) 190 per cent. during the period commencing the last financial quarter in the Financial Year of 2010 and ending 31 December 2011; and

(iii) 170 per cent., at all other times;

(r) by adding at the end of clause 19.1(l) thereof the following:

“save that such failure shall not constitute an Event of Default if (i) George Economou owns and controls throughout the Waiver Period at least the same number of shares in the Borrower as those owned and controlled by him on 1 January 2009 and (ii) any outstanding commission fees equal to the amount of $5,000,000 in aggregate (the “Outstanding Commissions”) payable by the Borrower to Drybulk in respect of any chartering and sale and purchase brokerage services performed by Drybulk shall be paid to Drybulk in the form of common shares in the Borrower’s issued share capital (the “New Shares”) and not in cash during the period commencing on 1 April 2009 and ending on the later of (A) the last day of the Waiver Period and (B) the date on which Drybulk has received New Shares equal in aggregate value to the amount of the Outstanding Commissions (the value of each New Share shall be the average trading price of each of the Borrower’s shares quoted on NASDAQ on the date on which any New Shares are issued to Drybulk)”.

5.2 Amendments to Finance Documents. With effect on and from the Effective Date each of the Finance Documents other than the Loan Agreement shall be, and shall be deemed by this Agreement to have been, amended as follows:

(a) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement and any of the other Finance Documents shall be construed as if the same referred to the Loan Agreement and those Finance Documents as amended and supplemented by this Agreement;

(b) by construing all references in the Loan Agreement and in the Finance Documents to “Mortgage” as references to the Mortgages as amended and supplemented by the Third Mortgage Amendment applicable thereto; and

(c) by construing references throughout each of the Finance Documents to “this Agreement”, “this Deed”, “hereunder and other like expressions as if the same referred to such Finance Documents as amended and supplemented by this Agreement.

5.3 Finance Documents to remain in full force and effect. The Finance Documents shall remain in full force and effect as amended and supplemented by:

(a) the amendments to the Finance Documents contained or referred to in Clauses 5.1 and 5.2; and

14

(b) such further or consequential modifications as may be necessary to give full effect to the terms of this Agreement.

6 FURTHER ASSURANCES

6.1 Borrower’s and each Security Party’s obligation to execute further documents etc. The Borrower and each Security Party shall:

(a) execute and deliver to the Security Trustee (or as it may direct) any assignment, mortgage, power of attorney, proxy or other document, governed by the law of England or such other country as the Security Trustee may, in any particular case, specify;

(b) effect any registration or notarisation, give any notice or take any other step,

which the Agent may, by notice to the Borrower, specify for any of the purposes described in Clause 6.2 or for any similar or related purpose.

6.2 Purposes of further assurances. Those purposes are:

(a) validity and effectively to create any Security Interest or right of any kind which the Security Trustee intended should be created by or pursuant to the Loan Agreement or any other Finance Document, each as amended and supplemented by this Agreement, and

(b) implementing the terms and provisions of this Agreement.

6.3 Terms of further assurances. The Security Trustee may specify the terms of any document to be executed by the Borrower or any Security Party under Clause 6.1, and those terms may include any covenants, powers and provisions which the Security Trustee considers appropriate to protect its interests.

6.4 Obligation to comply with notice. The Borrower or any Security Party shall comply with a notice under Clause 6.1 by the date specified in the notice.

7 FEES AND EXPENSES

7.1 Fee. On the date of this Agreement, the Borrower shall pay to the Agent certain facility fees set out in the letter addressed to the Agent from the Borrower and dated the same date as this Agreement.

7.2 Expenses. The provisions of clause 20 (fees and expenses) of the Loan Agreement shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.

8 COMMUNICATIONS

8.1 General. The provisions of clause 28 (notices) of the Loan Agreement, as amended and supplemented by this Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.

9 SUPPLEMENTAL

9.1 Counterparts. This Agreement may be executed in any number of counterparts.

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9.2 Third Party rights. A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

10 LAW AND JURISDICTION

10.1 Governing law. This Agreement, including any non-contractual obligations arising out of or in connection with this Agreement, shall be governed by and construed in accordance with English law.

10.2 Incorporation of the Loan Agreement provisions. The provisions of clause 30 (law and jurisdiction) of the Loan Agreement, as amended and supplemented by this Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.

THIS AGREEMENT has been duly executed as a Deed on the date stated at the beginning of this Agreement.

16

SCHEDULE 1

PART A

LENDERS

Lender	Lending Office
HSH Nordbank AG	Gerhart-Hauptmann-Platz 50
	D-20095 Hamburg
	Germany
Bank of Scotland Plc	New Uberior House
	11 Earl Grey Street
	Edinburgh EH3 9BN
	Scotland
Alliance & Leicester Commercial Finance plc	Carlton Park
	Narborough Leicester LE19 0AL
	England
Bayerische Hypo-und Vereinsbank AG	Alter Wall 22
	20457 Hamburg
	Germany
Commerzbank Aktiengesellschaft	Ness 7-9
	D-20457 Hamburg
	Germany
Natixis	68/76 Quai de la Rapée
	75012 Paris
	France
Sumitomo Mitsui Banking Corporation, Brussels Branch	Avenue des Arts 58
	Box 18
	1000 Brussels
	Belgium
Commerzbank Aktiengesellschaft	Jungfemstieg 22
	20349 Hamburg
	Germany

17

PART B

SWAP BANKS

HSH Nordbank AG	Martensdamm 6
	D-24103 Kiel
	Germany
Bank of Scotland plc (formerly known as HBOS Treasury Services Plc)	New Uberior House 11 Earl Grey Street
	Edinburgh EH3 9BN
	Scotland

18

SCHEDULE 2

LIST OF SHIPS

Number	Name of vessel	Deadweight	Year Built
1	Manasota	171,061	2004
2	Alameda	170,662	2001
3	Mendocino	76,623	2002
4	Coronado	75,706	2000
5	Conquistador	75,607	2000
6	Sonoma	74,786	2001
7	Catalina	74,432	2005
8	Samsara	73,688	1999
9	Padre	73,601	2004
10	Xanadu	72,270	1999
11	La Jolla	72,126	1997
12	Redondo	74,716	2000
13	Ocean Crystal	73,688	1999
14	Maganari	75,941	2001
15	Ligari	75,583	2004
16	Capitola	74,832	2001
17	Bargara	74,814	2002
18	Ecola	73,931	2001
19	Levanto	73,925	2001
20	Brisbane	151,066	1995
21	Majorca	74,477	2005
22	Marbella	72,451	2000
23	Primera	72,495	1998

19

EXECUTION PAGES

THE BORROWERS		/s/ Eugenia Papapontikou
SIGNED by	)
for and on behalf of	)
DRYSHIPS INC.	)
THE LENDERS
LENDERS
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
BANK OF SCOTLAND PLC	)
SIGNED by	)
for and on behalf of	)
ALLIANCE & LEICESTER COMMERCIAL FINANCE PLC	) )
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
BAYERISCHE HYPO-UND VEREINSBANK AG	)

20

SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
COMMERZBANK AKTIENGESELLSCHAFT	) )
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
NATIXIS (formerly known as NATEXIS BANQUES POPULAIRES	) )
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
SUMITOMO MITSUI BANKING CORPORATION	) )
AGENT
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
SECURITY TRUSTEE
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
LEAD ARRANGER/LEAD BOOKRUNNER
SIGNED by	)	/s/ Christoforos Bismpikos
for and on behalf of	)
HSH NORDBANK AG	)
JOINT BOOKRUNNER
SIGNED by	)
for and on behalf of	)	/s/ Christoforos Bismpikos
BANK OF SCOTLAND PLC	)

21

JOINT UNDERWRITERS
SIGNED by		)	/s/ Christoforos Bismpikos
for and on behalf of		)
HSH NORDBANK AG		)
SIGNED by		)	/s/ Christoforos Bismpikos
for and on behalf of		)
BANK OF SCOTLAND PLC		)
SWAP BANKS
SIGNED by		)	/s/ Christoforos Bismpikos
for and on behalf of		)
HSH NORDBANK AG		)
SIGNED by		)	/s/ Christoforos Bismpikos
for and on behalf of		)
BANK OF SCOTLAND PLC		)
SIGNED by		)	/s/ Christoforos Bismpikos
for and on behalf of		)
COMMERZBANK AKTIENGESELLSCHAFT		) )
Witness to all the		)	/s/ Eugenia Th. Voulika
above signatures		)
Name: Address:

22

COUNTERSIGNED this day of      November 2009 for and on behalf of the below companies each of which, by its execution hereof, confirms and acknowledges that it has read and understood the terms and conditions of this supplemental letter, that it agrees in all respects to the same and that the Finance Documents to which it is a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrower under the Loan Agreement.

for and on behalf of	for and on behalf of
WEALTH MANAGEMENT INC.	REA OWNING COMPANY LIMITED
for and on behalf of	for and on behalf of
MALVINA SHIPPING COMPANY LIMITED	NT LLC INVESTORS LTD
for and on behalf of	for and on behalf of
ARLETA NAVIGATION COMPANY LIMITED	SELMA SHIPPING COMPANY LIMITED
for and on behalf of	for and on behalf of
SAMSARA SHIPPING COMPANY LIMITED	PHOEBE OWNING COMPANY LIMITED
for and on behalf of	for and on behalf of
BORSARI SHIPPING COMPANY LIMITED	ONIL SHIPPING COMPANY LIMITED
for and on behalf of	for and on behalf of
FABIANA NAVIGATION COMPANY LIMITED	CELINE SHIPPING COMPANY LIMITED

23

for and on behalf of	for and on behalf of
KARMEN SHIPPING COMPANY LIMITED	THELMA SHIPPING COMPANY LIMITED
for and on behalf of	for and on behalf of
ARGO OWNING COMPANY LIMITED	KRONOS OWNING COMPANY LIMITED
for and on behalf of	for and on behalf of
TETHYS OWNING COMPANY LIMITED	SELENE OWNING COMPANY LIMITED
for and on behalf of	for and on behalf of
GAIA OWNING COMPANY LIMITED	TROJAN MARITIME CO.
for and on behalf of	for and on behalf of
DIONE OWNING COMPANY LIMITED	URANUS OWNING COMPANY LIMITED
for and on behalf of	for and on behalf of
TEMPO MARINE CO.	STAR RECORD OWNING COMPANY LIMITED

24

EX-4.21

Exhibit 4.21

Dated 30 July 2009

BOONE STAR OWNERS INC. and

IOKASTI OWNING COMPANY LIMITED

as Borrowers

-and-

PIRAEUS BANK A.E

as Lender

FIRST SUPPLEMENTAL AGREEMENT

in relation to a Loan Agreement dated 5 October 2007

in respect of a loan facility of (originally) US$90,000,000

WATSON, FARLEY & WILLIAMS

Piraeus

INDEX

Clause		Page
1	DEFINITIONS	1
2	REPRESENTATIONS AND WARRANTIES	3
3	AGREEMENT OF THE LENDER	4
4	CONDITIONS	4
5	VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS	6
6	CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS	13
7	EXPENSES	13
8	NOTICES	13
9	APPLICABLE LAW	13

THIS FIRST SUPPLEMENTAL AGREEMENT is dated 30 July 2009 and made

BETWEEN:

(1) BOONE STAR OWNERS INC. (“Boone”), and IOKASTI OWNING COMPANY LIMITED (“Iokasti”), each a corporation incorporated in the Marshall Islands whose registered office is at Ajeltake Road, Ajeltake Island, Majuro MH96960, Marshall Islands (together the “Borrowers” and each a “Borrower”); and

(2) PIRAEUS BANK A.E., acting through its branch at 47-49 Akti Miaouli, 185 36 Piraeus, Greece as “Lender”

IS SUPPLEMENTAL to a Loan Agreement dated 5 October 2007 made between (i) the Borrowers as joint and several borrowers and (ii) the Lender as lender whereby the Lender has made available to the Borrowers a loan facility of (originally) Ninety million United States Dollars (US$90,000,000) (the “Loan”) of which the current outstandings amount to $80,000,000 upon the terms and for the purposes therein specified.

WHEREAS pursuant to a request from the Borrowers, and subject to the terms and conditions herein contained, the Lender has agreed to waive the applications of certain covenants during the period 31 December 2008 until 31 March 2011 subject to the following conditions:

(A) the Lender will receive certain additional security for the obligations of the Borrowers under the Loan Agreement and the other Finance Documents; and

(B) the entry by the Borrowers into this First Supplemental Agreement whereby certain provisions of the Loan Agreement and certain other Finance Documents will be amended and/or varied.

NOW THEREFORE IT IS HEREBY AGREED

1 DEFINITIONS

1.1 Words and expressions defined in the Loan Agreement (as hereby amended) and the recitals hereto and not otherwise defined herein shall have the same meanings when used in this First Supplemental Agreement.

1.2 In this First Supplemental Agreement the words and expressions specified below shall have the meanings attributed to them below:

“Additional Charterparty Assignment” means, in relation to each Additional Ship, a second priority specific assignment of any Approved Charter in respect thereof executed or to be executed by the Additional Owner owning that Additional Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Account” means, in relation to each Additional Owner, an account opened or to be opened in the name of that Additional Owner with the Lender for receipt of the Earnings of its Additional Ship or such other account or accounts as may be established for this purpose with the prior consent of the Lender and, in the plural, means both of them;

“Additional Account Pledge” means, in relation to each Additional Account, a second priority pledge over that Additional Account to be executed by the relevant Additional Owner in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Finance Documents” means, together, the Additional Guarantees, the Additional Mortgages, the Additional Deeds of Covenant, the Additional General Assignments, any Additional Charterparty Assignments and the Additional Account Pledges and, in the singular, means any of them;

“Additional General Assignment” means, in relation to each Additional Ship, a second priority general assignment of the Earnings, Insurances and Requisition Compensation in respect thereof executed or to be executed by the Additional Owner owning that Additional Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Guarantee” means, in relation to each Additional Owner, the guarantee of the obligations of the Borrowers under the Loan Agreement executed or to be executed by that Additional Owner in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Mortgage” means, in relation to each Additional Ship, the second priority Maltese statutory mortgage over that Additional Ship executed or to be executed by the Additional Owner owning that Additional Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Owner” means each of Farat and Lotis and, in the plural, means both them;

“Additional Ship” means each of “DELRAY” and “TORO” and, in the plural, means both of them;

“Collateral Loan Agreement” means a loan agreement dated 13 March 2008 (as amended and supplemented by supplemental agreements dated 12 December 2008 and July 2009 respectively) made (originally) between (i) Annapolis Shipping Company Limited, Atlas Owning Company Limited, Farat and Lansat Shipping Company Limited (the “Collateral Borrowers”) as joint and several borrowers and (ii) the Lender as lender, in respect of a loan facility of (originally) US$130,000,000;

“Deed of Covenant” means, in relation to each Additional Ship, the second priority deed of covenant collateral to the relevant Additional Mortgage executed or to be executed by the Additional Owner owning that Additional Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“DELRAY” means the 1994-built bulk carrier vessel of 71,860 metric tons deadweight tons, having IMO Number 9071600 and registered in the ownership of Lotis under Maltese flag with the name “DELRAY”;

“Farat” means Farat Shipping Company Limited a company incorporated in Malta, whose registered office is at 5/2, Merchants Street, Valletta, Malta;

“Lotis” means Lotis Trading Inc., a corporation incorporated under the laws of Republic of Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH-96960;

“Mortgage Addendum” means, in relation to each Original Ship, the first addendum, to the Mortgage on that Original Ship, executed or to be executed by:

(a) in the case of “TRANSATLANTIC”, Boone; and

(b) in the case of “VOC GALAXY” Iokasti,

in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

2

“Original Ship” means each of “TRANSATLANTIC” and “VOC GALAXY” and, in the plural, means both of them;

“TORO” means the 1995-built bulk carrier vessel of 73,034 metric tons deadweight tons, haying IMO Number 9075735 registered in the ownership of Farat under Maltese flag with the name “TORO”; and

“Waiver Period” has the meaning ascribed to it in Recital (A) above.

1.3 Where the context so admits words importing the singular number only shall include the plural and vice versa and words importing persons shall include firms and corporations. Clause headings are inserted for convenience of reference only and shall be ignored in construing this First Supplemental Agreement. References to Clauses are to clauses of this First Supplemental Agreement save as may be otherwise expressly provided in this First Supplemental Agreement.

2 REPRESENTATIONS AND WARRANTIES

2.1 Each Borrower hereby jointly and severally represents and warrants to the Lender, as at the date of this First Supplemental Agreement, that the representations and warranties set forth in Clause 8 of the Loan Agreement (updated mutatis mutandis to the date of this First Supplemental Agreement) are true and correct as if all references therein to “this Agreement” were references to the Loan Agreement as further amended by this First Supplemental Agreement.

2.2 Each Borrower hereby further jointly and severally represents and warrants to the Lender that as at the date of this First Supplemental Agreement:

(a) each Borrower is duly incorporated and validly existing and in good standing under the laws of Malta and has full power to enter into and perform its obligations under this First Supplemental Agreement and has complied with all statutory and other requirements relative to its business, and does not have an established place of business in any part of the United Kingdom or the United States of America;

(b) all necessary governmental or other official consents, authorisations, approvals, licences, consents or waivers for the execution, delivery, performance, validity and/or enforceability of this First Supplemental Agreement and all other documents to be executed in connection with the amendments to the Loan Agreement as contemplated hereby have been obtained and will be maintained in full force and effect, from the date of this First Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and while all or any part of the Commitment remains outstanding;

(c) each Borrower has taken all necessary corporate and other action to authorise the execution, delivery and performance of its obligations under this First Supplemental Agreement and such other documents to which it is a party and such documents do or will upon execution thereof constitute the valid and binding obligations of each Borrower enforceable in accordance with their respective terms;

(d) the execution, delivery and performance of this First Supplemental Agreement and all such other documents as contemplated hereby does not and will not, from the date of this First Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and while all or any part of the Commitment remains outstanding, constitute a breach of any contractual restriction or any existing applicable law, regulation, consent or authorisation binding on each Borrower or on any of its property or assets and will not result in the creation or imposition of any security interest, lien, charge or encumbrance (other than under the Finance Documents) on any of such property or assets; and

3

(e) each Borrower has fully disclosed in writing to the Lender all facts which it knows or which it should reasonably know and which are material for disclosure to the Lender in the context of this First Supplemental Agreement and all information furnished by such Borrower or on its behalf relating to its business and affairs in connection with this First Supplemental Agreement was and remains true, correct and complete in all material respects and there are no other material facts or considerations the omission of which would render any such information misleading.

3 AGREEMENT OF THE LENDER

3.1 The Lender, relying upon each of the representations and warranties set out in Clauses 2.1 and 2.2 of this First Supplemental Agreement, hereby agrees with the Borrowers, subject to and upon the terms and conditions of this First Supplemental Agreement and in particular, but without limitation, subject to the fulfillment of the conditions precedent set out in Clause 4, to:

(a) waive the application of certain covenants contained within the Loan Agreement; and

(b) the amendments and/or variations of certain other provisions of the Loan Agreement set out in this First Supplemental Agreement.

3.2 Each Borrower agrees and confirms that the Loan Agreement and the Finance Documents to which it is a party shall remain in full force and effect and that Borrower shall remain liable under the Loan Agreement and the Finance Documents to which it is a party for all obligations and liabilities assumed by it thereunder.

4 CONDITIONS

4.1 The agreements of the Lender contained in Clause 3.1 of this First Supplemental Agreement shall all be expressly subject to the condition that the Lender shall have received in form and substance satisfactory to the Lender and its legal advisers on or before the date of this First Supplemental Agreement:

(a) evidence that the persons executing this First Supplemental Agreement on behalf of each Borrower are duly authorised to execute the same on behalf of such Borrower;

(b) a certificate from an officer of each Additional Owner confirming the names of all the directors and Shareholders of that Additional Owner and having attached thereto true and complete copies of its incorporation and constitutional documents;

(c) true and complete copies of the resolutions passed at separate meetings of all the directors and shareholders of each Borrower and each Additional Owner authorising and approving the execution of, in the case of each Borrower the Mortgage Addendum and in the case of each Additional Owner the Additional Finance Documents to which it is a party and any other document or action to which it is or is to be a party and authorising its directors or other representatives to execute the same on its behalf;

(d) the original of any power of attorney issued by each Borrrower and each Additional Owner pursuant to such resolutions aforesaid;

(e) evidence that each Additional Ship is:

(i) registered in the ownership of the relevant Additional Owner under the laws and flag of the Malta; and

4

(ii) insured in accordance with the relevant provisions of the Additional Deed of Covenant relative to that Additional Ship and all requirements thereof in respect of such insurance have been fulfilled; and

(f) the Additional Finance Documents and the Mortgage Addenda, duly executed by the Additional Owners or, in the case of each Mortgage Addendum, each Borrower together with evidence that:

(i) each Additional Mortgage has been registered against the relevant Additional Ship with first priority in accordance with the laws of Malta;

(ii) each Mortgage Addendum in connection with the relevant Original Ship has been duly registered in accordance with the laws of Malta;

(iii) all notices required to be given under each Additional Deed of Covenant, each Additional General Assignment and each Additional Charterparty Assignment have been given and acknowledged in the manner therein provided (other than in the case of a Charterparty Assignment in which case the Borrower or, as the case may be, Additional Owner which is a party thereto shall procure that the Lender receives the relevant acknowledgement only if an Event of Default has occurred); and

(iv) save for the charges created by or pursuant to:

(A) any Finance Document (as defined in the Collateral Loan Agreement) which has been executed pursuant to the Collateral Loan Agreement; and

(B) the Additional Mortgages, the Additional Deeds of Covenant, the Additional General Assignments and the Additional Charterparty Assignments,

there is no lien, charge or encumbrance of any kind whatsoever on either Additional Ship or her Earnings, Insurances or Requisition Compensation.

(g) a certified true copy of any Approved Charter entered into in respect of either Additional Ship;

(h) the original of any mandates or other documents required in connection with the opening or operation of the Additional Accounts;

(i) documents establishing that each Additional Ship is managed by the Approved Manager;

(j) a letter of undertaking executed by the Approved Manager in favour of the Lender in the terms required by the Lender agreeing certain matters in relation to the management of each Additional Ship and subordinating the rights of the Approved Manager against that Additional Ship and the Additional Owner owning that Additional Ship to the rights of the Lender under the Finance Documents;

(k) copies of ISM DOC and SMC and the International Ship Security Certificate under the ISPS Code in respect of each Additional Ship;

(l) each Additional Ship maintains the highest available class with such first-class classification society which is a member of the IACS as the Lender may approve free of all recommendations and conditions of such classification society;

(m) evidence that each Additional Owner is a direct or indirect subsidiary of the Corporate Guarantor;

5

(n) certified copies of all documents (with a certified translation if an original is not in English) evidencing any other necessary action, approvals or consents with respect to this First Supplemental Agreement and the Additional Finance Documents (including without limitation) all necessary governmental and other official approvals and consents in such pertinent jurisdictions as the Lender deems appropriate;

(o) such legal opinions as the Lender may require in respect of the matters contained in this First Supplemental Agreement and the Additional Finance Documents and the Mortgage Addenda; and

(p) evidence that the agent referred to in Clause 9.4 has accepted its appointment as agent for service of process under this First Supplemental Agreement and the Additional Finance Documents.

5 VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS

5.1 In consideration of the agreement of the Lender contained in Clause 3.1 of this First Supplemental Agreement the Borrowers hereby agree with the Lender that upon satisfaction of the conditions referred to in Clause 4.1, the provisions of the Loan Agreement and the Guarantee shall be varied and/or amended and/or supplemented as follows:

(a) by inserting in clause 1.1 of the Loan Agreement the definitions of “Additional Guarantee”, “Additional Owner”, “Additional Ships, “Collateral Loan Agreement”, “DELRAY”, “Farat”, “Lotis”, “Mortgage Addendum”, “Original Ship”, and “TORO” set out in Clause 1.2 of this First Supplemental Agreement;

(b) the definition of, and references throughout each of the Finance Documents to, the Mortgage relevant to each Original Ship, shall be construed as if the same referred to that Mortgage as amended and supplemented by the relevant Mortgage Addendum;

(c) by adding the following new definition of “Collateral Loan” in clause 1.1 of the Loan Agreement:

““Collateral Loan” means the principal amount outstanding at any relevant time under the Collateral Loan Agreement;”;

(d) by adding the following new paragraphs (c) and (d) in the definition of “Account” contained in clause 1.1 of the Loan Agreement;

“(c) in the case of “DELRAY”, an earnings account in the name of Lotis with the Lender designated “Lotis Traders Inc.—Earnings Account; and

(d) in the case of “TORO”, an earnings account in the name of Farat with the Lender designated “Farat Owning Company Limited - Earnings Account”;”;

(e) by deleting the word “either” and replacing it with the word “any” in the first line of the definition of “Account” contained in clause 1.1 of the Loan Agreement;

(f) by deleting the word “and” after the words “Charter Assignment;” in sub-paragraph (j) in the definition of “Finance Documents” in clause 1.1 of the Loan Agreement;

(g) by adding the following new paragraph (k) in the definition of “Finance Documents” in clause 1.1 of the Loan Agreement:

“(k) the Additional Guarantees;”;

6

(h) by redesignating the existing sub-paragraph (k) of the definition of “Finance Documents” in clause 1.1 thereof as a new sub-paragraph (l);

(i) by adding the words “each Additional Owner,” after the word “mean” and before the words “the Corporate Guarantor” in the definition of “Security Party” in clause 1.1 of the Loan Agreement;

(j) by adding the following new definition of “Relevant Charter” in clause 1.1 of the Loan Agreement:

““Relevant Charter” has the meaning given to it in Clause 14.3;”;

(k) by deleting the definition of “Ship” contained in clause 1.1 of the Loan Agreement and substituting the same with the following:

““Ship” means each of “TRANSATLANTIC”, “VOC GALAXY” and each Additional Ship and in the plural means all of them;”;

(l) by deleting the definition “VOC GALAXY” in clause 1.1 of the Loan Agreement and replacing it with the following new definition:

““VOC GALAXY” means the 2002-built bulk carrier vessel of 30,928 gross registered tons and 16,341 net registered tons, having IMO Number 9257060 previously registered in the ownership of the relevant Seller under the flag of Antigua & Bermuda with the name “VOC GALAXY”, purchased by Iokasti pursuant to the relevant MOA and currently registered in its ownership under Maltese flag with the name “PACHINO”;”;

(m) by adding the words “or, as the case may be, Additional Owner” after the words “Borrower” in:

(i) the second line of the definition of “Account Pledge” in clause 1.1 of the Loan Agreement;

(ii) the second line of the definition of “Approved Charter” in clause 1.1 of the Loan Agreement;

(iii) the fifth line of the definition of “Approved Manager’s Undertaking” in clause 1.1 of the Loan Agreement;

(iv) the second line of sub-paragraph (a) in the definition of “Charter Assignment” in clause 1.1 of the Loan Agreement;

(v) the second line of sub-paragraph (a) in the definition of “Earnings” in clause 1.1 of the Loan Agreement;

(vi) the third line of the definition of “General Assignment” in clause 1.1 of the Loan Agreement;

(vii) the fifth line of sub-paragraph (e) of the definition of “Permitted Security Interests” in clause 1.1 of the Loan Agreement;

(viii) the second line of sub-paragraph (b)(ii) of the definition of “Total Loss Date” in clause 1.1 of the Loan Agreement;

(ix) the second line of the definition of “obligatory insurances” in clause 1.2 of the Loan Agreement; and

7

(x) in the second line of clause 18.1(k) of the Loan Agreement;

(n) by deleting the definition of “Margin” in clause 1.1 of the Loan Agreement and substituting the same with the following new definition:

““Margin” means:

(a) during the period commencing on 1 April 2009 and ending on the last day of the Waiver Period, 2 per cent. per annum; and

(b) at all times thereafter and subject to the terms of Clause 4.10, 1.5 per cent per annum;”;

(o) by deleting clauses 4.4 to 4.12 (inclusive) of the Loan Agreement and substituting the same with the following new clauses:

“4.4 Notification of market disruption. The Lender shall promptly notify the Borrowers if:

(a) no rate is quoted on Reuters BBA Page LIBOR 01; or

(b) for any reason the Lender is unable to obtain Dollars in the London Interbank Market in order to fund or continue to fund the Loan (or any part thereof) during any Interest Period; or

(c) LIBOR for that Interest Period does not adequately reflect the Lender’s cost of funding for that Interest Period.

4.5 Suspension of drawdown. If the Lender’s notice under Clause 4.4 is served before the Loan is made, the Lender’s obligation to make the Loan shall be suspended while the circumstances referred to in the Lender’s notice continue.

4.6 Application of alternative rate of interest. Following the service of a notice by the Lender pursuant to Clause 4.4, but before the commencement of the Interest Period to which that notice relates, the Lender shall have the right to:

(a) reduce (in its sole discretion) the duration of the Interest Period selected by the Borrowers, unless a shorter period is not available in which case the Lender shall have the right to amend (in its sole discretion) the duration of the Interest Period selected by the Borrowers; and/or

(b) determine (in its sole discretion) the relevant rate of interest which shall apply to the Loan during that Interest Period and which shall be the aggregate of (i) the applicable Margin and (ii) either:

(i) the arithmetic mean of the rates per annum offered, on the relevant Quotation Date, for deposits in Dollars for a period equal to, or as near as possible to, the relevant Interest Period which appear on the electronic pages (together, the “Applicable Screen Rates”) of (aa) KLIEMM (Carl Kliem GmbH), (bb) USDDEPO=ICAP (Icap Plc) and (cc) USDDEPO=TTLK (Tullet Prebon Plc) on the Reuters Money News Services or

(ii) if:

(A) for any reason, there are no Applicable Screen Rates available on the relevant Quotation Date; or

8

(B) the Applicable Screen Rates (or any of them) do not reflect the rates given in the interbank market on that Quotation Date,

the rate per annum, expressed as a percentage, which reflects the cost to the Lender of funding the Loan (or any part thereof) during that Interest Period from whichever alternative sources are available to the Lender (and as it may select in its sole discretion) in Dollars or in any available currency,

(the “Alternative Rate”).

The Lender shall promptly notify the Borrowers in writing of any Alternative Rate and any change to the Interest Period selected initially by the Borrower arising through the operation of this Clause 4.6.

4.7 Negotiation of alternative basis for funding. If the Borrowers do not agree with the Alternative Rate they shall notify the Lender in writing not later than 2 days after the date on which the Lender serves its notice pursuant to Clause 4.6. The Borrowers and the Lender shall use reasonable endeavours to agree, within 10 days after the date on which the Borrowers serve their notice of objection to the Alternative Rate (the “Negotiation Period”), an alternative basis (including, but not limited to, an alternative interest period, funding in an alternative currency or currencies and an alternative margin which, for the avoidance of doubt, shall reflect the Lender’s cost of funding) for the Lender to continue to fund the Loan during the Interest Period concerned.

4.8 Application of alternative rate of interest. Any Alternative Rate or an alternative basis for the Lender to continue to fund the Loan shall take effect in accordance with the terms notified by the Lender pursuant to Clause 4.6 or, as the case may be, upon the terms agreed pursuant to Clause 4.7. The alternative basis shall continue to apply if the relevant circumstances are continuing at the end of the applicable Interest Period (in the case of the Alternative Rate) or interest period so set by the Lender (in each other case) and for so long as the Lender and the Borrowers are in agreement as to the alternative basis for funding.

4.9 Prepayment. If the Borrowers do not agree with the Interest Period and/or Alternative Rate set by the Lender pursuant to Clause 4.6 and an alternative basis for funding the Loan (or any part thereof) is not agreed pursuant to Clause 4.7 within the Negotiation Period, the Borrowers shall prepay the Loan upon demand by the Lender together with all accrued interest thereon at the applicable rate plus the applicable Margin.

4.10 Application of Margin. The Margin shall be reduced at the end of the Waiver Period to 1.5 per cent. per annum and shall at all times thereafter remain at such rate Provided that at any relevant time:

(a) no Event of Default or Potential Event of Default has occurred; and

(b) the Borrowers are in compliance with the terms of Clause 14.1.”;

(p) by deleting the number “1,” at the beginning of clause 5.2(a) of the Loan Agreement;

(q) by deleting clause 7.7 of the Loan Agreement and substituting the same with the following:

“7.7 Mandatory prepayment. The Borrowers shall be obliged to prepay (1) the Total Amount if an Original Ship is sold or becomes a Total Loss during the Waiver Period or (2) the Relevant Fraction of the Loan if an Original Ship is sold or becomes a Total Loss at any other time:

(a) if an Original Ship is sold, on or before the date on which the sale is completed by delivery of such Ship to the buyer; or

9

(b) if an Original Ship becomes a Total Loss, on the earlier of the date falling 180 days after the Total Loss Date and the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss,

and in this Clause 7.7:

“Total Amount” means, in relation to an Original Ship which has been sold or become a Total Loss during the Waiver Period, an amount equal to the whole of the sale or insurance proceeds relating to the Total Loss of that Original Ship;

“Relevant Fraction” is a fraction whose:

(i) numerator is the Market Value of the Original Ship being sold or which has become a Total Loss on the date on which such sale is completed or (as the case may be) the date on which the Total Loss occurred; and

(ii) denominator is the aggregate Market Value of all the Original Ships on the date on which the relevant Original Ship which is subject to a Mortgage is sold or becomes a Total Loss.

If at any time during the Waiver Period an Original Ship is sold or becomes a Total Loss, the Total Amount relative to that Original Ship is greater than the Advance relative to that Original Ship, the amount by which the Total Amount exceeds the relevant Advance shall be applied in prepayment of the Collateral Loan in accordance with clause 7 of the Collateral Loan Agreement.”;

(r) by adding:

(i) the words “or either Additional Owner” after the word “Borrower” in the first line; and

(ii) the words “or, as the case may be, such Additional Owner” after the word “Borrower” in the second line,

of clause 10.18 of the Loan Agreement;

(s) by adding new clauses 10.19 and 10.20 in the Loan Agreement as follows:

“10.19 Information on Relevant Charter. The Borrowers shall, and shall procure that each Additional Owner shall, immediately inform the Lender if the charterer which has entered into a Relevant Charter with that Borrower or, as the case may be, Additional Owner is in breach of its obligations under that Relevant Charter.

10.20 No amendment to Relevant Charter etc. No Borrower or, as the case may be, Additional Owner will agree to any amendment or supplement to, or waive or fail to enforce the Relevant Charter to which it is or will become a party or any of its provisions.”;

(t) by adding a new sub-paragraph (g) in clause 11.3 of the Loan Agreement:

“(g) during the period 31 December 2008 to 31 December 2009, pay any dividends or make any other form of distribution (other than any dividends which are distributed in the form of shares);”;

10

(u) by adding the words “at any time (other than during the Waiver Period)” after the word “Borrowers” in the second line of clause 14.1 of the Loan Agreement;

(v) by deleting clause 14.3 of the Loan Agreement and substituting the same as follows:

“14.3 Valuation of Ships. The Market Value of a Ship or, as the case may be, a Fleet Vessel at any date is that shown by a valuation prepared:

(a) as at a date not more than 14 days previously;

(b) by an independent sale and purchase shipbroker which the Lender has appointed and the Borrowers have approved (such approval not to be unreasonably withheld) for the purpose;

(c) with or without physical inspection of the relevant Ship (as the Lender may require);

(d) on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms as between a willing seller and a willing buyer;

(e) free of any existing charter or other contract of employment (other than:

(i) in the case of a Ship, any Relevant Charter to which that Ship may be subject and which has an unexpired duration of at least 11 months; and

(ii) in the case of a Fleet Vessel, any charterparty to which that Fleet Vessel may be subject, which is made between the owner of that Fleet Vessel and a charterer acceptable to the Lender and has an unexpired duration of at least 11 months,

in which case such Relevant Charter or, as the case may be, charterparty, shall be taken into account in determining the Market Value of the relevant Ship Provided that, in the case of a Relevant Charter, the Lender is satisfied that the parties to such Relevant Charter are in full compliance with the terms thereof); and

(f) after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale.

In this Clause 14.3 “Relevant Charter” means, in relation to a Ship, any time charter party in respect of that Ship entered into by the relevant Borrower or, as the case may be, Additional Owner and a charterer in all respects acceptable to the Lender, exceeding or which, by virtue of any optional extensions is capable of exceeding, 11 months in duration (as the same may be amended or supplemented from time to time) on terms and substance in all respects acceptable to the Lender.”;

(w) by deleting clause 14.6 and 14.7 of the Loan Agreement and substituting the same as follows:

“14.6 Frequency of valuation. The Borrowers acknowledge and agree that the Lender may commission a valuation of each Ship:

(a) at the end of each 3-month period ending on 31 March, 30 June, 30 September and 31 December in each year;

11

(b) if the Lender provides its consent pursuant to Clause 10.18 in respect of any amendment and/or variation of a Relevant Charter, immediately after such amendment and/or variation has been effected, and

(c) at any other time as the Lender may determine (including, but not limited to, if, in the opinion of the Lender, any charterer in respect of a Relevant Charter is not in compliance with the terms of that Relevant Charter) in its absolutely discretion.

14.7 Provision of information. Each Borrower shall promptly provide the Lender and any independent sale and purchase shipbroker or expert acting under Clause 14.4 with any information which the Lender or the independent sale and purchase shipbroker or expert may request for the purposes of the valuation; and, if a Borrower fails to provide the information by the date specified in the request, the valuation may be made on any basis and assumptions which the independent sale and purchase shipbroker or the Lender (or the expert appointed by it) considers prudent.”;

(x) by adding the words “(other than during the period 31 December 2008 to 31 December 2009)” after the words “financial year” in the second line of clause 11.11(b) of the Corporate Guarantee;

(y) by adding the words “(other than any reorganisation, spin-off, redomiciliation or transfer of ownership of the Guarantor (i) in respect of any corporate entity whose business primarily consists of activities in the oil and gas sector and is a subsidiary of the Guarantor and (ii) which will (A) include the transfer of any Security Interest currently existing in respect of or registered over such corporate entity or any of its assets (other than any Security Interest created or registered in connection with any guarantee which has been executed by the Guarantor securing such entity’s obligations under an existing loan agreement to which such entity is a borrower), (B) be made on terms consistent with the conditions applying in the international debt and equity markets on the date of such reorganisation, spin-off, redomiciliation or transfer, (C) not create any Financial Indebtedness (other than any Financial Indebtedness which may occur in connection with any guarantee which has or will be executed by the Guarantor securing such entity’s obligations under a loan agreement to which such entity is or will be a borrower) to, or any Security Interest over, the assets (or any of them) of, the Guarantor or the Group and (D) not cause any material adverse change in the financial position, state of affairs or prospects of the Guarantor or the Group)” after the words “reorganisation” in the second line of clause 11.14 of the Corporate Guarantee;

(z) by adding in the first line of clause 11.15 of the Corporate Guarantee after the word “that” the words “(other than during the Waiver Period subject to no Event of Default being in existence at the relevant time)”;

(aa) by construing all references therein to “this Agreement” where the context admits as being references to “this Agreement as the same is amended and supplemented by this First Supplemental Agreement and as the same may from time to time be further supplemented and/or amended”; and

(bb) by construing references to each of the Finance Documents as being references to each such document as it is from time to time supplemented and/or amended.

5.2 Amendments to Finance Documents. With effect on and from the date of this First Supplemental Agreement each of the Finance Documents other than the Loan Agreement shall be, and shall be deemed by this Agreement to have been, amended as follows:

(a) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement and any of the other Finance Documents shall be construed as if the same referred to the Loan Agreement and those Finance Documents as amended and supplemented by this First Supplemental Agreement; and

12

(b) by construing references throughout each of the Finance Documents to “this Agreement”, “this Deed”, “hereunder and other like expressions as if the same referred to such Finance Documents as amended and supplemented by this First Supplemental Agreement.

5.3 Finance Documents to remain in full force and effect. The Finance Documents shall remain in full force and effect as amended and supplemented by:

(a) the amendments to the Finance Documents contained or referred to in Clauses 5.1 and 5.2; and

(b) such further or consequential modifications as may be necessary to make the same consistent with, and to give full effect to, the terms of this First Supplemental Agreement.

6 CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS

Save for the alterations to the Loan Agreement made or to be made pursuant to this First Supplemental Agreement and such further modifications (if any) thereto as may be necessary to make the same consistent with the terms of this First Supplemental Agreement, the Loan Agreement shall remain in full force and effect and the security constituted by the security Documents shall continue and remain valid and enforceable.

7 EXPENSES

The Borrowers agree to pay to the Lender upon demand and from time to time all costs, charges and expenses (including legal fees) incurred by the Lender in connection with the preparation, negotiation, execution and (if required) registration or preservation of rights under the enforcement or attempted enforcement thereof, this First Supplemental Agreement and the Finance Documents or otherwise in connection with the Loan or any part of thereof. Without prejudice to the foregoing, the Borrowers hereby irrevocably authorise the Lender to debit any of the Accounts with the amount necessary to settle the Lender’s lawyers’ legal fees and disbursements.

8 NOTICES

The provisions of Clause 27 (Notices) of the Loan Agreement shall apply to this First Supplemental Agreement as if the same were set out herein in full.

9 APPLICABLE LAW

9.1 This First Supplemental Agreement shall be governed by and construed in accordance with English law.

9.2 Subject to Clause 9.3, the courts of England shall have exclusive jurisdiction to settle any Disputes which may arise out of or in connection with this First Supplemental Agreement.

9.3 Clause 9.2 is for the exclusive benefit of the Lender which reserves the right:

(a) to commence proceedings in relation to any matter which arises out of or in connection with this First Supplemental Agreement in the courts of any country other than England and which have or claim jurisdiction to that matter; and

13

(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

None of the Borrowers shall commence any proceedings in any country other than England in relation to a matter which arises out of or in connection with this First Supplemental Agreement.

9.4 Each Borrower irrevocably appoints Ince Process Agents Ltd. for the time being presently of 5th Floor, International House, 1 St. Katharine’s Way, London E1W lAY, England for the time being to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this First Supplemental Agreement.

9.5 Nothing in this Clause 9 shall exclude or limit any right which the Lender may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

9.6 In this Clause 9, “proceedings” means proceedings of any kind, including an application for a provisional or protective measure.

IN WITNESS WHEREOF the parties hereto have caused this First Supplemental Agreement to be duly executed the day and year first above written.

BORROWERS		/s/ Alexandros Mylonas
SIGNED by	)
	)
for and on behalf of	)
BOONE STAR OWNERS INC.	)
/s/ Pat Skala PAT SKALA WATSON, FARLEY & WILLIAMS 89 AKTI MIAOULI in the presence of: PIRAEUS 185 38 - GREECE	)

SIGNED by	)	/s/ Alexandros Mylonas
	)
for and on behalf of	)
IOKASTI OWNING COMPANY LIMITED	)
/s/ Pat Skala PAT SKALA WATSON, FARLEY & WILLIAMS 89 AKTI MIAOULI in the presence of: PIRAEUS 185 38 - GREECE	)

LENDER		/s/ Jason Dallas        /s/ Krikor Janikian
SIGNED by	)
	)
for and on behalf of	)
PIRAEUS BANK A.E.	)
/s/ Pat Skala PAT SKALA WATSON, FARLEY & WILLIAMS 89 AKTI MIAOULI in the presence of: PIRAEUS 185 38 - GREECE	)

14

COUNTERSIGNED this 30 July 2009 by Dryships Inc. which, by its execution hereof confirms and acknowledges that it has read and understood the terms and conditions of the above First Supplemental Agreement, that it agrees in all respects to the same and that the Finance Documents to which each is a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrowers under the Loan Agreement.

/s/ Alexandros Mylonas

for and on behalf of

DRYSHIPS INC.

Dated 30 July 2009

15

EX-4.23

Exhibit 4.23

To: Iason Owing Company Limited

Trust Company Complex

Ajeltake Road

Ajeltake Island

Majuro

Marshall Islands MH96960

and

DryShips Inc.

Trust Company Complex

Ajeltake Road

Ajeltake Island

Majuro

Marshall Islands MH96960

24^th February 2010

Dear Sirs

US$47,000,000 loan facility to Iason Owing Company Limited

We refer to the facility agreement dated 16 November 2007 in connection with the above facility (the “Facility Agreement”). Words and expressions defined therein shall, unless the context otherwise requires or unless otherwise defined herein, have the same meanings when used in this letter.

Following our discussions and subject to documentation satisfactory in all respects to ourselves, we confirm that the Bank is prepared to agree to the following arrangements in connection with the Facility Agreement and the Security Documents:

1 to waive the application of clause 5.3 of the Corporate Guarantee for a period of commencing on the date of this letter and ending on 1^st January 2011 (the “Waiver Period”);

2 to waive the application of clause 8.3.1 of the Facility Agreement (in relation to financial covenants) for the Waiver Period;

3 to waive the application of clause 7.1.10 of the Facility Agreement in respect solely of the representation and warranty concerning the ultimate beneficial ownership of no less than 25% of the total issued voting share capital of the Corporate Guarantor, and, consequently, to waive the application of paragraph (b) of clause 10.1.28 of the Facility Agreement, in either case, until the final Repayment Date (the “Maturity Date”);

4 to waive the application of clause 4.1.10 of the Corporate Guarantee in respect solely of the representation and warranty concerning the ultimate beneficial ownership of no less than 25% of the total issued voting share capital of the Corporate Guarantor until the Maturity Date; and

5 to increase the Margin to three per cent (3.0%) per annum at all times during the period commencing on the date of this letter until the Bank notifies the Borrower that it has determined in its absolute and unfettered discretion that the international financial and credit markets have improved.

This letter and any non contractual obligations in connection with this letter shall be governed by, and construed in accordance with, English law.

The terms of this letter shall not take effect unless and until the Bank is provided with full documentation (including without limitation, a supplemental agreement to the Facility Agreement and any security documents required thereunder) on terms and conditions acceptable to the Bank in all respect and in form acceptable to the Bank in its sole discretion.

ATH-#2747395-v1

K.A. 8331/03.08

/s/ Lambros Theodorou

Signed by: Lambros Theodorou

for and on behalf of

EFG EUROBANK ERGASIAS S.A.

/s/ Marina Tzoutzouraki

Signed by: Marina Tzoutzouraki

for and on behalf of

EFG EUROBANK ERGASIAS S.A.

We agree to the above.

/s/ Illegible

Signed by:

for and on behalf of

IASON OWNING COMPANY LIMITED

Dated:

Acknowledged by:

/s/ Illegible

for and on behalf of

DRYSHIPS INC.

Dated:

ATH-#2747395-v1

K.A. 8331/03.08

2

EX-4.25

Exhibit 4.25

Private & Confidential

Dated 11 June 2009

SUPPLEMENTAL AGREEMENT

relating to a

loan of up to US$101,150,000

to

TEAM-UP OWNING COMPANY LIMITED

and

ORPHEUS OWNING COMPANY LIMITED

provided by

THE BANKS AND FINANCIAL INSTITUTIONS SET OUT IN SCHEDULE 1

Arranger, Agent, Security Agent and Account Bank

DNB NOR BANK ASA

Swap Provider

DNB NOR BANK ASA

Contents

Clause	Page
1       Definitions	2
2       Agreement of Creditors	4
3       Amendments	5
4       Representations and warranties	9
5       Conditions	10
6       Relevant Parties’ confirmation	11
7       Expenses	11
8       Miscellaneous and notices	12
9       Applicable law	12
Schedule 1 The Banks	14
Schedule 2 Documents and evidence required as conditions precedent	15
Schedule 3 Form of Charter Assignment	17

THIS SUPPLEMENTAL AGREEMENT is dated 11 June 2009 and made BETWEEN:

(1) TEAM-UP OWNING COMPANY LIMITED, a corporation incorporated under the laws of the Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (“Team-Up”);

(2) ORPHEUS OWNING COMPANY LIMITED, a corporation incorporated under the laws of the Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (“Orpheus” and, together with Team-Up, the “Borrowers”);

(3) DRYSHIPS INC., a corporation incorporated under the laws of the Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the “Corporate Guarantor”);

(4) CARDIFF MARINE INC., a corporation incorporated in the Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, Liberia (the “Manager”);

(5) THE BANKS AND FINANCIAL INSTITUTIONS whose names and addresses are set out in schedule 1 (together the “Banks” and each a “Bank”);

(6) DNB NOR BANK ASA, a company incorporated in Norway with its registered office at Stranden 21, P.O. Box 1171 Sentrum N-0107 Oslo, Norway, acting for the purposes of this Agreement through its branch at 20 St. Dunstan’s Hill, London EC3R 8HY, England as arranger (in such capacity the “Arranger”), agent (in such capacity the “Agent”), security agent (in such capacity the “Security Agent”) and account bank (in such capacity the “Account Bank”); and

(7) DNB NOR BANK ASA, a company incorporated in Norway with its registered office at Stranden 21, P.O. Box 1171 Sentrum N-0107 Oslo, Norway, acting for the purposes of this Agreement through its branch at 20 St. Dunstan’s Hill, London EC3R 8HY, England as swap provider (in such capacity the “Swap Provider”).

WHEREAS:

(A) this Agreement is supplemental to:

(a) a loan agreement dated 4 December 2007 (the “Principal Agreement”) made between the Borrowers as joint and several borrowers, the Banks as lenders, the Arranger, the Agent, the Security Agent, the Account Bank and the Swap Provider, pursuant to which the Banks agreed (inter alia) to advance (and have advanced) by way of loan to the Borrowers, upon the terms and conditions therein contained, the principal sum of One hundred and one million one hundred and fifty thousand Dollars ($101,150,000) of which the principal amount outstanding at the date hereof is $85,525,000; and

(b) a corporate guarantee dated 4 December 2007 (the “Principal Corporate Guarantee”) made between the Corporate Guarantor and the Security Agent in respect of the obligations of the Borrowers to the Creditors under the Principal Agreement and the Master Swap Agreement;

(B) this Agreement sets out the terms and conditions upon which the Creditors agree, at the request of the Borrowers:

(a) to waive the application of clause 8.2.1 of the Principal Agreement for a certain period specified herein;

(b) to waive the application of clause 5.3 of the Principal Corporate Guarantee for a certain period specified herein;

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(c) to certain other amendments to the terms and conditions applicable to the Loan, the Principal Agreement and the Principal Corporate Guarantee and agreed to by the Borrowers, the Corporate Guarantor and the Creditors; and

(d) to certain consequential changes to the Principal Agreement and the Principal Corporate Guarantee required in connection with the above and agreed to by the Borrowers, the Corporate Guarantor and the Creditors.

NOW IT IS HEREBY AGREED as follows:

1. Definitions

1.1 Defined expressions

Words and expressions defined in the Principal Agreement shall unless the context otherwise requires or unless otherwise defined herein, have the same meanings when used in this Agreement.

1.2 Definitions

In this Agreement, unless the context otherwise requires:

“Avoca Charter” means the charter contract dated 3 September 2008 in respect of Avoca made between Cosco Qingdao (Qingdao Ocean Shipping Company, Limited) of the Republic of China as charterer and Orpheus as owner, which contract is, on the date of this Agreement, incorporated in a recapitulation email dated 3 September 2008 addressed by Simpson Spence & Young (being the said charterer’s brokers) acting on behalf of the said charterer to Orpheus;

“Avoca Charter Assignment” means the first priority assignment of the Avoca Charter executed or (as the context may require) to be executed by Orpheus in favour of the Security Agent in the form set out in schedule 3;

“Charter Assignments” means, together, the Avoca Charter Assignment and the Saldanha Charter Assignment and “Charter Assignment” means either of them;

“Charters” means, together, the Avoca Charter and the Saldanha Charter and “Charter” means either of them;

“Corporate Guarantee” means the Principal Corporate Guarantee as amended by this Agreement;

“Effective Date” means the date falling no later than 12 June 2009, on which the Agent notifies the Borrowers in writing that it has received the documents and evidence specified in clause 5 and schedule 2 in a form and substance satisfactory to it;

“Loan Agreement” means the Principal Agreement as amended by this Agreement;

“Relevant Documents” means, together, this Agreement and the Charter Assignments;

“Relevant Parties” means, together, the Borrowers, the Manager and the Corporate Guarantor;

“Saldanha Charter” means the charter contract dated 25 June 2008 in respect of Saldanha made between Cosco Bulk Carriers Co. Ltd. of the Republic of China as charterer and Team-Up as owner, which contract is, on the date of this Agreement, incorporated in a recapitulation email dated 25 June 2008 addressed by Genoa Sea Brokers SPA (being the said charterer’s brokers) acting on behalf of the said charterer to Team-Up;

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“Saldanha Charter Assignment” means the first priority assignment of the Saldanha Charter executed or (as the context may require) to be executed by Team-Up in favour of the Security Agent in the form set out in schedule 3; and

“Waiver Period” means the period of twenty four (24) months commencing on 19 May 2009.

1.3 Principal Agreement and Principal Corporate Guarantee

1.3.1 References in the Principal Agreement to “this Agreement” shall, with effect from the Effective Date and unless the context otherwise requires, be references to the Principal Agreement as amended by this Agreement and words such as “herein”, “hereof”, “hereunder”, “hereafter”, “hereby” and “hereto”, where they appear in the Principal Agreement, shall be construed accordingly.

1.3.2 References in the Principal Corporate Guarantee to “this Guarantee”, shall with effect from the Effective Date and unless the context otherwise requires, be references to the Principal Corporate Guarantee as amended by this Agreement and words such as “herein”, “hereof”, “hereunder”, “hereafter”, “hereby” and “hereto”, where they appear in the Principal Corporate Guarantee, shall be construed accordingly.

1.4 Headings

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement.

1.5 Construction of certain terms

In this Agreement, unless the context otherwise requires:

1.5.1 references to clauses and schedules are to be construed as references to clauses of, and schedules to, this Agreement and references to this Agreement includes its schedules;

1.5.2 references to (or to any specified provision of) this Agreement or any other document shall be construed as references to this Agreement, that provision or that document as in force for the time being and as amended in accordance with terms thereof, or, as the case may be, with the agreement of the relevant parties;

1.5.3 references to a “regulation” include any present or future regulation, rule, directive, requirement, request or guideline (whether or not having the force of law) of any agency, authority, central bank or government department or any self-regulatory or other national or supra-national authority;

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

1.5.5 references to a time of day are to London time;

1.5.6 references to a person shall be construed as references to an individual, firm, company, corporation, unincorporated body of persons or any Government Entity;

1.5.7 references to a “guarantee” include references to an indemnity or other assurance against financial loss including, without limitation, an obligation to purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and “guaranteed” shall be construed accordingly; and

1.5.8 references to any enactment shall be deemed to include references to such enactment as re-enacted, amended or extended.

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2 Agreement of Creditors

2.1 The Creditors and the Relevant Parties hereby agree and acknowledge that:

(a) on the date of this Agreement the Security Value is less than the Security Requirement and that the Banks are entitled under clause 8.2.1 of the Principal Agreement to require from the Borrowers that such deficiency be remedied in the manner specified therein; and

(b) the Corporate Guarantor is in breach of the financial covenants set out in clause 5.3 of the Principal Corporate Guarantee.

The Borrowers and the other Relevant Parties have requested that the Creditors waive (i) the application of clause 8.2.1 of the Principal Agreement and clause 5.3 of the Principal Corporate Guarantee and (ii) the current breach of clause 5.3 of the Principal Corporate Guarantee.

2.2 The Banks, relying upon the representations and warranties on the part of the Relevant Parties contained in clause 4, agree with the Borrowers and the Corporate Guarantor that, subject to the terms and conditions of this Agreement and in particular, but without prejudice to the generality of the foregoing, fulfilment on or before 12 June 2009 of the conditions contained in clause 5 and schedule 2, the Creditors, with effect on the Effective Date:

2.2.1 waive for the Waiver Period:

(a) the application of clause 8.2.1 of the Loan Agreement Provided however that, for the avoidance of doubt, such waiver shall not prejudice the Banks’ right to demand compliance by the Borrowers, and the Borrowers’ obligation to comply, with such clause immediately after the end of Waiver Period; and

(b) the application of clause 5.3 of the Corporate Guarantee Provided however that, for the avoidance of doubt, such waiver shall not prejudice the Security Agent’s and/or the Agent’s and/or the Banks’ right to demand compliance by the Corporate Guarantor, and the Corporate Guarantor’s obligation to comply, with such clause immediately after the end of the Waiver Period,

Provided further that, within thirty (30) days from the cancellation, frustration or termination (other than expiry by mere effluxion of same) of either Charter, the waivers of the application of clause 8.2.1 of the Loan Agreement and clause 5.3 of the Corporate Guarantee contained in this clause 2.2.1 shall immediately cease, and such clauses shall apply with immediate effect unless within such thirty (30) day period:

(i) the Borrowers and the Corporate Guarantor have presented in writing to the Agent an alternative remedial plan for the purpose of ensuring compliance with clause 8.2.1 of the Loan Agreement and clause 5.3 of the Corporate Guarantee at all times until all amounts owing under the Security Documents have been repaid in full; and

(ii) the Agent has advised in writing the Borrowers and the Corporate Guarantor that such plan is in all respects acceptable and satisfactory to the Agent in its absolute and unfettered discretion and the Relevant Parties or any other persons have complied in full with any terms imposed by the Agent in its absolute and unfettered discretion as a condition to accepting such plan;

2.2.2 waive the breach of clause 5.3 of the Corporate Guarantee existing on the date of this Agreement Provided however that, for the avoidance of doubt, such waiver shall not prejudice the Security Agent’s and/or the Agent’s and/or the Banks’ right to demand compliance by the Corporate Guarantor, and the Corporate Guarantor’s obligation to comply, with such clause at any time in the future (but subject to the terms of clause 2.2.1 above);

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2.2.3 consent and agree to the amendment of the Principal Agreement on the terms set out in clause 3.1; and

2.2.4 consent and agree to the amendment of the Principal Corporate Guarantee on the terms set out in clause 3.2.

3 Amendments

3.1 Amendments to Principal Agreement and Principal Corporate Guarantee

The Principal Agreement shall, with effect on and from the Effective Date, be (and it is hereby) amended in accordance with the following provisions (and the Principal Agreement (as so amended) will continue to be binding upon each of the parties hereto upon such terms as so amended):

3.1.1 by inserting in clause 1.2 of the Principal Agreement the following new definitions of “Avoca Charter”, “Avoca Charter Assignment”, “Avoca Charterer”, “Basel 2 Accord”, “Basel 2 Approach”, “Basel 2 Regulation”, “Capital Adequacy Law”, “Charter Assignments”, “Charters”, “Excess Cash”, “Excess Cash Calculation Date”, “Long-Term Charter”, “Saldanha Charter”, “Saldanha Charter Assignment”, “Saldanha Charterer”, “Security Period” and “Supplemental Agreement” in the correct alphabetical order:

““Avoca Charter” means the charter contract dated 3 September 2008 in respect of Avoca made between the Avoca Charterer as charterer and the Avoca Borrower as owner, which contract is, on the date of the Supplemental Agreement, incorporated in a recapitulation email dated 3 September 2008 addressed by Simpson Spence & Young (being the Avoca Charterer’s brokers) acting on behalf of the Avoca Charterer to the Avoca Borrower;”;

““Avoca Charter Assignment” means the first priority charter assignment of the Avoca Charter executed or (as the context may require) to be executed by the Avoca Borrower in favour of the Security Agent in the form set out in schedule 3 of the Supplemental Agreement;”;

““Avoca Charterer” means Cosco Qingadao (Qingdao Ocean Shipping Company, Limited) of the People’s Republic of China and includes its successors in title;”;

““Basel 2 Accord” means the “International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement;”;

““Basel 2 Approach” means either the Standardised Approach or the relevant Internal Ratings Based Approach (each as defined in the Basel 2 Accord) adopted by a Bank (or its holding company) for the purposes of implementing or complying with the Basel 2 Accord;”;

““Basel 2 Regulation” means (a) any law or regulation implementing the Basel 2 Accord or (b) any Basel 2 Approach adopted by a Bank;”;

““Capital Adequacy Law” means any law or any regulation (whether or not having the force of law, but, if not having the force of law, with which a Bank or, as the case may be, its holding company habitually complies), including (without limitation) those relating to Taxation, capital adequacy, liquidity, reserve assets, cash ratio deposits and special deposits or other banking or monetary controls or requirements which affect the manner in which a Bank allocates capital resources to its obligations hereunder (including, without limitation, those resulting from the implementation or application of or compliance with the Basel 2 Accord or any Basel 2 Regulation);”;

““Charter Assignments” means, together, the Avoca Charter Assignment and the Saldanha Charter Assignment and “Charter Assignment” means either of them;”;

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““Charters” means, together, the Avoca Charter and the Saldanha Charter and “Charter” means either of them;”;

““Excess Cash” means, in relation to an Operating Account as at each Excess Cash Calculation Date, the funds (as determined by the Agent in its absolute discretion) in excess of $3,500,000 standing to the credit of such Operating Account on such date;

““Excess Cash Calculation Date” means each of 31 March, 30 June, 30 September and 31 December of each calendar year (but commencing with 30 June 2009);”

““Long-Term Charter” means, in respect of a Ship, any time or voyage charterparty of that Ship for a term which exceeds or by virtue of any optional extensions therein contained might exceed twelve (12) months’ duration and which is entered into by the relevant Borrower with a charterer of its Ship at any time during the Security Period, and it includes each Charter;”;

““Saldanha Charter” means the charter contract dated 25 June 2008 in respect of Saldanha made between the Saldanha Charterer as charterer and the Saldanha Borrower as owner, which contract is, on the date of the Supplemental Agreement, incorporated in a recapitulation email dated 25 June 2008 addressed by Genoa Sea Brokers SPA (being the Saldanha Charterer’s brokers) acting on behalf of the Saldanha Charterer to the Saldanha Borrower;”;

““Saldanha Charter Assignment” means the first priority charter assignment of the Saldanha Charter executed or (as the context may require) to be executed by the Saldanha Borrower in favour of the Security Agent in the form set out in schedule 3 of the Supplemental Agreement;”;

““Saldanha Charterer” means Cosco Bulk Carriers Co. Ltd. of the People’s Republic of China and includes its successors in title;”;

““Security Period” means the period commencing on the date of this Agreement and ending when all moneys owing under this Agreement and the other Security Documents have been repaid in full;”;

““Supplemental Agreement” means the agreement dated 11 June 2009 made between (inter alios) the Borrowers and the Creditors supplemental to this Agreement;”;

3.1.2 by deleting the definition of “Equity Ratio” in clause 1.2 of the Principal Agreement in its entirety;

3.1.3 by deleting the definition of “Margin” in clause 1.2 of the Principal Agreement and by inserting in its place the following new definition of “Margin”:

““Margin” means two per cent (2%) per annum;”;

3.1.4 by deleting the definitions of “Margin Calculation Date”, “Margin Period” and “Measurement Period” in clause 1.2 of the Principal Agreement in their entirety;

3.1.5 by inserting the words“, the Supplemental Agreement, the Charter Assignments,” after the words “this Agreement”, in the first line of the definition of “Security Documents” in clause 1.2 of the Principal Agreement;

3.1.6 by inserting the words “, the Charters, any other Long-Term Charter” after the words “the Management Agreements” in the first line of the definition of “Underlying Documents” in clause 1.2 of the Principal Agreement;

3.1.7 by inserting at the end of clause 1.4.3 of the Principal Agreement the following words: “and, for the avoidance of doubt, shall include any Basel 2 Regulation”;

3.1.8 by deleting clause 3.1.2 in its entirety, by deleting the heading “General” in the existing clause 3.1.1 and by renumbering the existing clause 3.1.1 as clause 3.1;

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3.1.9 by adding after the word “agree” in the penultimate line of clause 3.2 of the Principal Agreement the following new words:

“Provided that the Borrowers may not select more than three (3) Interest Periods having a duration of one (1) month within the same calendar year”;

3.1.10 by amending the words “pursuant to clauses 4.3, 8.3.1(a) or 12.1” in the fifteenth line of clause 3.4 of the Principal Agreement to read “pursuant to clauses 4.3, 8.3.1(a), 8.4 or 12.1”;

3.1.11 by adding after the words “proportionately.” in the penultimate line of clause 4.5 of the Principal Agreement and immediately before the subsequent sentence, the following new sentence:

“Any amount prepaid pursuant to clause 8.4 shall be applied in reducing proportionately those repayment instalments under clause 4.1 (including the Balloon Instalments) which fall due on or after 23 July 2012.”;

3.1.12 by deleting clauses 7.2.13(b) and 7.2.13(c) in their entirety and by inserting a “.” instead of the “;” at the end of the remaining clause 7.2.13(a);

3.1.13 by deleting clause 8.1.14 of the Principal Agreement in its entirety and by replacing it with the following new clause 8.1.14:

“8.1.14 Charters

without prejudice to the rights of the Banks under the provisions of the relevant Ship Security Documents, advise the Agent promptly of any Long-Term Charter in respect of a Ship (other than the Charters) and (a) forthwith after its execution deliver a certified copy of each such Long-Term Charter to the Agent, (b) forthwith following demand by the Agent execute an assignment of such Long-Term Charter in favour of the Security Agent in the form or substantially the form of the Charter Assignments and any notice of assignment required in connection therewith and immediately after the Agent’s demand following an Event of Default give such notice to the relevant charterer and procure that within seven (7) days after the service of such notice of assignment on such charterer, the relevant charterer provides its acknowledgement of such notice in writing and in the form required by such assignment and (c) pay all legal and other costs incurred by the Agent or any other Creditor in connection with any such charter assignments; and”;

3.1.14 by deleting clause 8.3.12 in its entirety and by replacing it with the following new clause 8.3.12:

“8.3.12 Share capital and distribution

purchase or otherwise acquire for value any shares of their capital or declare or pay any dividends or distribute any of their present or future assets, undertaking, rights or revenues to any of their shareholders;”;

3.1.15 by inserting after clause 8.3.16 of the Principal Agreement the following new clause 8.4:

“8.4 Excess Cash recapture

8.4.1 On the first Interest Payment Date falling after each Excess Cash Calculation Date, the Borrowers shall prepay to the Agent (for the account of the Banks) such part of the Loan as is equal to the aggregate amount of the Excess Cash in relation to each of the Operating Accounts as at such Excess Cash Calculation Date. From each such Excess Cash Calculation Date until the due date of the relevant prepayment, the Borrowers undertake to maintain in each Operating Account, a minimum cash balance of no less than the amount to be prepaid on such date of prepayment.

8.4.2 The provisions of clause 4.4 and any relevant provisions of clause 4.5 shall apply to any prepayments made under this clause 8.4.

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8.4.3 Notwithstanding the provisions of this clause 8.4, the provisions of clause 14.3 shall continue to apply at all times (but, in relation to withdrawals under clause 14.3.4, subject always to the prohibitions and restrictions of clause 8.3.12).”;

3.1.16 by amending the words “under clauses 8.1.5, 8.2 or 8.3” in the eighth and ninth lines of clause 10.1.3 of the Principal Agreement to read “under clauses 8.1.5, 8.2, 8.3 or 8.4”;

3.1.17 by deleting clause 10.1.28 of the Principal Agreement in its entirety and by replacing it with the following new clause 10.1.28:

“10.1.28 Shareholdings: there is any change in the legal and/or ultimate beneficial ownership of any of the shares in any of the Borrowers, the Corporate Guarantor, the Manager or any of them such that either of the Borrowers ceases to be a wholly-owned direct subsidiary of the Corporate Guarantor; or”;

3.1.18 by inserting after clause 10.1.32 of the Principal Agreement the following new clause 10.1.33 and by deleting the symbol “.” at the end of clause 10.1.32 of the Principal Agreement and replacing it with the words “; or”:

“10.1.33 Termination of Charter: either Charter is cancelled or terminated or becomes frustrated for any reason whatsoever (other than expiry by effluxion of time or the relevant Ship becoming a Total Loss) unless within thirty (30) days of any such event occurring:

(a) the Borrowers and the Corporate Guarantor have presented to the Agent in writing an alternative remedial plan for the purpose of ensuring compliance with clause 8.2.1 of this Agreement and clause 5.3 of the Corporate Guarantee at all times throughout the Security Period; and

(b) the Agent has advised the Borrowers and the Corporate Guarantor in writing that such plan is in all respects acceptable and satisfactory to the Agent in its absolute and unfettered discretion and the Borrowers or any other persons have complied in full with any terms imposed by the Agent in its absolute and unfettered discretion as a condition to accepting such plan;”;

3.1.19 by amending the words “under clauses 4.2, 4.3, 4.4, 8.2.1 or 12.1” in the first and beginning of the second line of clause 11.1.3 to read “under clauses 4.2, 4.3, 4.4, 8.2.1, 8.4 or 12.1”; and

3.1.20 by deleting in clause 12.2 of the Principal Agreement the words “any law or any regulation, request or requirement (whether or not having the force of law, but, if not having the force of law, with which a Bank or, as the case may be, its holding company habitually complies), including (without limitation) those relating to Taxation, capital adequacy, liquidity, reserve assets, cash ratio deposits and special deposits” and by inserting in their place the words “any Capital Adequacy Law or of compliance by a Bank with any Capital Adequacy Law”.

3.2 Amendments to Principal Corporate Guarantee

The Principal Corporate Guarantee shall with effect on and from the Effective Date be (and it is hereby) amended in accordance with the following provisions (and the Principal Corporate Guarantee (as so amended) will continue to be binding upon each of the parties hereto upon such terms as so amended):

3.2.1 by deleting clauses 4.2.7(b) and 4.2.7(c) in their entirety and by inserting a “.” instead of the “;” at the end of the remaining clause 4.2.7(a);

3.2.2 by adding after the words “and operating vessels” in the penultimate line of clause 5.2.1 of the Principal Corporate Guarantee the words “as well as of making other investments in the shipping and oil gas industry”;

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3.2.3 by inserting at the end of clause 5.2.2 of the Principal Corporate Guarantee the following words:

“save for (a) the reorganisation and spin-off of the drillship activities of the Group into another company and the subsequent listing of that company and such business on NYSE or NASDAQ and (b) the redomiciliation of that company owing such business to the Marshall Islands, in each case as described and carried out in the manners described and disclosed in writing, by or on behalf of the Guarantor to the Agent prior to the date of the Supplemental Agreement;”; and

3.2.4 by deleting clause 5.2.6 of the Principal Corporate Guarantee in its entirety and by replacing it with the following new clause 5.2.6:

5.2.6 Share Capital and distribution

(a) during the period from 19 May 2009 until 19 May 2011, purchase or otherwise acquire for value any shares of its capital or declare, pay or make any cash dividends or cash distributions to any of its shareholders; and

(b) from 20 May 2011 and at all times thereafter, purchase or otherwise acquire for value any shares of its capital or declare, pay or make any cash dividends or cash distributions to any of its shareholders Provided always that the Guarantor may declare, pay or make any cash dividends or cash distributions to any of its shareholders if (i) the aggregate cash dividends or cash distributions in respect of any financial year do not exceed fifty per cent (50%) of its Net Income for such financial year, (ii) the Guarantor is not in any breach of any of the undertakings expressed to be assumed by it in clause 5.3 and (iii) no other Event of Default shall have occurred at the time of or would occur as a result of, declaration, payment or making of such cash dividends or cash distributions.”.

3.3 Continued force and effect

Save as amended by this Agreement, the provisions of the Principal Agreement, the Principal Corporate Guarantee and the other Security Documents shall continue in full force and effect and (a) the Principal Agreement and this Agreement shall be read and construed as one instrument and (b) the Principal Corporate Guarantee and this Agreement shall be read and construed as one instrument.

4 Representations and warranties

4.1 Primary representations and warranties

Each Relevant Party represents and warrants to the Creditors that:

4.1.1 Existing representations and warranties

the representations and warranties set out in clause 7 of the Principal Agreement and clause 4 of the Principal Corporate Guarantee were true and correct on the date of the Principal Agreement and the Principal Corporate Guarantee, respectively, and are true and correct, including to the extent that they may have been or shall be amended by this Agreement, as if made at the date of this Agreement with reference to the facts and circumstances existing at such date;

4.1.2 Corporate power

each of the Relevant Parties has power to execute, deliver and perform its obligations under the Relevant Documents to which it is or is to be a party; all necessary corporate, shareholder and other action has been taken by each of the Relevant Parties to authorise the execution, delivery and performance of the Relevant Documents to which it is or is to be a party;

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4.1.3 Binding obligations

the Relevant Documents to which it is or is to be a party constitute valid and legally binding obligations of each of the Relevant Parties enforceable in accordance with their terms;

4.1.4 No conflict with other obligations

the execution, delivery and performance of the Relevant Documents to which it is or is to be a party by each of the Relevant Parties will not (i) contravene any existing law, statute, rule or regulation or any judgment, decree or permit to which any of the Relevant Parties is subject, (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which any of the Relevant Parties is a party or is subject or by which any of the Relevant Parties or any of its property is bound or (iii) contravene or conflict with any provision of the constitutional documents of any of the Relevant Parties or (iv) result in the creation or imposition of or oblige any of the Relevant Parties to create any Encumbrance on any of their undertakings, assets, rights or revenues of any of the Relevant Parties;

4.1.5 No filings required

it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of any of the Relevant Documents that they or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewhere in any Relevant Jurisdiction or that any stamp, registration or similar tax or charge be paid in any Relevant Jurisdiction on or in relation to the Relevant Documents and each of the Relevant Documents is in proper form for its enforcement in the courts of the Relevant Jurisdiction;

4.1.6 Choice of law

the choice of English law to govern the Relevant Documents and the submissions by the Relevant Parties to the non-exclusive jurisdiction of the English courts are valid and binding; and

4.1.7 Consents obtained

every consent, authorisation, licence or approval of, or registration or declaration to, governmental or public bodies or authorities or courts required by any of the Relevant Parties in connection with the execution, delivery, validity, enforceability or admissibility in evidence of the Relevant Documents to which it is or is to be a party or the performance by each Relevant Party of its obligations under such document has been obtained or made and is in full force and effect and there has been no default in the observance of any conditions or restrictions (if any) imposed in, or in connection with, any of the same.

4.2 Repetition of representations and warranties

Each of the representations and warranties contained in clause 4.1 of this Agreement, clause 7 of the Principal Agreement (as amended by this Agreement) and clause 4 of the Principal Corporate Guarantee shall be deemed to be repeated by each Relevant Party on the Effective Date as if made with reference to the facts and circumstances existing on such day.

5 Conditions

5.1 Documents and evidence

The agreements and waivers of the Creditors referred to in clause 2 shall be subject to the receipt by the Agent or its duly authorised representative of the documents and evidence specified in schedule 2 in form and substance satisfactory to the Agent.

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5.2 General conditions precedent

The agreements and the waivers of the Creditors referred to in clause 2 shall be further subject to:

5.2.1 the representations and warranties in clause 4 being true and correct on the Effective Date as if each were made with respect to the facts and circumstances existing at such time; and

5.2.2 no Default (other than those described in clause 2.1) having occurred and continuing at the time of the Effective Date.

5.3 Waiver of conditions precedent

The conditions specified in this clause 5 are inserted solely for the benefit of the Creditors and may be waived by the Agent in whole or in part with or without conditions.

6 Relevant Parties’ confirmation

6.1 Security Documents

Each of the Relevant Parties acknowledges and agrees, for the avoidance of doubt, that:

6.1.1 each of the Security Documents to which it is a party, and its obligations thereunder, shall remain in full force and effect notwithstanding the amendments made to the Principal Agreement and the Principal Corporate Guarantee by this Agreement and the waivers and other amendments agreed by the Creditors in this Agreement; and

6.1.2 with effect from the Effective Date, references to “the Agreement” or “the Loan Agreement” or the “Corporate Guarantee” or the “Guarantee” in any of the other Security Documents to which it is a party shall henceforth be references to the Principal Agreement and the Principal Corporate Guarantee, respectively, as each amended by this Agreement and, in each case, as from time to time hereafter amended.

7 Expenses

7.1 Expenses

The Borrowers jointly and severally agree to pay to the Agent on a full indemnity basis on demand all expenses (including legal and out-of-pocket expenses) incurred by the Creditors:

7.1.1 in connection with the negotiation, preparation, execution and, where relevant, registration of the Relevant Documents and of any amendment or extension of, or the granting of any waiver or consent under, the Relevant Documents; and

7.1.2 in contemplation of, or otherwise in connection with, the enforcement of, or preservation of any rights under the Relevant Documents or otherwise in respect of the monies owing and obligations incurred under the Relevant Documents, together with interest at the rate referred to in clause 3.4 of the Principal Agreement from the date on which such expenses were incurred to the date of payment (as well after as before judgement).

7.2 Value Added Tax

All expenses payable pursuant to this clause 7 shall be paid together with value added tax or any similar tax (if any) properly chargeable thereon.

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7.3 Stamp and other duties

The Borrowers jointly and severally agree to pay to the Agent on demand all stamp, documentary, registration or other like duties or taxes (including any duties or taxes payable by the Creditors or any of them) imposed on or in connection with this Agreement and shall indemnify the Creditors against any liability arising by reason of any delay or omission by the Borrowers to pay such duties or taxes.

8 Miscellaneous and notices

8.1 Notices

The provisions of clause 17.1 of the Principal Agreement shall extend and apply to the giving or making of notices or demands hereunder as if the same were expressly stated herein and for this purpose any notices to be sent to the Corporate Guarantor or the Manager shall be sent to the address of the Corporate Guarantor referred to in clause 8.1 of the Principal Corporate Guarantee:

8.2 Counterparts

This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts, each of which when so executed and delivered shall be an original but all counterparts shall together constitute one and the same instrument.

8.3 Joint and several liability

Notwithstanding anything to the contrary contained in this Agreement, the agreements, obligations and liabilities of the Borrowers herein contained are joint and several and shall be construed accordingly. Each of the Borrowers agrees and consents to be bound by this Agreement notwithstanding that the other Borrower which was intended to sign or be bound may not do so or be effectual bound and notwithstanding that this Agreement may be invalid or unenforceable against the other Borrower whether or not the deficiency is known to the Creditors or any of them. The Banks shall be at liberty to release either of the Borrowers from this Agreement and to compound with or otherwise vary the liability or to grant time and indulgence to make other arrangements with either of the Borrowers without prejudicing or affecting the rights and remedies of the Creditors or any of them against the other Borrower.

9 Applicable law

9.1 Law

This Agreement (and any non-contractual obligation connected with it) is governed by, and shall be construed in accordance with, English law.

9.2 Submission to jurisdiction

Each of the Relevant Parties agrees, for the benefit of each Creditor, that any legal action or proceedings arising out of or in connection with this Agreement (or any non-contractual obligation connected with it) against any of their assets may be brought in the English courts. Each of the Relevant Parties irrevocably and unconditionally submits to the jurisdiction of such courts and irrevocably designates, appoints and empowers Ince & Co. at present of International House, 1 St. Katharine’s Way, London E1W 1AY, England to receive for it and on its behalf, service of process issued out of the English courts in any such legal action or proceedings. The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of any Creditor to take proceedings against any of the Relevant Parties in the courts of any other competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. Each of the Relevant Parties further agrees that only the courts of England and not those of any other state shall have jurisdiction to determine any claim which any of the Relevant Parties may have against any Creditor arising out of or in connection with this Agreement (or any non-contractual obligation connected with it).

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9.3 Contracts (Rights of Third Parties) Act 1999

No term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Agreement.

IN WITNESS whereof the parties to this Agreement have caused this Agreement to be duly executed as a deed on the date first above written.

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Schedule 1

The Banks

DnB NOR Bank ASA	20 St. Dunstan’s Hill
	London EC3R 8HY
	England
	Fax no:  +44 207 626 5956
	Att:        Shipping Department

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Schedule 2

Documents and evidence required as conditions precedent

(referred to in clause 5.1)

1 Corporate authorisations

In relation to each of the Relevant Parties:

(a) Constitutional documents

copies certified by an officer of each of the Relevant Parties, as a true, complete and up to date copies, of all documents which contain or establish or relate to the constitution of that party or a secretary’s certificate confirming that there have been no changes or amendments to the constitutional documents certified copies of which were previously delivered to the Agent pursuant to the Principal Agreement;

(b) Resolutions

copies of resolutions of each of its board of directors and its shareholders approving this Agreement and the other Relevant Documents and the terms and conditions hereof and thereof and authorising the signature, delivery and performance of each such party’s obligations thereunder, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Relevant Party as:

(1) being true and correct;

(2) being duly passed at meetings of the directors of such Relevant Party and, as the case may be, of the shareholders of such Relevant Party each duly convened and held;

(3) not having been amended, modified or revoked; and

(4) being in full force and effect,

together with originals or certified copies of any powers of attorney issued by any party pursuant to such resolutions; and

(c) Certificate of incumbency

a list of directors and officers of each Relevant Party specifying the names and positions of such persons, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Relevant Party to be true, complete and up to date;

2 Consents

a certificate (dated no earlier than five (5) Banking Days prior to the date of this Agreement) from an officer of each of the Relevant Parties stating that no consents, authorisations, licences or approvals are necessary for such Relevant Party to authorise, or are required by each of the Relevant Parties or any other party (other than the Creditors) in connection with, the execution, delivery, and performance of this Agreement and the other Relevant Documents to which such Relevant Party is or is to be a party;

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3 Relevant Documents

the Charter Assignments and any notices of assignment required thereunder, each by the relevant Borrower duly executed;

4 Charters

a copy of each Charter;

5 Legal opinions

such legal opinions in relation to the laws of the Republic of the Marshall Islands and the laws of the Republic of Liberia and any other legal opinions as the Agent shall in its absolute discretion require; and

6 Process agent

a letter from each Relevant Party’s agent for receipt of service of proceedings accepting its appointment under this Agreement and the other Relevant Documents to which such Relevant Party is or is to be a party as such Relevant Party’s process agent.

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Schedule 3

Form of Charter Assignment

17

Private & Confidential

Dated     June 2009

TEAM-UP OWNING COMPANY LIMITED

and

DNB NOR BANK ASA

CHARTER ASSIGNMENT

m.v. Saldanha

Contents

Clause	Page
1       Definitions	2
2       Warranty	4
3       Assignment and application of money	4
4       Undertakings	5
5       Continuing security	6
6       Powers of Mortgagee	7
7       Attorney	7
8       Further assurance	8
9       Notices	8
10     Law, jurisdiction and other provisions	8
Schedule 1 Forms of Notice of Assignment of Charter	10

THIS ASSIGNMENT is made the      day of June 2009 BETWEEN:

1 TEAM-UP OWNING COMPANY LIMITED, a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the “Owner”); and

2 DNB NOR BANK ASA, a company incorporated in Norway with its registered office at Stranden 21, P.O. Box 1171 Sentrum N-0107 Oslo, Norway, acting for the purposes of this Assignment through its branch at 20 St. Dunstan’s Hill, London EC3R 8HY, England as security agent and trustee for and on behalf of the other Secured Creditors (as this term is defined herebelow) (the “Mortgagee”).

WHEREAS:

(A) by a charterparty contract dated 25 June 2008 made between (1) Cosco Bulk Carriers Co. Ltd. of the People’s Republic of China (the “Charterer”) and (2) the Owner, which contract is on the date of this Agreement, incorporated in a recapitulation email dated 25 June 2008 addressed by Genoa Sea Brokers SPA the Charterer’s brokers acting on behalf of the Charterer to the Owner (the “Charter”), the Owner agreed to let to the Charterer, and the Charterer agreed to take on time charter, for the period and upon the terms and conditions therein mentioned, the Ship (as hereinafter defined);

(B) by a loan agreement dated 4 December 2007 as amended from time to time (the “Loan Agreement”) and made between (1) the Owner and Orpheus Owning Company Limited as joint and several borrowers (therein and herein together referred to as the “Borrowers”), (2) DnB NOR Bank ASA as arranger, (3) DnB NOR Bank ASA as agent (in such capacity the “Agent”), security agent, swap provider (in such capacity the “Swap Provider”) and account bank and (4) the banks and financial institutions referred to in schedule 1 thereto as lenders (the “Banks” and, together with the Agent and the Swap Provider, the “Secured Creditors”), the Banks agreed (inter alia) to advance by way of loan to the Borrowers, jointly and severally, upon the terms and conditions therein contained, the principal sum of up to One hundred and one million one hundred and fifty thousand Dollars ($101,150,000);

(C) by a 1992 ISDA Master Agreement (including the schedule thereto) dated as of 4 December 2007 (the “Master Swap Agreement”) and made between the Borrowers and the Swap Provider, the Swap Provider agreed the terms and conditions upon which it would enter into (inter alia) interest rate swap or other derivative transactions with the Borrowers in respect of the Loan, whether in whole or in part as the case may be from time to time;

(D) pursuant to clause 16.14 of the Loan Agreement, each of the Secured Creditors has appointed the Mortgagee as its security agent and trustee and pursuant to a Trust Deed dated 4 December 2007 and executed by the Mortgagee (as trustee) in favour of the Secured Creditors, the Mortgagee agreed to hold, receive, administer and enforce this Assignment as security agent and trustee for and on behalf of itself and the Secured Creditors;

(E) pursuant to the Loan Agreement, the Owner has executed in favour of the Mortgagee a first priority statutory Maltese mortgage dated 13 December 2007 (the “Mortgage”) on the motor vessel Saldanha documented in the name of the Owner under the laws and flag of Malta under Official Number 9268992 (the “Ship”) as security for the payment by the Owner of the Outstanding Indebtedness (as that expression is defined in the Deed of Covenant) (as defined below);

(F) pursuant to the Loan Agreement, the Owner has executed in favour of the Mortgagee a deed of covenant dated 13 December 2007 (the “Deed of Covenant”) collateral to the Mortgage, whereby the Owner has assigned and agreed to assign to the Mortgagee the Earnings and Insurances of, and any Requisition Compensation for, the Ship as security for the payment by the Owner of the Outstanding Indebtedness; and

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(G) this Assignment is a charter assignment referred to in clause 8.1.14 of the Loan Agreement in respect of the Ship and is supplemental to the Loan Agreement, the Master Swap Agreement, the Mortgage and the Deed of Covenant and to the security thereby created and shall nonetheless continue in full force and effect notwithstanding any discharge of the Mortgage.

NOW THIS ASSIGNMENT WITNESSES AND IT IS HEREBY AGREED as follows:

1 Definitions

1.1 Defined expressions

Words and expressions defined in the Deed of Covenant (whether expressly or by reference to the Mortgage and/or the Loan Agreement) shall, unless otherwise defined in this Assignment, or the context otherwise requires, have the same meanings when used in this Assignment.

1.2 Definitions

In this Assignment, unless the context otherwise requires:

“Agent” includes its successors in title and its replacements;

“Assigned Property” means all of the Owner’s right, title and interest in and to:

(a) the Charter Earnings; and

(b) all other Charter Rights;

“Banks” includes their successors in title and Transferee Banks; “Charter” means the charterparty referred to in Recital (A) hereto;

“Charter Earnings” means all money whatsoever payable by the Charterer to the Owner under or pursuant to the Charter and/or any guarantee, security or other assurance given to the Owner at any time in respect of the Charterer’s obligations under or pursuant to the Charter including (but without prejudice to the generality of the foregoing) all claims for damages in respect of any breach by the Charterer of the Charter;

“Charterer” includes the successors in title of the Charterer;

“Charter Rights” means all of the rights of the Owner under or pursuant to the Charter and any guarantee, security or other assurance given to the Owner at any time in respect of the Charterer’s obligations under or pursuant to the Charter including (without limitation) the right to receive the Charter Earnings;

“Collateral Instrument” means any note, bill of exchange, certificate of deposit and other negotiable and non-negotiable instruments, guarantees, indemnities and other assurances against financial loss and any other documents or instruments which contain or evidence an obligation (with or without security) to pay, discharge or be responsible directly or indirectly for, any indebtedness or liabilities of the Borrowers or either of them or any other person liable under the Security Documents and includes any documents or instruments creating or evidencing a mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest of any kind;

“Loan” means the aggregate principal amount advanced by the Banks to the Borrowers pursuant to the Loan Agreement or, as the context may require, the amount thereof at any time outstanding;

“Loan Agreement” means the agreement dated 4 December 2007 mentioned in Recital (B) hereto as amended and supplemented from time to time;

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“Master Swap Agreement” means the agreement referred to in recital (B) hereto;

“Master Swap Agreement Liabilities” means at any relevant time all liabilities, actual or contingent, present or future, owing by the Borrowers to the Swap Provider under the Master Swap Agreement;

“Mortgagee” includes its successors in title and its replacements;

“Operating Account” means an interest bearing Dollar account of the Owner opened by the Owner with the Account Bank and with account number 63519002 and includes any sub-accounts thereof and any other account designated in writing by the Mortgagee to be an Operating Account for the purposes of this Assignment;

“Outstanding Indebtedness” means the aggregate of the Loan and interest accrued and accruing thereon, the Master Swap Agreement Liabilities, the Expenses and all other sums of money from time to time owing to the Mortgagee, the Secured Creditors or any of them, whether actually or contingently, under the Loan Agreement and the other Security Documents or any of them;

“Owner” includes its successors in title;

“Security Documents” means the Loan Agreement, the Master Swap Agreement, the Mortgage, the Deed of Covenant, this Assignment and any other document which is defined as such in the Loan Agreement and such other documents as may have been or may hereafter be executed to guarantee and/or secure all or any part of the Loan, interest thereon, the Master Swap Agreement Liabilities, and other moneys from time to time owing by the Borrowers or either of them or any other Security Parties pursuant to the Loan Agreement or the Master Swap Agreement or the Security Documents or any of them (whether or not any such document also secures moneys from time to time owing pursuant to any other document or agreement);

“Security Party” means the Owner, the other Borrower and any other party who may at any time be a party to any of the Security Documents (other than the Creditors);

“Security Period” means the period commencing on the date hereof and terminating upon discharge of the security created by the Security Documents by payment of all moneys payable thereunder; and

“Swap Provider” includes its successors in title.

1.3 Headings

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Assignment.

1.4 Construction of certain terms

The provisions of clause 1.6 of the Deed of Covenant shall apply mutatis mutandis to this Assignment as if set out herein and as if references therein to “this Deed” were references to this Assignment.

1.5 Conflict with Deed of Covenant

This Assignment shall be read together with the Deed of Covenant but in case of any conflict between the two instruments the provisions of the Deed of Covenant shall prevail.

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2 Warranty

The Owner hereby represents and warrants to the Mortgagee that:

2.1 the Owner is the sole, legal and beneficial owner of the whole of the Assigned Property free from all Encumbrances and other interests and rights of every kind;

2.2 the copy of the Charter delivered by the Owner to the Mortgagee is a true and complete copy of such document (in the form of the recapitulation e-mail referred to in Recital (A)), the Charter constitutes the valid and binding obligations of the parties thereto enforceable in accordance with its terms, is in full force and effect and there have been no amendments or variations thereof or defaults thereunder;

2.3 the Ship has been delivered to and accepted by the Charterer for service under the Charter; and

2.4 there are no commissions, rebates, premiums or other payments in connection with the Charter other than as disclosed by the Owner to the Mortgagee in writing prior to the date hereof.

3 Assignment and application of money

3.1 Assignment

By way of security for the Outstanding Indebtedness, the Owner with full title guarantee hereby assigns and agrees to assign to the Mortgagee absolutely all its rights title and interest to the Assigned Property and all its benefits and interests present and future therein Provided however that the Charter Earnings shall be payable to the Operating Account until such time as an Event of Default shall occur and be continuing and the Mortgagee shall direct to the contrary whereupon the Owner shall forthwith, and the Mortgagee may at any time thereafter, instruct the persons from whom the Charter Earnings are then payable to pay the same to the Mortgagee or as it may direct and any Charter Earnings then in the hands of the Owner’s brokers or other agents shall be deemed to have been received by them for the use and on behalf of the Mortgagee.

3.2 Notice

The Owner hereby covenants and undertakes with the Mortgagee that it will forthwith after the Mortgagee’s demand following an Event of Default give written notice of the assignment contained in clause 3.1 to the Charterer in the form set out in schedule 1 and will procure that within seven (7) days after the giving of such notice the Charterer delivers to the Mortgagee a copy thereof with the acknowledgement thereof set out in such schedule duly executed by the Charterer.

3.3 Application

All moneys received by the Mortgagee in respect of the Assigned Property shall be held and applied by it in accordance with the terms of clauses 8.1 and 8.3 of the Deed of Covenant.

3.4 Shortfalls

In the event that the balance referred to in clause 8.1 of the Deed of Covenant is insufficient to pay in full the whole of the Outstanding Indebtedness, the Mortgagee shall be entitled to collect the shortfall from the Owner or any other person liable for the time being therefor.

3.5 Use of Owner’s name

The Owner covenants and undertakes with the Mortgagee to do or permit to be done each and every act or thing which the Mortgagee may from time to time require to be done for the purpose of enforcing the Mortgagee’s rights under this Assignment and to allow its name to be used as and when required by the Mortgagee for that purpose in each case following an Event of Default.

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3.6 Reassignment

Upon payment and discharge in full to the satisfaction of the Mortgagee of the Outstanding Indebtedness the Mortgagee (acting on the instructions of the Majority Banks) shall, at the request and cost of the Owner, re-assign the Assigned Property to the Owner or as it may direct.

4 Undertakings

4.1 Covenants and undertakings

The Owner hereby covenants and undertakes with the Mortgagee that throughout the Security Period:

4.1.1 Negative undertakings

it will not, without the previous written consent of the Mortgagee (acting on the instructions of the Majority Banks):

(a) Variations

agree to any variation of the charterhire payable under the Charter or the duration of the Charter or any other material variation of the Charter; or

(b) Releases and waivers

release the Charterer from any of the Charterer’s obligations under the Charter or waive any breach of the Charterer’s obligations thereunder or consent to any such act or omission of the Charterer as would otherwise constitute such breach;

(c) Termination or extension

terminate the Charter for any reason whatsoever; or

(d) Consents

grant any consent which may be required from the Owner under the Charter;

4.1.2 Performance of Charter obligations

it will perform its obligations under the Charter and use its best endeavours to procure that the Charterer shall perform its obligations under the Charter;

4.1.3 Information

it will supply to the Mortgagee all information, accounts and records that may be necessary or of assistance to enable the Mortgagee to verify the amount of all payments of charterhire and any other amount payable under the Charter; and

4.1.4 Original Charter

it will provide the Mortgagee with a certified true copy of the executed Charter as soon as it becomes available in the form of a charterparty and with an original executed Charter forthwith following the Mortgagee’s demand.

4.2 Withdrawal

The Owner hereby covenants and undertakes with the Mortgagee that, in the event of any payment of charterhire or other amount owing to the Owner not being made by the Charterer on the due date (as such due date is determined pursuant to the terms of the Charter) and the

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Owner has sent to the Charterer notice that it has failed to make proper and timely payment and, as a result the Owner has the right to withdraw the Ship from service of the Charterer under the Charter, the Owner will, if so directed by the Mortgagee, exercise such right at such time and in such manner as the Mortgagee shall so direct.

5 Continuing security

5.1 Continuing security

The security created by this Assignment shall:

5.1.1 be held by the Mortgagee as a continuing security for the payment of the Outstanding Indebtedness and the performance and observance of and compliance with all of the covenants, terms and conditions in the Security Documents contained, express or implied and that the security so created shall not be satisfied by any intermediate payment or satisfaction of any part of the amount hereby and thereby secured (or by any settlement of accounts between the Owner or any other person who may be liable to the Mortgagee and/or the Secured Creditors in respect of the Outstanding Indebtedness or any part thereof and the Mortgagee and/or the Secured Creditors or any of them);

5.1.2 be in addition to, and shall not in any way prejudice or affect and may be enforced by the Mortgagee without prior recourse to the security created by any of the other Security Documents or by any present or future Collateral Instruments, right or remedy held by or available to the Mortgagee and/or the Secured Creditors or any right or remedy of the Mortgagee and/or the Secured Creditors thereunder; and

5.1.3 not in any way be prejudiced or affected by the existence of any of the other Security Documents or any such Collateral Instrument, rights or remedies or by the same becoming wholly or in part void, voidable or unenforceable on any ground whatsoever or by the Mortgagee dealing with, exchanging, varying or failing to perfect or enforce any of the same or giving time for payment or performance or indulgence or compounding with any person liable.

5.2 Rights additional

All the rights, remedies and powers vested in the Mortgagee hereunder shall be an addition to and not a limitation of any and every other right, power or remedy vested in the Mortgagee and/or the Secured Creditors or any of them under the Loan Agreement, this Assignment, the other Security Documents or any Collateral Instrument or at law and that all the powers so vested in the Mortgagee and/or the Secured Creditors may be exercised from time to time and as often as the Mortgagee and/or the Secured Creditors may deem expedient.

5.3 No enquiry

The Mortgagee shall not be obliged to make any enquiry as to the nature or sufficiency of any payment received by it under the Mortgage and/or this Assignment or to make any claim or take any action to collect any moneys hereby assigned or to enforce any rights or benefits hereby assigned to the Mortgagee or to which the Mortgagee may at any time be entitled under the Mortgage and/or this Assignment.

5.4 Obligations of the Owner

The Owner shall remain liable to perform all the obligations assumed by it in relation to the Assigned Property and the Mortgagee shall be under no obligation of any kind whatsoever in respect thereof or be under any liability whatsoever in the event of any failure by the Owner to perform its obligations in respect thereof.

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5.5 Discharge of Mortgage

Notwithstanding that this Assignment is expressed to be supplemental to the Loan Agreement, the Master Swap Agreement and the Mortgage, it shall continue in full force and effect after any discharge of the Loan Agreement, the Master Swap Agreement or the Mortgage.

6 Powers of Mortgagee

6.1 Protective action

The provisions of clause 6.1 of the Deed of Covenant shall apply mutatis mutandis to this Assignment as if set out herein and as if references therein to “this Deed” were references to this Assignment.

6.2 Powers on Event of Default

Upon the happening of an Event of Default, the Mortgagee shall become forthwith entitled, as and when it may see fit, to exercise in relation to the Assigned Property or any part thereof all or any of the rights, powers and remedies possessed by it as assignee and/or chargee of the Assigned Property (whether at law, by virtue of this Assignment or otherwise) and in particular (without limiting the generality of the foregoing):

6.2.1 to collect, recover, compromise and give a good discharge for, all claims then outstanding or thereafter arising in respect of the Charter and/or the property hereby assigned or any part thereof, and to take over or institute (if necessary using the name of the Owner) all such proceedings in connection therewith as the Mortgagee in its absolute discretion thinks fit;

6.2.2 to discharge, compound, release or compromise claims in respect of the Charter and/or the Assigned Property or any part thereof which have given or may give rise to any charge or lien or other claim on the Ship, her Earnings, Insurances or Requisition Compensation or any part thereof or which are or may be enforceable by proceedings against the Ship, her Earnings, Insurances or Requisition Compensation or any part thereof; and

6.2.3 to recover from the Owner on demand all Expenses incurred or paid by the Mortgagee in connection with the exercise of the powers (or any of them) referred to in this clause 6.2.

6.3 Liability of Mortgagee

The Mortgagee shall not be liable as mortgagee in possession in respect of any of the Assigned Property to account or be liable for any loss upon realisation or for any neglect or default of any nature whatsoever in connection therewith for which a mortgagee in possession may be liable as such.

7 Attorney

7.1 Appointment

By way of security, the Owner hereby irrevocably appoints the Mortgagee to be its attorney generally for and in the name and on behalf of the Owner, and as the act and deed or otherwise of the Owner to execute, seal and deliver and otherwise perfect and do all such deeds, assurances, agreements, instruments, acts and things (including, without limiting the generality of the foregoing, to ask, require, demand, receive, compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of the Charter, to endorse any cheque or other instrument or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Mortgagee may deem to be necessary or advisable and otherwise to do any and all things which the Owner itself could do in relation to the Assigned Property) which may be required for the full exercise of all or any of the rights, powers or remedies conferred hereby or which may be deemed proper in or in connection with all or any of the purposes aforesaid. The power hereby conferred shall be a general power of

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attorney under the Powers of Attorney Act 1971, and the Owner ratifies and confirms, and agrees to ratify and confirm, any deed, assurance, agreement, instrument, act or thing which the Mortgagee may execute or do pursuant thereto Provided always that such power shall not be exercisable by or on behalf of the Mortgagee until the happening of any Event of Default.

7.2 Exercise of power

The exercise of such power by or on behalf of the Mortgagee shall not put any person dealing with the Mortgagee upon any enquiry as to whether any Event of Default has happened, nor shall such person be in any way affected by notice that no such event has happened, and the exercise by the Mortgagee of such power shall be conclusive evidence of its right to exercise the same.

7.3 Filings

The Owner hereby irrevocably appoints the Mortgagee to be its attorney in its name and on its behalf and as its act and deed or otherwise, to agree the form of and to execute and do all deeds, instrument, acts and things in order to file, record, register or enrol this Assignment and/or any notice and/or acknowledgement of the assignment herein contained in any court, public office or elsewhere which the Mortgagee may in its discretion consider necessary or advisable, now or in the future, to ensure the legality, validity, enforceability or admissibility in evidence thereof and any other assurance, document, act or thing required to be executed by the Owner pursuant to clause 8.

8 Further assurance

The Owner hereby further undertakes at its own expense from time to time to execute, sign, perfect, do and (if required) register every such further assurance, document, act or thing as in the opinion of the Mortgagee may be necessary or desirable for the purpose of more effectually assigning, mortgaging and charging the Assigned Property or perfecting the security constituted or intended to be constituted by this Assignment.

9 Notices

The provisions of clause 17.1 of the Loan Agreement shall apply mutatis mutandis in respect of any certificate, notice, demand or other communication given or made under this Assignment as if set out herein and as if references therein to the “Borrowers or either of them” and “the Security Agent” were references to the Owner and the Mortgagee, respectively.

10 Law, jurisdiction and other provisions

10.1 Law

This Assignment and any non-contractual obligations in connection with this Assignment are governed by, and shall be construed in accordance with, English law.

10.2 Submission to jurisdiction

For the benefit of the Mortgagee, the parties hereto irrevocably agree that any legal action or proceedings in connection with this Assignment (including any non-contractual obligations in connection with this Assignment) may be brought in the English courts or in the courts of any other country chosen by the Mortgagee, each of which shall have jurisdiction to settle any disputes arising out of or in connection with this Assignment (including any non-contractual obligations in connection with this Assignment). The Owner irrevocably and unconditionally submits to the jurisdiction of the English courts and the courts of any country chosen by the Mortgagee and irrevocably designates, appoints and empowers Ince & Co. at present of International House, 1 St. Katharine’s Way, London E1W 1AY, England to receive, for it and on its behalf, service of process issued out of the English courts in any legal action or proceedings arising out of or in connection with this Assignment (including any non-contractual obligations in connection with this Assignment). The submission to such jurisdiction shall not (and shall not be

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construed so as to) limit the right of the Mortgagee to take proceedings against the Owner in any other court of competent jurisdiction nor shall the taking of proceedings by the Mortgagee in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. The parties further agree that only the courts of England and not those of any other State shall have jurisdiction to determine any claim which the Owner may have against the Mortgagee arising out of, or in connection with, this Assignment (including any non-contractual obligations in connection with this Assignment).

10.3 Counterparts

This Assignment may be entered into in the form of two counterparts, each executed by one of the parties, and provided all the parties shall so execute this Assignment, each of the executed counterparts, when duly exchanged or delivered, shall be deemed to be an original but, taken together, they shall constitute one instrument.

10.4 English language

All certificates, instruments and other documents to be delivered under or supplied in connection with this Assignment or the Charter shall be in the English language or shall be accompanied by a certified English translation upon which the recipient shall be entitled to rely.

10.5 Severability of provisions

Each of the provisions of this Assignment are severable and distinct from the others and if at any time one or more of such provisions is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Assignment shall not in any way be affected or impaired thereby.

10.6 Contracts (Rights of Third Parties) Act 1999

No term of this Assignment is enforceable under the provisions of the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Assignment.

IN WITNESS whereof this Assignment has been duly executed as a deed the day and year first above written.

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Schedule 1

Forms of Notice of Assignment of Charter

To: Cosco Bulk Carriers Co. Ltd.

People’s Republic of China

m.v. Saldanha

We refer to the charterparty contract dated 25 June 2008 made between (1) you, Cosco Bulk Carriers Co. Ltd. of the People’s Republic of China (the “Charterer”) and (2) us, Team-Up Owning Company Limited of the Marshall Islands (the “Owner”), which contract is on the date of this Agreement, incorporated in a recapitulation email dated 25 June 2008 addressed by Genoa Sea Brokers SPA the Charterer’s brokers acting on behalf of the Charterer to the Owner, whereby we agreed to let and you agreed to take on time charter, for the period and upon the terms and conditions therein mentioned, the motor vessel Saldanha, registered in our name under the flag of Malta (the “Ship”) (the “Charter”).

NOW WE HEREBY GIVE YOU NOTICE:

1 that by an Assignment dated [—] 2009 (the “Assignment”) made between us and DnB NOR Bank ASA of 20 St. Dunstan’s Hill, London EC3R 8HY, England (the “Assignee”) as security agent and trustee for certain banks and financial institutions, we have assigned to the Assignee all our rights title and interest to and in any moneys whatsoever payable to us under the Charter and all other rights and benefits whatsoever accruing to us under the Charter including (but without prejudice to the generality of the foregoing) all claims for damages in respect of any breach by you of the Charter;

2 that you are hereby irrevocably authorised and instructed to pay such moneys as aforesaid to our bank account with account number 63519002 held with the Assignee or to such other account as the Assignee may from time to time direct; and

3 that the said Assignment includes provisions that no variations shall be made to the charterhire payable under the Charter or the duration of the Charter or any other material variation of the Charter (nor shall you be released from your obligations thereunder) without the previous written consent of the Assignee and we shall remain liable to perform all our obligations under the Charter and the Assignee shall be under no obligation of any kind whatsoever in respect thereof.

The authority and instructions herein contained cannot be revoked or varied by us without the consent of the Assignee.

This letter and any non-contractual obligations in connection with this letter are governed by, and shall be construed in accordance with, English law.

For and on behalf of

TEAM-UP OWNING COMPANY LIMITED

Dated: [—]

10

Form of Charterer’s Consent and Agreement

(on duplicate)

To: DnB NOR Bank ASA

To: Team-Up Owning Company Limited

We acknowledge receipt of the notice set out above and consent to the assignment referred to therein and, in consideration of US$10 and other good and valuable consideration (the receipt and adequacy of which we hereby acknowledge), we hereby undertake with, and confirm to, the Assignee as follows:

(a) to pay all amounts due from us under the Charter in full in Dollars (and without any set-off or counterclaim whatsoever and free and clear of any deductions or withholdings) to your account held with DnB NOR Bank ASA at 20 St. Dunstan’s Hill, London EC3R 8HY, England with account number 63519002 or to the order of the Assignee;

(b) to permit the Assignee to enforce all other rights and benefits whatsoever accrued or accruing to the Owner under the Charter and for this purpose to take over or institute proceedings in respect thereof;

(c) not, without the prior written consent of the Assignee to agree, to any variation of the Charter;

(d) to perform our obligations under the Charter; and

(e) that we have not received any notice of any prior charge, assignment or encumbrance over the Owner’s right, title and interest in and to the Charter.

This letter and any non-contractual obligations in connection with this letter are governed by, and shall be construed in accordance with, English law.

By:
	for and on behalf of
	COSCO BULK CARRIERS CO. LTD.
Date: [—]

11

EXECUTED as a DEED	)
by	)
for and on behalf of	)
TEAM-UP OWNING COMPANY LIMITED	)	Attorney-in-fact
in the presence of:	)
Witness
Name:
Address:
Occupation:
EXECUTED as a DEED	)
by	)
for and on behalf of	)
DNB NOR BANK ASA	)	Attorney-in-fact
in the presence of:	)
Witness
Name:
Address:
Occupation:

12

Private & Confidential

Dated      June 2009

ORPHEUS OWNING COMPANY LIMITED

and

DNB NOR BANK ASA

CHARTER ASSIGNMENT

m.v. Avoca

Contents

Clause		Page
1	Definitions	2
2	Warranty	3
3	Assignment and application of money	4
4	Undertakings	5
5	Continuing security	6
6	Powers of Mortgagee	7
7	Attorney	7
8	Further assurance	8
9	Notices	8
10	Law, jurisdiction and other provisions	8
Schedule 1 Forms of Notice of Assignment of Charter		10

THIS ASSIGNMENT is made the      day of June 2009 BETWEEN:

1 ORPHEUS OWNING COMPANY LIMITED, a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the “Owner”); and

2 DNB NOR BANK ASA, a company incorporated in Norway with its registered office at Stranden 21, P.O. Box 1171 Sentrum N-0107 Oslo, Norway, acting for the purposes of this Assignment through its branch at 20 St. Dunstan’s Hill, London EC3R 8HY, England as security agent and trustee for and on behalf of the other Secured Creditors (as this term is defined herebelow) (the “Mortgagee”).

WHEREAS:

(A) by a charterparty contract dated 3 September 2008 made between (1) Cosco Qingdao (Qingdao Ocean Shipping Company, Limited) of the People’s Republic of China (the “Charterer”) and (2) the Owner, which contract is on the date of this Agreement, incorporated in a recapitulation email dated 3 September 2008 addressed by Simpson Spence & Young the Charterer’s brokers acting on behalf of the Charterer to the Owner (the “Charter”), the Owner agreed to let to the Charterer, and the Charterer agreed to take on time charter, for the period and upon the terms and conditions therein mentioned, the Ship (as hereinafter defined);

(B) by a loan agreement dated 4 December 2007 as amended from time to time (the “Loan Agreement”) and made between (1) the Owner and Team-Up Owning Company Limited as joint and several borrowers (therein and herein together referred to as the “Borrowers”), (2) DnB NOR Bank ASA as arranger, (3) DnB NOR Bank ASA as agent (in such capacity the “Agent”), security agent, swap provider (in such capacity the “Swap Provider”) and account bank and (4) the banks and financial institutions referred to in schedule 1 thereto as lenders (the “Banks” and, together with the Agent and the Swap Provider, the “Secured Creditors”), the Banks agreed (inter alia) to advance by way of loan to the Borrowers, jointly and severally, upon the terms and conditions therein contained, the principal sum of up to One hundred and one million one hundred and fifty thousand Dollars ($101,150,000);

(C) by a 1992 ISDA Master Agreement (including the schedule thereto) dated as of 4 December 2007 (the “Master Swap Agreement”) and made between the Borrowers and the Swap Provider, the Swap Provider agreed the terms and conditions upon which it would enter into (inter alia) interest rate swap or other derivative transactions with the Borrowers in respect of the Loan, whether in whole or in part as the case may be from time to time;

(D) pursuant to clause 16.14 of the Loan Agreement, each of the Secured Creditors has appointed the Mortgagee as its security agent and trustee and pursuant to a Trust Deed dated 4 December 2007 and executed by the Mortgagee (as trustee) in favour of the Secured Creditors, the Mortgagee agreed to hold, receive, administer and enforce this Assignment as security agent and trustee for and on behalf of itself and the Secured Creditors;

(E) pursuant to the Loan Agreement, the Owner has executed in favour of the Mortgagee a first priority statutory Maltese mortgage dated 29 January 2008 (the “Mortgage”) on the motor vessel Avoca documented in the name of the Owner under the laws and flag of Malta under Official Number 9310446 (the “Ship”) as security for the payment by the Owner of the Outstanding Indebtedness (as that expression is defined in the Deed of Covenant) (as defined below);

(F) pursuant to the Loan Agreement, the Owner has executed in favour of the Mortgagee a deed of covenant dated 29 January 2008 (the “Deed of Covenant”) collateral to the Mortgage, whereby the Owner has assigned and agreed to assign to the Mortgagee the Earnings and Insurances of, and any Requisition Compensation for, the Ship as security for the payment by the Owner of the Outstanding Indebtedness; and

(G) this Assignment is a charter assignment referred to in clause 8.1.14 of the Loan Agreement in respect of the Ship and is supplemental to the Loan Agreement, the Master Swap Agreement, the Mortgage and the Deed of Covenant and to the security thereby created and shall nonetheless continue in full force and effect notwithstanding any discharge of the Mortgage.

1

NOW THIS ASSIGNMENT WITNESSES AND IT IS HEREBY AGREED as follows:

1 Definitions

1.1 Defined expressions

Words and expressions defined in the Deed of Covenant (whether expressly or by reference to the Mortgage and/or the Loan Agreement) shall, unless otherwise defined in this Assignment, or the context otherwise requires, have the same meanings when used in this Assignment.

1.2 Definitions

In this Assignment, unless the context otherwise requires:

“Agent” includes its successors in title and its replacements;

“Assigned Property” means all of the Owner’s right, title and interest in and to:

(a) the Charter Earnings; and

(b) all other Charter Rights;

“Banks” includes their successors in title and Transferee Banks;

“Charter” means the charterparty referred to in Recital (A) hereto;

“Charter Earnings” means all money whatsoever payable by the Charterer to the Owner under or pursuant to the Charter and/or any guarantee, security or other assurance given to the Owner at any time in respect of the Charterer’s obligations under or pursuant to the Charter including (but without prejudice to the generality of the foregoing) all claims for damages in respect of any breach by the Charterer of the Charter;

“Charterer” includes the successors in title of the Charterer;

“Charter Rights” means all of the rights of the Owner under or pursuant to the Charter and any guarantee, security or other assurance given to the Owner at any time in respect of the Charterer’s obligations under or pursuant to the Charter including (without limitation) the right to receive the Charter Earnings;

“Collateral Instrument” means any note, bill of exchange, certificate of deposit and other negotiable and non-negotiable instruments, guarantees, indemnities and other assurances against financial loss and any other documents or instruments which contain or evidence an obligation (with or without security) to pay, discharge or be responsible directly or indirectly for, any indebtedness or liabilities of the Borrowers or either of them or any other person liable under the Security Documents and includes any documents or instruments creating or evidencing a mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest of any kind;

“Loan” means the aggregate principal amount advanced by the Banks to the Borrowers pursuant to the Loan Agreement or, as the context may require, the amount thereof at any time outstanding;

“Loan Agreement” means the agreement dated 4 December 2007 mentioned in Recital (B) hereto as amended and supplemented from time to time;

“Master Swap Agreement” means the agreement referred to in recital (B) hereto;

2

“Master Swap Agreement Liabilities” means at any relevant time all liabilities, actual or contingent, present or future, owing by the Borrowers to the Swap Provider under the Master Swap Agreement;

“Mortgagee” includes its successors in title and its replacements;

“Operating Account” means an interest bearing Dollar account of the Owner opened by the Owner with the Account Bank and with account number 63520002 and includes any sub-accounts thereof and any other account designated in writing by the Mortgagee to be an Operating Account for the purposes of this Assignment;

“Outstanding Indebtedness” means the aggregate of the Loan and interest accrued and accruing thereon, the Master Swap Agreement Liabilities, the Expenses and all other sums of money from time to time owing to the Mortgagee, the Secured Creditors or any of them, whether actually or contingently, under the Loan Agreement and the other Security Documents or any of them;

“Owner” includes its successors in title;

“Security Documents” means the Loan Agreement, the Master Swap Agreement, the Mortgage, the Deed of Covenant, this Assignment and any other document which is defined as such in the Loan Agreement and such other documents as may have been or may hereafter be executed to guarantee and/or secure all or any part of the Loan, interest thereon, the Master Swap Agreement Liabilities, and other moneys from time to time owing by the Borrowers or either of them or any other Security Parties pursuant to the Loan Agreement or the Master Swap Agreement or the Security Documents or any of them (whether or not any such document also secures moneys from time to time owing pursuant to any other document or agreement);

“Security Party” means the Owner, the other Borrower and any other party who may at any time be a party to any of the Security Documents (other than the Creditors);

“Security Period” means the period commencing on the date hereof and terminating upon discharge of the security created by the Security Documents by payment of all moneys payable thereunder; and

“Swap Provider” includes its successors in title.

1.3 Headings

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Assignment.

1.4 Construction of certain terms

The provisions of clause 1.6 of the Deed of Covenant shall apply mutatis mutandis to this Assignment as if set out herein and as if references therein to “this Deed” were references to this Assignment.

1.5 Conflict with Deed of Covenant

This Assignment shall be read together with the Deed of Covenant but in case of any conflict between the two instruments the provisions of the Deed of Covenant shall prevail.

2 Warranty

The Owner hereby represents and warrants to the Mortgagee that:

2.1 the Owner is the sole, legal and beneficial owner of the whole of the Assigned Property free from all Encumbrances and other interests and rights of every kind;

3

2.2 the copy of the Charter delivered by the Owner to the Mortgagee is a true and complete copy of such document (in the form of the recapitulation email referred to in Recital (A)), the Charter constitutes the valid and binding obligations of the parties thereto enforceable in accordance with its terms, is in full force and effect and there have been no amendments or variations thereof or defaults thereunder;

2.3 the Ship has been delivered to and accepted by the Charterer for service under the Charter; and

2.4 there are no commissions, rebates, premiums or other payments in connection with the Charter other than as disclosed by the Owner to the Mortgagee in writing prior to the date hereof.

3 Assignment and application of money

3.1 Assignment

By way of security for the Outstanding Indebtedness, the Owner with full title guarantee hereby assigns and agrees to assign to the Mortgagee absolutely all its rights title and interest to the Assigned Property and all its benefits and interests present and future therein Provided however that the Charter Earnings shall be payable to the Operating Account until such time as an Event of Default shall occur and be continuing and the Mortgagee shall direct to the contrary whereupon the Owner shall forthwith, and the Mortgagee may at any time thereafter, instruct the persons from whom the Charter Earnings are then payable to pay the same to the Mortgagee or as it may direct and any Charter Earnings then in the hands of the Owner’s brokers or other agents shall be deemed to have been received by them for the use and on behalf of the Mortgagee.

3.2 Notice

The Owner hereby covenants and undertakes with the Mortgagee that it will forthwith after the Mortgagee’s demand following an Event of Default give written notice of the assignment contained in clause 3.1 to the Charterer in the form set out in schedule 1 and will procure that within seven (7) days after the giving of such notice the Charterer delivers to the Mortgagee a copy thereof with the acknowledgement thereof set out in such schedule duly executed by the Charterer.

3.3 Application

All moneys received by the Mortgagee in respect of the Assigned Property shall be held and applied by it in accordance with the terms of clauses 8.1 and 8.3 of the Deed of Covenant.

3.4 Shortfalls

In the event that the balance referred to in clause 8.1 of the Deed of Covenant is insufficient to pay in full the whole of the Outstanding Indebtedness, the Mortgagee shall be entitled to collect the shortfall from the Owner or any other person liable for the time being therefor.

3.5 Use of Owner’s name

The Owner covenants and undertakes with the Mortgagee to do or permit to be done each and every act or thing which the Mortgagee may from time to time require to be done for the purpose of enforcing the Mortgagee’s rights under this Assignment and to allow its name to be used as and when required by the Mortgagee for that purpose in each case following an Event of Default.

3.6 Reassignment

Upon payment and discharge in full to the satisfaction of the Mortgagee of the Outstanding Indebtedness the Mortgagee (acting on the instructions of the Majority Banks) shall, at the request and cost of the Owner, re-assign the Assigned Property to the Owner or as it may direct.

4

4 Undertakings

4.1 Covenants and undertakings

The Owner hereby covenants and undertakes with the Mortgagee that throughout the Security Period:

4.1.1 Negative undertakings

it will not, without the previous written consent of the Mortgagee (acting on the instructions of the Majority Banks):

(a) Variations

agree to any variation of the charterhire payable under the Charter of the duration of the Charter or any other material variation of the Charter; or

(b) Releases and waivers

release the Charterer from any of the Charterer’s obligations under the Charter or waive any breach of the Charterer’s obligations thereunder or consent to any such act or omission of the Charterer as would otherwise constitute such breach;

(c) Termination or extension

terminate the Charter for any reason whatsoever; or

(d) Consents

grant any consent which may be required from the Owner under the Charter;

4.1.2 Performance of Charter obligations

it will perform its obligations under the Charter and use its best endeavours to procure that the Charterer shall perform its obligations under the Charter;

4.1.3 Information

it will supply to the Mortgagee all information, accounts and records that may be necessary or of assistance to enable the Mortgagee to verify the amount of all payments of charterhire and any other amount payable under the Charter; and

4.1.4 Original Charter

it will provide the Mortgagee with a certified true copy of the executed Charter as soon as it becomes available in the form of a charterparty and with an original executed Charter forthwith following the Mortgagee’s demand.

4.2 Withdrawal

The Owner hereby covenants and undertakes with the Mortgagee that, in the event of any payment of charterhire or other amount owing to the Owner not being made by the Charterer on the due date (as such due date is determined pursuant to the terms of the Charter) and the Owner has sent to the Charterer notice that it has failed to make proper and timely payment and, as a result the Owner has the right to withdraw the Ship from service of the Charterer under the Charter, the Owner will, if so directed by the Mortgagee, exercise such right at such time and in such manner as the Mortgagee shall so direct.

5

5 Continuing security

5.1 Continuing security

The security created by this Assignment shall:

5.1.1 be held by the Mortgagee as a continuing security for the payment of the Outstanding Indebtedness and the performance and observance of and compliance with all of the covenants, terms and conditions in the Security Documents contained, express or implied and that the security so created shall not be satisfied by any intermediate payment or satisfaction of any part of the amount hereby and thereby secured (or by any settlement of accounts between the Owner or any other person who may be liable to the Mortgagee and/or the Secured Creditors in respect of the Outstanding Indebtedness or any part thereof and the Mortgagee and/or the Secured Creditors or any of them);

5.1.2 be in addition to, and shall not in any way prejudice or affect and may be enforced by the Mortgagee without prior recourse to the security created by any of the other Security Documents or by any present or future Collateral Instruments, right or remedy held by or available to the Mortgagee and/or the Secured Creditors or any right or remedy of the Mortgagee and/or the Secured Creditors thereunder; and

5.1.3 not in any way be prejudiced or affected by the existence of any of the other Security Documents or any such Collateral Instrument, rights or remedies or by the same becoming wholly or in part void, voidable or unenforceable on any ground whatsoever or by the Mortgagee dealing with, exchanging, varying or failing to perfect or enforce any of the same or giving time for payment or performance or indulgence or compounding with any person liable.

5.2 Rights additional

All the rights, remedies and powers vested in the Mortgagee hereunder shall be an addition to and not a limitation of any and every other right, power or remedy vested in the Mortgagee and/or the Secured Creditors or any of them under the Loan Agreement, this Assignment, the other Security Documents or any Collateral Instrument or at law and that all the powers so vested in the Mortgagee and/or the Secured Creditors may be exercised from time to time and as often as the Mortgagee and/or the Secured Creditors may deem expedient.

5.3 No enquiry

The Mortgagee shall not be obliged to make any enquiry as to the nature or sufficiency of any payment received by it under the Mortgage and/or this Assignment or to make any claim or take any action to collect any moneys hereby assigned or to enforce any rights or benefits hereby assigned to the Mortgagee or to which the Mortgagee may at any time be entitled under the Mortgage and/or this Assignment.

5.4 Obligations of the Owner

The Owner shall remain liable to perform all the obligations assumed by it in relation to the Assigned Property and the Mortgagee shall be under no obligation of any kind whatsoever in respect thereof or be under any liability whatsoever in the event of any failure by the Owner to perform its obligations in respect thereof.

5.5 Discharge of Mortgage

Notwithstanding that this Assignment is expressed to be supplemental to the Loan Agreement, the Master Swap Agreement and the Mortgage, it shall continue in full force and effect after any discharge of the Loan Agreement, the Master Swap Agreement or the Mortgage.

6

6 Powers of Mortgagee

6.1 Protective action

The provisions of clause 6.1 of the Deed of Covenant shall apply mutatis mutandis to this Assignment as if set out herein and as if references therein to “this Deed” were references to this Assignment.

6.2 Powers on Event of Default

Upon the happening of an Event of Default, the Mortgagee shall become forthwith entitled, as and when it may see fit, to exercise in relation to the Assigned Property or any part thereof all or any of the rights, powers and remedies possessed by it as assignee and/or chargee of the Assigned Property (whether at law, by virtue of this Assignment or otherwise) and in particular (without limiting the generality of the foregoing):

6.2.1 to collect, recover, compromise and give a good discharge for, all claims then outstanding or thereafter arising in respect of the Charter and/or the property hereby assigned or any part thereof, and to take over or institute (if necessary using the name of the Owner) all such proceedings in connection therewith as the Mortgagee in its absolute discretion thinks fit;

6.2.2 to discharge, compound, release or compromise claims in respect of the Charter and/or the Assigned Property or any part thereof which have given or may give rise to any charge or lien or other claim on the Ship, her Earnings, Insurances or Requisition Compensation or any part thereof or which are or may be enforceable by proceedings against the Ship, her Earnings, Insurances or Requisition Compensation or any part thereof; and

6.2.3 to recover from the Owner on demand all Expenses incurred or paid by the Mortgagee in connection with the exercise of the powers (or any of them) referred to in this clause 6.2.

6.3 Liability of Mortgagee

The Mortgagee shall not be liable as mortgagee in possession in respect of any of the Assigned Property to account or be liable for any loss upon realisation or for any neglect or default of any nature whatsoever in connection therewith for which a mortgagee in possession may be liable as such.

7 Attorney

7.1 Appointment

By way of security, the Owner hereby irrevocably appoints the Mortgagee to be its attorney generally for and in the name and on behalf of the Owner, and as the act and deed or otherwise of the Owner to execute, seal and deliver and otherwise perfect and do all such deeds, assurances, agreements, instruments, acts and things (including, without limiting the generality of the foregoing, to ask, require, demand, receive, compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of the Charter, to endorse any cheque or other instrument or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Mortgagee may deem to be necessary or advisable and otherwise to do any and all things which the Owner itself could do in relation to the Assigned Property) which may be required for the full exercise of all or any of the rights, powers or remedies conferred hereby or which may be deemed proper in or in connection with all or any of the purposes aforesaid. The power hereby conferred shall be a general power of attorney under the Powers of Attorney Act 1971, and the Owner ratifies and confirms, and agrees to ratify and confirm, any deed, assurance, agreement, instrument, act or thing which the Mortgagee may execute or do pursuant thereto Provided always that such power shall not be exercisable by or on behalf of the Mortgagee until the happening of any Event of Default.

7

7.2 Exercise of power

The exercise of such power by or on behalf of the Mortgagee shall not put any person dealing with the Mortgagee upon any enquiry as to whether any Event of Default has happened, nor shall such person be in any way affected by notice that no such event has happened, and the exercise by the Mortgagee of such power shall be conclusive evidence of its right to exercise the same.

7.3 Filings

The Owner hereby irrevocably appoints the Mortgagee to be its attorney in its name and on its behalf and as its act and deed or otherwise, to agree the form of and to execute and do all deeds, instrument, acts and things in order to file, record, register or enrol this Assignment and/or any notice and/or acknowledgement of the assignment herein contained in any court, public office or elsewhere which the Mortgagee may in its discretion consider necessary or advisable, now or in the future, to ensure the legality, validity, enforceability or admissibility in evidence thereof and any other assurance, document, act or thing required to be executed by the Owner pursuant to clause 8.

8 Further assurance

The Owner hereby further undertakes at its own expense from time to time to execute, sign, perfect, do and (if required) register every such further assurance, document, act or thing as in the opinion of the Mortgagee may be necessary or desirable for the purpose of more effectually assigning, mortgaging and charging the Assigned Property or perfecting the security constituted or intended to be constituted by this Assignment.

9 Notices

The provisions of clause 17.1 of the Loan Agreement shall apply mutatis mutandis in respect of any certificate, notice, demand or other communication given or made under this Assignment as if set out herein and as if references therein to the “Borrowers or either of them” and “the Security Agent” were references to the Owner and the Mortgagee, respectively.

10 Law, jurisdiction and other provisions

10.1 Law

This Assignment and any non-contractual obligations in connection with this Assignment are governed by, and shall be construed in accordance with, English law.

10.2 Submission to jurisdiction

For the benefit of the Mortgagee, the parties hereto irrevocably agree that any legal action or proceedings in connection with this Assignment (including any non-contractual obligations in connection with this Assignment) may be brought in the English courts or in the courts of any other country chosen by the Mortgagee, each of which shall have jurisdiction to settle any disputes arising out of or in connection with this Assignment (including any non-contractual obligations in connection with this Assignment). The Owner irrevocably and unconditionally submits to the jurisdiction of the English courts and the courts of any country chosen by the Mortgagee and irrevocably designates, appoints and empowers Ince & Co. at present of International House, 1 St. Katharine’s Way, London E1W 1AY, England to receive, for it and on its behalf, service of process issued out of the English courts in any legal action or proceedings arising out of or in connection with this Assignment (including any non-contractual obligations in connection with this Assignment). The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of the Mortgagee to take proceedings against the Owner in any other court of competent jurisdiction nor shall the taking of proceedings by the Mortgagee in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. The parties further agree that only the courts of England and not those of any other State shall have jurisdiction to determine any claim which the Owner may have against the Mortgagee arising out of, or in connection with, this Assignment (including any non-contractual obligations in connection with this Assignment).

8

10.3 Counterparts

This Assignment may be entered into in the form of two counterparts, each executed by one of the parties, and provided all the parties shall so execute this Assignment, each of the executed counterparts, when duly exchanged or delivered, shall be deemed to be an original but, taken together, they shall constitute one instrument.

10.4 English language

All certificates, instruments and other documents to be delivered under or supplied in connection with this Assignment or the Charter shall be in the English language or shall be accompanied by a certified English translation upon which the recipient shall be entitled to rely.

10.5 Severability of provisions

Each of the provisions of this Assignment are severable and distinct from the others and if at any time one or more of such provisions is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Assignment shall not in any way be affected or impaired thereby.

10.6 Contracts (Rights of Third Parties) Act 1999

No term of this Assignment is enforceable under the provisions of the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Assignment.

IN WITNESS whereof this Assignment has been duly executed as a deed the day and year first above written.

9

Schedule 1

Forms of Notice of Assignment of Charter

To: Cosco Qingdao (Qingdao Ocean Shipping Company, Limited)

People’s Republic of China

m.v. Avoca

We refer to the charterparty contract dated 3 September 2008 made between (1) you, Cosco Qingdao (Qingdao Ocean Shipping Company, Limited) of the People’s Republic of China (the “Charterer”) and (2) us, Orpheus Owning Company Limited of the Marshall Islands (the “Owner”), which contract is on the date of this Agreement, incorporated in a recapitulation email dated 3 September 2008 addressed by Simpson Spence & Young the Charterer’s brokers acting on behalf of the Charterer to the Owner, whereby we agreed to let and you agreed to take on time charter, for the period and upon the terms and conditions therein mentioned, the motor vessel Avoca, registered in our name under the flag of Malta (the “Ship”) (the “Charter”).

NOW WE HEREBY GIVE YOU NOTICE:

1 that by an Assignment dated [—] 2009 (the “Assignment”) made between us and DnB NOR Bank ASA of 20 St. Dunstan’s Hill, London EC3R 8HY, England (the “Assignee”) as security agent and trustee for certain banks and financial institutions, we have assigned to the Assignee all our rights title and interest to and in any moneys whatsoever payable to us under the Charter and all other rights and benefits whatsoever accruing to us under the Charter including (but without prejudice to the generality of the foregoing) all claims for damages in respect of any breach by you of the Charter;

2 that you are hereby irrevocably authorised and instructed to pay such moneys as aforesaid to our bank account with account number 63520002 held with the Assignee or to such other account as the Assignee may from time to time direct; and

3 that the said Assignment includes provisions that no variations shall be made to the charterhire payable under the Charter or the duration of the Charter or any other material variation of the Charter (nor shall you be released from your obligations thereunder) without the previous written consent of the Assignee and we shall remain liable to perform all our obligations under the Charter and the Assignee shall be under no obligation of any kind whatsoever in respect thereof.

The authority and instructions herein contained cannot be revoked or varied by us without the consent of the Assignee.

This letter and any non-contractual obligations in connection with this letter are governed by, and shall be construed in accordance with, English law.

For and on behalf of

ORPHEUS OWNING COMPANY LIMITED

Dated: [—]

10

Form of Charterer’s Consent and Agreement

(on duplicate)

To: DnB NOR Bank ASA

To: Orpheus Owning Company Limited

We acknowledge receipt of the notice set out above and consent to the assignment referred to therein and, in consideration of US$10 and other good and valuable consideration (the receipt and adequacy of which we hereby acknowledge), we hereby undertake with, and confirm to, the Assignee as follows:

(a) to pay all amounts due from us under the Charter in full in Dollars (and without any set-off or counterclaim whatsoever and free and clear of any deductions or withholdings) to your account held with DnB NOR Bank ASA at 20 St. Dunstan’s Hill, London EC3R 8HY, England with account number 63520002 or to the order of the Assignee;

(b) to permit the Assignee to enforce all other rights and benefits whatsoever accrued or accruing to the Owner under the Charter and for this purpose to take over or institute proceedings in respect thereof;

(c) not, without the prior written consent of the Assignee to agree, to any variation of the Charter;

(d) to perform our obligations under the Charter; and

(e) that we have not received any notice of any prior charge, assignment or encumbrance over the Owner’s right, title and interest in and to the Charter.

This letter and any non-contractual obligations in connection with this letter are governed by, and shall be construed in accordance with, English law.

By:
	for and on behalf of
	COSCO QINGDAO (QINGDAO OCEAN SHIPPING COMPANY, LIMITED)
Date: [—]

11

EXECUTED as a DEED	)
by	)
for and on behalf of	)
ORPHEUS OWNING COMPANY LIMITED	)	Attorney-in-fact
in the presence of:	)
Witness
Name:
Address:
Occupation:
EXECUTED as a DEED	)
by	)
for and on behalf of	)
DNB NOR BANK ASA	)	Attorney-in-fact
in the presence of:	)
Witness
Name:
Address:
Occupation:

12

EXECUTED as a DEED		)	/s/ Illegible Attorney-in-fact
by	Alexandros Mylonas	)
for and on behalf of		)
TEAM-UP OWNING COMPANY LIMITED		)
as Borrower		)
in the presence of:		)
/s/ Leila Sum
Witness
Name:	LEILA SUM
Address:	NORTON ROSE LLP
Occupation:	TRAINEE SOLICITOR
EXECUTED as a DEED		)	/s/ Illegible Attorney-in-fact
by		)
for and on behalf of		)
ORPHEUS OWNING COMPANY LIMITED		)
as Borrower		)
in the presence of:		)
/s/ Leila Sum
Witness
Name:	LEILA SUM
Address:	NORTON ROSE LLP
Occupation:	TRAINEE SOLICITOR
EXECUTED as a DEED		)	/s/ Illegible Attorney-in-fact
by		)
for and on behalf of		)
DRYSHIPS INC.		)
as Corporate Guarantor		)
in the presence of:		)
/s/ Leila Sum
Name:	LEILA SUM
Address:	NORTON ROSE LLP
Occupation:	TRAINEE SOLICITOR
EXECUTED as a DEED		)	/s/ Illegible Attorney-in-fact
by		)
for and on behalf of		)
CARDIFF MARINE INC.		)
as Manager		)
in the presence of:		)
/s/ Leila Sum
Witness
Name:	LEILA SUM
Address:	NORTON ROSE LLP
Occupation:	TRAINEE SOLICITOR

18

SIGNED by	MARIA GRATZI	)	/s/ Maria Gratzi Attorney-In-fact
for and on behalf of		)
DNB NOR BANK ASA		)
as Arranger, Agent, Security Agent,		)
Swap Provider and Account Bank
In the presence of: LEILA SUM, TRAINEE SOLICITOR, NORTON ROSE LLP
/s/ Leila Sum			/s/ Maria Gratzi Attorney-in-fact
SIGNED by	MARIA GRATZI	)
for and on behalf of		)
DNB NOR RANK ASA		)
as Bank		)
In the presence of: LEILA SUM, TRAINEE SOLICITOR, NORTON ROSE LLP
/s/ Leila Sum

19

EX-4.28

Exhibit 4.28

CONTRACT

FOR

CONSTRUCTION AND SALE

OF

A DRILLSHIP

(HULL NO. 1838)

BETWEEN

DRILLSHIP PAROS OWNERS INC.

AND

SAMSUNG HEAVY INDUSTRIES CO., LTD.

INDEX

	PAGE
ARTICLE I - DESCRIPTION AND CLASS	6
1. Description:	6
2. Dimensions and Characteristics:	6
3. The Classification, Rules and Regulations:	7
4. HSE Analysis, studies and assessments	7
5. Subcontracting	8
6. Registration:	8
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	9
1. Contract Price:	9
2. Adjustment of Contract Price:	9
3. Currency:	9
4. Terms of Payment:	9
5. Method of Payment:	11
6. Notice of Payment before Delivery:	11
7. Expenses:	12
8. Prepayment:	12
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	13
1. Delivery:	13
2. Speed:	14
3. Fuel Consumption for the Diesel Generator Prime Drivers:	15
4. Variable Load Capacity:	15
5. Effect of Rescission:	16
ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	17
1. Approval of Plans and Drawings:	17
2. Appointment of BUYER’s Supervisor:	17
3. Inspection by the Supervisor:	18
4. Facilities:	19
5. Liability of BUILDER:	19
6. Responsibility of BUYER:	20
7. Delivery and Construction Schedule:	21
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	22
1. How Effected:	22
2. Changes in Rules of Classification Society, Regulations, etc.:	23
3. Substitution of Materials:	24
ARTICLE VI - TRIALS AND ACCEPTANCE	25

2

1. Notice:	25
2. Weather Condition:	25
3. How Conducted:	26
4. Method of Acceptance or Rejection	26
5. Effect of Acceptance:	27
6. Disposition of Surplus Consumable Stores:	28
ARTICLE VII - DELIVERY	29
1. Time and Place:	29
2. When and How Effected:	29
3. Documents to be delivered to BUYER:	29
4. Tender of DRILLSHIP:	30
5. Title and Risk:	31
6. Removal of DRILLSHIP:	31
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	32
1. Causes of Delay (Force Majeure):	32
2. Notice of Delay:	33
3. Definition of Permissible Delay:	33
4. Right to Rescind for Excessive Delay:	33
ARTICLE IX - WARRANTY OF QUALITY	35
1. Guarantee:	35
2. Notice of Defects:	35
3. Remedy of Defects:	35
4. Extent of BUILDER’s Responsibility	37
ARTICLE X - RESCISSION BY BUYER	38
1. Notice:	38
2. Refundment by BUILDER:	38
3. Discharge of Obligations:	39
ARTICLE XI - BUYER’S DEFAULT	40
1. Definition of Default:	40
2. Effect of Default on or before Delivery of DRILLSHIP:	40
3. Disposal of DRILLSHIP:	41
ARTICLE XII - ARBITRATION	42
1. Decision by the Classification Society:	42
2. Proceedings of Arbitration in London UK:	42
3. Notice of Award:	43
4. Expenses:	43
5. Entry in Court:	43
6. Alteration of Delivery Date:	43

3

ARTICLE XIII - SUCCESSOR AND ASSIGNS	44
ARTICLE XIV - TAXES AND DUTIES	45
1. Taxes and Duties Incurred in Korea:	45
2. Taxes and Duties Incurred Outside Korea:	45
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.	46
1. Patents:	46
2. General Plans, Specifications and Working Drawings:	46
ARTICLE XVI - BUYER’S SUPPLIES	47
1. Responsibility of BUYER:	47
2. Responsibility of BUILDER:	48
3. Title:	48
ARTICLE XVII - INSURANCE	49
1. Extent of Insurance Coverage:	49
2. Application of the Recovered Amounts:	49
3. Termination of BUILDER’s Obligation to Insure:	50
ARTICLE XVIII - NOTICE	51
1. Address:	51
2. Language:	51
3. Effective Date of Notice:	52
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	53
ARTICLE XX - INTERPRETATION	54
1. Laws Applicable:	54
2. Discrepancies:	54
3. Entire Agreement:	54
4. Amendments and Supplements:	54
ARTICLE XXI - CONFIDENTIALITY	55
EXHIBIT “1” VESSEL SPECIFICATION	57
EXHIBIT “2” TOPSIDE SPECIFICATION	58
EXHIBIT “3” DELIVERY AND CONSTRUCTION SCHEDULE	59
EXHIBIT “4” LETTER OF REFUNDMENT GUARANTEE NO	60
EXHIBIT “5” PERFORMANCE GUARANTEE	63
EXHIBIT “6” OPTIONAL ITEMS	64

4

This Contract, made and entered into on this 17^th day of September 2007 by and between DRILLSHIP PAROS OWNERS INC., a corporation incorporated and existing under the laws of Marshall Islands having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 (hereinafter called the “BUYER”), on the one part and SAMSUNG HEAVY INDUSTRIES CO., LTD., a corporation incorporated and existing under the laws of the Republic of Korea and having its registered office at 34th Floor, Samsung Life Insurance Seocho Tower 1321-15, Seocho-Dong, Seocho-Gu, Seoul, Korea 137-857 (hereinafter called the “BUILDER”), on the other part.

W I T N E S S E T H:

In consideration of the mutual covenants herein contained, the BUILDER acknowledges that the Contract is a turn key contract for the construction and sale of a drillship constructed and tested out to be fully ready to drill and fully functioning in accordance with and subject to the terms and conditions of this Contract and Specifications and the BUILDER agrees as described in the Specifications to design, construct, build, launch, equip, test and complete One (1) Drillship composed of a hull part as described in the specification attached hereto as Exhibit “1” of this Contract (hereinafter referred to as the “VESSEL”) and topside part as described in the specification attached hereto as Exhibit “2” of this Contract (hereinafter referred to as “TOPSIDE”) (the VESSEL and TOPSIDE being hereinafter collectively referred to as the “DRILLSHIP”) and in accordance with the Delivery and Construction Schedule attached hereto as Exhibit “3” (said Exhibits 1 through 3 (including all amendments, additions, deletions and variations incorporated into the Specifications for HN. 1674 up to the Effective Date of this Contract) being hereinafter collectively called the “Specifications”) which Specifications have been initialed by representatives of the parties hereto for identification and which Specifications hereby are each incorporated herein by reference hereto and made an integral part of this Contract, at the BUILDER’s shipyard located in Geoje Island, Korea (hereinafter referred to as the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the DRILLSHIP from the BUILDER, upon the terms and conditions hereinafter set forth.

5

ARTICLE I - DESCRIPTION AND CLASS

1. Description:

The DRILLSHIP, having the BUILDER’s Hull No. 1838, shall be designed, constructed, built, launched, equipped, tested, completed and delivered in accordance with the provisions of this Contract, and the Specifications. To the extent not defined in the Specifications, the DRILLSHIP’s construction is to meet the first-class international shipbuilding and construction standards and practices, including without limitation such standards and practices relating to BUILDER’s Quality Assurance Programs.

2. Dimensions and Characteristics:

Length, overall	Max. 228 meters
Length, between perpendiculars	abt. 219.4 meters
Breadth, moulded	abt. 42 meters
Depth, moulded	abt. 19 meters
Scantling draft, moulded	abt. 13 meters

Speed, guaranteed: The trial speed shall not be less than 12.0 knots on the transit draught of 8.5 meters and at total thruster motor output of 28,700 KW.

Guaranteed Fuel Consumption, Diesel Generator Prime Drivers (in relation to each engine): The fuel consumption shall be not more than the engine manufacturers’ nominal fuel consumption plus five percent (5) % with engine driven pumps at manufacturer’s shop trial, burning marine diesel having the lower calorific value of 10,200 kCal/kg, at 85% MCR under the environment condition of ISO 3046/1-1986 specified in the Specifications.

Guaranteed Variable Load Capacity: The variable load capacity of the DRILLSHIP will be not less than 20,000 metric tons for drilling and survival conditions without extended well test oil on board as specified in the Specifications.

The details of the aforementioned particulars, as well as the definitions and the methods of measurements and calculations shall be as indicated in the Specifications.

6

3. The Classification, Rules and Regulations:

The DRILLSHIP, including its machinery, equipment and outfittings shall be constructed and classified in accordance with the rules and regulations (the editions and amendments thereto being in force) as of the signing date of this Contract and under special survey of American Bureau of Shipping (hereinafter called the “Classification Society”), and shall be distinguished in the register by the symbol of Al , “Drilling Unit”, AMS, ACCU, DPS-3, NBLES, SH-DLA, CDS.

Decisions of the Classification Society as to compliance or non-compliance with the classification rules and regulations shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the Specifications.

The DRILLSHIP shall also comply with the rules, regulations and requirements of the regulatory bodies as described and listed in the Specifications.

The DRILLSHIP will be built and delivered (i) in accordance with the terms of this Contract and the Specifications, (ii) in full compliance and certification to and with the IMO MODU code with amendments, (iii) in full compliance with the regulations, provisions, and requirements included in the Specifications, (iv) in full compliance with the requirements of the Classification Society so as to be classed with the Classification Society as a MODU, and (v) so that the DRILLSHIP will be approved to operate in the United States Gulf of Mexico/the Outer Continental Shelf of the United States, the waters outside West Africa, Central Africa, South Africa, South America, South East Asia, UK, Australia, South Atlantic and in the Mediterranean. The BUILDER will take all action necessary, and remedy at its cost and expense, any deficiency that constitutes a failure to comply with the above requirements.

All fees and charges incidental to the Classification Society and in respect to compliance with the above referred rules, regulations and requirements, as well as all DRILLSHIP design fees and/or royalties (except any royalties for the BUYER’s Supplies), shall be for account of the BUILDER.

4. HSE Analysis, studies and assessments

The BUYER shall perform HSE Analysis, studies and assessments such as HAZID’s, Risk Analysis, HAZOP’s, Readability and Vulnerability analysis, Working Environment assessment of the DRILLSHIP.

7

If the finding of such HSE Analysis, studies and assessments demand changes to the design, layout and construction of the DRILLSHIP to make the DRILLSHIP meet the requirements of the Contract, then the BUILDER shall implement such changes in accordance with the findings.

Should the findings lead the BUYER to request changes to the Contract then a Variation Order shall be in accordance with Article V.

The BUILDER shall be responsible for obtaining the Classification Society’s approval of all required plans and drawings of the DRILLSHIP.

5. Subcontracting

The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the DRILLSHIP, provided that the work is carried out at a reputable yard in Korea or at the BUILDER’s wholly owned subsidiaries at Ningbo and Rongcheng in China, where the aggregate value of the works or services to be subcontracted equals or is below Five million five hundred thousand United States Dollars (US$ 5,500,000) but if exceeding such value the BUILDER shall obtain in writing the prior approval of the BUYER (whose approval shall not be unreasonably withheld), but any subcontracting shall always be subject to the condition that the BUILDER shall ensure that the rights of the BUYER and the requirements in the Contract are satisfied and provided for in such work. The BUILDER shall not be relieved from any of its obligations and liabilities under the Contract and shall be responsible for all work, acts, omissions and defaults of any subcontractors as fully as if they were the work, acts, omissions or defaults of the BUILDER.

6. Registration:

The DRILLSHIP, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under the Malta flag at the BUYER’s expenses.

(End of Article)

8

ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT

1. Contract Price:

The Contract price of the DRILLSHIP, net receivable by the BUILDER and exclusive of the BUYER’s Supplies (as defined in Paragraph 1 of Article XVI hereof) is Six Hundred Seven Million Three Hundred Seventy Thousand United States Dollars (US$ 607,370,000) (hereinafter referred to as the “Contract Price”). The Contract Price shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.

2. Adjustment of Contract Price:

Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery of the DRILLSHIP in the manner as hereinafter provided at article III.

The BUYER has the right to exercise the purchase the option as per Exhibit “6” within 3 months after the date of the signing contract. Should the BUYER exercise one of the options, the payment terms of the exercised option items shall be same with that of the Contract, provided that the amount of the first installment shall be paid at the same time of the second installment is due, and the BUILDER will reissue a Refundment Guarantee covering full amount of the adjusted Contract Price to replace the old Refundment Guarantee.

3. Currency:

Any and all payments by the BUYER to the BUILDER, or vice versa if any, which are due under this Contract shall be made in United States Dollars.

4. Terms of Payment:

The Contract Price shall be due and payable by the BUYER to the BUILDER in the installments as follows:

(a) First Installment:

The First Installment amounting to Ninety One Million One Hundred Five Thousand Five Hundred United States Dollars (15%, US$ 91,105,500), less the amount of Five Million United States Dollars (US$ 5,000,000) already paid by the BUYER to the BUILDER as Commitment Fee, making the net sum for this first installment Eighty Six Million One Hundred Five Thousand Five Hundred United States Dollars (US$ 86,105,500) shall be due and payable within five (5) banking days after the receipt of the original Refundment Guarantee.

9

(b) Second Installment:

The Second Installment amounting to Ninety One Million One Hundred Five Thousand Five Hundred United States Dollars (15%, US$ 91,105,500) shall be due and payable within three (3) banking days six months after the Effective Date of the Contract upon receipt of the BUILDER’s invoice therefore.

(c) Third Installment:

The Third Installment amounting to Ninety One Million One Hundred Five Thousand Five Hundred United States Dollars (15%, US$ 91,105,500) shall be due and payable within three (3) banking days from the receipt of the BUILDER’s invoice and a telefax notice from the BUILDER, countersigned by the classification surveyor, certifying that steel cutting for the Drillship has commence but not earlier than 19 months after the second installment.

(d) Fourth Installment:

The Fourth Installment amounting to Ninety One Million One Hundred Five Thousand Five Hundred United States Dollars (15%, US$ 91,105,500) shall be due and payable within three (3) banking days from the receipt of the BUILDER’s invoice and a telefax notice from the Builder, countersigned by the classification surveyor, certifying that keel laying for the DRILLSHIP has commenced but not earlier than 4 months after the third installment.

(e) Fifth Installment:

The Fifth Installment amounting to Two Hundred and Forty Two Million Nine Hundred Forty Eight Thousand United States Dollars (40%, US$ 242,948,000) plus or minus any adjustment of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery of the DRILLSHIP or upon tender for delivery of the DRILLSHIP referred to in Paragraph 4 of Article VII of this Contract.

10

5. Method of Payment:

(a) First Installment:

Within five (5) banking days after the receipt of the original Refundment Guarantee, the BUYER shall remit by telegraphic transfer the first installment to the account to be specified in advance in writing by the BUILDER.

(b) Second, Third and Fourth Installments:

Upon the due date of the second, third and fourth installments, in accordance with Article II, 4 (b), (c) and (d) as appropriate, the BUYER shall remit by telegraphic transfer each of the respective installments to the account to be specified in advance in writing by the BUILDER.

(c) Fifth Installment:

At least three (3) banking days prior to the anticipated delivery date of the DRILLSHIP, the BUYER shall remit by telegraphic transfer the fifth installment to the bank specified in advance in writing by the BUILDER in the name of the BUYER’s bank with instructions of the amount so remitted to be payable to the BUILDER against a copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE DRILLSHIP signed by the BUYER and the BUILDER.

Simultaneously with each of all such payment, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable or telefax.

No payment due under this Contract shall be delayed, suspended or withheld by the BUYER on account of any dispute or disagreement between the parties hereto. Any claim that the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.

6. Notice of Payment before Delivery:

With the exception of the first installment, the BUILDER shall give the BUYER Ten (10) banking days prior notice in writing or telefax or telex of the anticipated due date and amount of each installment payable on or before delivery of the DRILLSHIP.

11

7. Expenses:

Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees referred to in paragraph 2 of Article XIV of this Contract connected with such payment shall be for account of the BUYER.

8. Prepayment:

Prepayment of any installment due on or before delivery of the DRILLSHIP shall be subject to mutual agreement between the parties hereto.

(End of Article)

12

ARTICLE III - ADJUSTMENT OF CONTRACT PRICE

The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty):

1. Delivery:

(a) No adjustment shall be made and the Contract Price shall remain unchanged for the first 30 days of delay in delivery of the DRILLSHIP beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the 31^st day of delay).

(b) If the delivery of the DRILLSHIP is delayed more than 30 days after the Delivery Date, then, in such event, beginning at twelve o’clock midnight of the 31^st day after the Delivery Date, the Contract Price shall be reduced by the sum of Hundred and twenty thousand United States Dollars (US$ 120,000) for each full day for which thereafter delivery is delayed.

However, the total reduction in the Contract Price pursuant to this Paragraph (b) shall not be more than as would be the case for a delay of 180 days counting from midnight of the 31^st day after the Delivery Date at the above specified rate of reduction.

(c) However, if the delay in delivery of the DRILLSHIP should continue for a period of 210 days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.

The BUILDER may, at any time after the expiration of the aforementioned 210 days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the DRILLSHIP at a specified future date which date BUILDER represents to BUYER is the earliest date BUILDER can deliver the DRILLSHIP to BUYER under this Contract, based on the circumstances then known. If the BUYER shall not make an election within Twenty (20) days as

13

provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the DRILLSHIP is not delivered by such specified date, the BUYER shall have the same right of rescission upon the same terms and conditions as hereinabove provided.

(d) If, at the time of actual delivery the BUYER has entered into an unconditional charter contract providing for the immediate deployment of the DRILLSHIP to provide services in return for the payment of cash consideration upon delivery of the DRILLSHIP (the “Delivery Contract”), and, should Delivery occur before twelve o’clock midnight on the Delivery Date and the third party accepts to take such early delivery under the Delivery Contract, then in such event, the final installment of the Contract Price shall be increased by the sum of Seventy five thousand United States Dollars (US$ 75,000) for each full day of early delivery, beginning at the time of actual delivery of the DRILLSHIP until twelve o’clock midnight on March 31, 2011, provided that the aggregate increases to the Contract Price for early delivery of the DRILLSHIP shall not exceed Three million United States Dollars (US$ 3,000,000) (the “Bonus”).

(e) For the purpose of this Article, the delivery of the DRILLSHIP shall be deemed to be delayed when and if the DRILLSHIP, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.

2. Speed:

(a) The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the Specifications) being less than the guaranteed speed, if such variation is not more than 0.5 knots.

(b) However, commencing with and including such deficiency of 0.5 knots in trial speed below the guaranteed speed of the DRILLSHIP, the Contract Price shall be reduced by Eighty thousand United States Dollars (US$ 80,000) for each 0.1 knot below the guaranteed speed.

(c) If the deficiency in the speed upon final sea trial is more than one (1) knot below the guaranteed speed of the DRILLSHIP, then the BUYER may, at its option, reject the

14

DRILLSHIP and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the DRILLSHIP at a reduction in the Contract Price at a rate of One Hundred Thousand United States Dollars (U$ 100,000) for each 0.1 knot below 11.5 knots.

3. Fuel Consumption for the Diesel Generator Prime Drivers:

(a) The Contract Price shall not be affected or changed in case the actual fuel consumption for each engine, as determined by the shop trial as specified in the Specifications, is not more than one percent (1%) in excess of the Guaranteed Fuel Consumption specified in Paragraph 3 of Article I.

(b) However, in the event that the actual fuel consumption of any engine at the shop trial is in excess of one percent (1%) of the Guaranteed Fuel Consumption, the Contract Price shall be reduced by the sum of Forty thousand United States Dollars (US$ 40,000) for each one percent (1%) per engine by which the actual fuel consumption of any engine exceeds the Guaranteed Fuel Consumption plus One percent (1%).

(c) The BUYER has an option to reject the DRILLSHIP and rescind the Contract in accordance with the provisions of Paragraphs 2, 3 and 4 of Article X – RESCISSION BY BUYER hereof in the event the actual fuel consumption of any engine is more than five percent (5%) in excess of the Guaranteed Fuel Consumption.

4. Variable Load Capacity:

(a) In the event that the actual Variable Load Capacity of the DRILLSHIP is more than 500 metric tons below the Guaranteed Variable Deck Load Capacity of the DRILLSHIP, then the Contract Price shall be reduced by Four thousand United States Dollars (US$ 4,000) per each metric ton of the shortfall below 19,500 metric tons.

(b) In the event that the actual Variable Load Capacity of the DRILLSHIP is more than 1,500 metric tons below the Guaranteed Variable Load Capacity of the DRILLSHIP, then the BUYER may at its option reject the DRILLSHIP and rescind the Contract in accordance with the provisions of Paragraphs 2, 3 and 4 of Article X – RESCISSION BY BUYER hereof or accept the DRILLSHIP at a reduction in the Contract Price of Four million United States Dollars (US$ 4,000,000).

15

5. Effect of Rescission:

It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this Article, the BUYER shall not be entitled to any liquidated damages, or any other recourse unless by means of the provisions of Article X hereof.

(End of Article)

16

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION

1. Approval of Plans and Drawings:

Approved plans and drawings of the BUILDER’s HN. 1674 (including all amendments, additions, deletions and variations incorporated into the Specification up to the date of this Contract signing) shall be deemed to be approved by the BUYER and shall be applied to the Drillship. The BUILDER shall be exempted from the approval of the BUYER for the plans and drawings in accordance with the Specifications. All plans and drawings, which are modified by the BUILDER shall, however, be subject to approval by the BUYER in accordance with Article V.

2. Appointment of BUYER’s Supervisor:

The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor (herein called the “Supervisor”) who shall be duly authorized in writing by the BUYER, which authorization shall be described in a separate letter to be sent to the BUILDER prior to the Supervisor’s arrival, to act on behalf of the BUYER in connection with the modifications of the Specifications, adjustments of the Contract Price and Delivery Date in writing, approval of the plans and drawings, attendance to the tests and inspections relating to the DRILLSHIP, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint assistant(s) to attend at the Shipyard for the purposes as aforesaid. In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the DRILLSHIP, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized to perform the supervision, each of them will form uniform opinions between them to keep the design and specifications so as not to adversely affect the Contract Price and Delivery of the DRILLSHIP. In the event of any additional costs attributable to dispatch of two or more Supervisors due to resale, novation, charter or any other occurrence otherwise resulting from the BUYER side, such costs shall be solely borne by the BUYER and the BUYER shall reimburse and hold harmless the BUILDER from any such costs and expenses.

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3. Inspection by the Supervisor:

The necessary inspections of the DRILLSHIP, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or the Supervisor throughout the entire period of construction in order to ensure that the design, construction, building, launching, equipping, testing and completion of the DRILLSHIP is duly performed in accordance with the Contract and the Specifications.

The BUILDER shall give a written notice to the Supervisors reasonably in advance of the date and place of tests and inspections for the convenience of their attendance. Failure of the Supervisors to be present at such tests and inspections after due notice to them as above provided, shall be deemed to be a waiver of their right to be present. In such cases, the BUYER shall be obliged to accept the results of such tests and inspections on the basis of the BUILDER’s certificate subject to acceptance by the Classification Society.

Whether or not the Supervisors have been present, the BUILDER shall promptly deliver to the BUYER or the Supervisors a copy of the results of all tests and inspections.

For tests or inspections outside the Shipyard sufficient advance notice to allow for the Supervisor to arrange transportation shall be given. This advance notice should not be less than three (3) days for tests or inspection that require air travel for attendance.

The inspection schedule must be reasonable at all times in order to allow the Supervisor to carry out their duties properly and inspections must be spread over reasonable time, but in follow building schedule at the same rate.

BUILDER may request BUYER’s Supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s Supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s Supervisor one (1) day in advance as a minimum.

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If any of the BUYER’s Supervisors discover any construction, material or workmanship which is not deemed to conform to the requirements of this Contract and/or the Specifications, the BUYER’s Supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon receipt of such notice from the BUYER’s Supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII and shall to the extent possible not prevent the progress of the construction and the timely delivery of the DRILLSHIP.

If, following such disagreement, the Classification Society or the arbitrator enters a determination in favor of the BUYER, then in such case the BUILDER shall immediately correct such non-conformity subject to Article VI 4. (b). If the Classification Society or the arbitrator enters a determination in favor of the BUILDER, then the time for delivery of the DRILLSHIP shall be extended for the period of any actual delay in construction, if any, occasioned by such proceedings (but not by any time by which the period is extended owing to the BUILDER’s own default), and the BUYER shall pay the BUILDER interest at the rate of five percent (5%) per annum on the outstanding Instalments of the Contract Price for the said period of delay.

In working hours during construction of the DRILLSHIP until delivery thereof, the BUYER’s Supervisors shall, subject to the reasonable requirements of the Shipyard’s work program and safety control, be permitted free and ready access to the DRILLSHIP, her machinery and equipment, and to any other place where work on the DRILLSHIP is being done, or materials are being processed or stored in connection with the construction of the DRILLSHIP, including the yards, workshops, stores and offices of the BUILDER, and the premises of subcontractors of the BUILDER, who are doing work or storing materials in connection with the DRILLSHIP’s construction.

4. Facilities:

The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.

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5. Liability of BUILDER:

The BUILDER agrees to fully protect, defend, indemnify and hold BUYER harmless from and against all liabilities, obligations, claims or actions for personal injury or death arising out of performance by BUILDER or BUYER of their obligations hereunder prior to the acceptance by BUYER of the DRILLSHIP, and asserted by or on behalf of,

(i) any employee, agent, contractor, or subcontractor of BUILDER, or

(ii) any employee of any agent, contractor, or subcontractor of BUILDER, regardless of the basis of such claims and even if such claims should arise out of the sole or concurrent fault or negligence of BUYER, or any employee, agent, contractor or subcontractor of BUYER.

Similarly, the BUYER agrees to fully protect, defend, indemnify and hold BUILDER harmless from and against all liabilities, obligations, claims or actions for personal injury or death arising out of performance by BUILDER or BUYER of their obligations hereunder prior to the acceptance by BUYER of the DRILLSHIP, and asserted by or on behalf of,

(i) any employee, agent, contractor, or subcontractor of BUYER, or

(ii) any employee of any agent, contractor, or subcontractor of BUYER, regardless of the basis of such claims and even if such claims should arise out of the sole or concurrent fault or negligence of BUILDER, or any employee, agent or subcontractor of BUILDER.

6. Responsibility of BUYER:

The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER, which BUILDER represents and confirms is in all material respects in accordance with normal shipbuilding practice and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the DRILLSHIP, and/or any disturbance in the construction schedule of the BUILDER.

The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the DRILLSHIP’s design, construction, building, launching, equipping, and completion. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently possible.

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7. Delivery and Construction Schedule:

Attached hereto as Exhibit “3” is a tentative Delivery and Construction Schedule, and within one hundred and eighty (180) days after the date of this Contract, BUILDER shall deliver or cause to be delivered to BUYER a final Delivery and Construction Schedule (herein, as from time to time amended with notice to the BUYER, referred to as the “Schedule”), prepared in reasonable detailed schedule and setting forth the estimated time table for the design, construction, building, launching, equipping, testing and completion of the DRILLSHIP, it being understood that the Schedule may be used by BUYER for purposes of verifying and measuring the progress being made under the terms of this Contract. In the event the actual progress of the construction of the DRILLSHIP is lagging behind the Schedule, the BUILDER shall issue a recovery plan to overcome such lagging so that the planned Delivery Date shall not be affected.

During the course of performance of this Contract the BUILDER shall submit to the BUYER on a monthly basis;

a) a status report on the DRILLSHIP’s construction as compared with the Schedule;

b) a report setting out the actual progress in performance of this Contract during the previous month as compared with the Schedule, including monthly progress photographs illustrating the progress of the construction;

c) a list of modifications or changes (if any) agreed during the previous month;

d) a document register showing the status of document preparation and planned and actual completion of documents.

(End of Article)

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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS

1. How Effected:

The Specifications may be modified and/or changed by written agreement of the parties, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the DRILLSHIP, other terms and conditions of this Contract and the Specifications occasioned by or resulting from such modifications and/or changes. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time that is reasonably possible.

Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the DRILLSHIP together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the Specifications occasioned by such modifications and/or changes.

The aforementioned agreement to modify and/or change the Specifications may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the Specifications, and such letters and message shall be incorporated into this Contract and made a part hereof.

The failure of the parties to agree on the increase or decrease in the Contract Price, or extension or reduction in the time of delivery, if any, for any modifications or changes requested by the BUYER shall not prevent the BUILDER from performing any agreed work so as not to prevent the proper progress of the DRILLSHIP’s design, construction, building, launching, equipping, testing and completion, but shall be dealt with in accordance with Article XII.

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The BUILDER may make minor changes to the Specifications, if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval that shall not be unreasonably withheld.

2. Changes in Rules of Classification Society, Regulations, etc.:

If, after the Effective Date of this Contract, any requirements as to Classification Society, or as to the rules and regulations to which the construction of the DRILLSHIP is required to conform, are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto, upon receipt of information thereof, shall transmit such information in full to the other party in writing within fourteen (14) days after receipt of the said information and thereafter the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the DRILLSHIP or not, in the BUYER’s sole discretion.

(a) However, if such alterations or changes are compulsory for the construction of DRILLSHIP, the BUILDER shall incorporate such alterations or changes into the construction of the DRILLSHIP, provided that the parties shall agree on any increase or decrease in the Contract Price, extension or reduction in time of delivery of the DRILLSHIP and other terms and conditions of this Contract and the Specifications occasioned by or resulting from such alterations or changes.

(b) If such alterations or changes are not compulsory for the construction of the DRILLSHIP, but the BUYER desires to incorporate such alterations or changes into the construction of the DRILLSHIP, then the BUYER shall notify the BUILDER in writing of such intention within fourteen (14) days after receipt of the said information. The BUILDER shall accept such alterations or changes, provided that the parties shall agree on any increase or decrease in the Contract Price, extension or reduction in time of delivery of the DRILLSHIP and other terms and conditions of this Contract and the Specifications occasioned by or resulting from such alterations or changes.

Such agreement of the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the Specifications. The failure of the parties to agree on the increase or decrease in the Contract Price, or extension or reduction in the time of delivery, if any, for any modifications or changes requested by the BUYER shall not prevent the BUILDER from performing any agreed work so as not to prevent the proper progress of the DRILLSHIP’s design, construction, building, launching, equipping, testing and completion, but shall be dealt with in accordance with Article XII.

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3. Substitution of Materials:

In the event that any of the materials required by the Specifications or otherwise under this Contract for the construction of the DRILLSHIP can not be procured in time to effect timely delivery of the DRILLSHIP, or are in short supply, (other than as the result of any neglect or omission on the part of the BUILDER) the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the DRILLSHIP must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include decrease or increase in the Contract Price and other terms and conditions of this Contract affected by such substitution.

(End of Article)

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ARTICLE VI - TRIALS AND ACCEPTANCE

1. Notice:

The sea trial shall start when the DRILLSHIP is reasonably completed in all material respects according to the Specifications, and otherwise any and all tests or trials shall be performed and notified as per the Specifications.

The BUILDER shall give the BUYER at least Thirty (30) days estimated prior notice and seven (7) days confirming prior notice in writing or by telefax confirmed in writing of the time and place of the sea trial of the DRILLSHIP, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representative and his assistant(s) on board the DRILLSHIP to witness such sea trial.

Failure in attendance of the BUYER’s representative at the sea trial of the DRILLSHIP for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the DRILLSHIP at the sea trial, and the BUILDER may conduct the sea trial without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the DRILLSHIP on the basis of certificates of the Classification Society and a certificate of the BUILDER stating that the DRILLSHIP, upon sea trial, is found to conform to this Contract and the Specifications.

2. Weather Condition:

The sea trial and any other tests and trials of the DRILLSHIP as per the Specifications shall be carried out under the weather condition that is deemed favorable enough by the judgment of both the BUYER and the BUILDER and as per the Specifications. In the event of unfavorable weather on the date specified for the sea trial or other tests and trials as per the Specifications, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the sea trial or other tests and trials of the DRILLSHIP as per the Specifications, the weather should suddenly become so unfavorable that orderly conduct of the test or trial can no longer be continued, the test or trial shall be discontinued and postponed until the first favorable day next following, unless the BUYER shall assent in writing to acceptance of the DRILLSHIP on the basis of the tests and trials already made before such discontinuance has occurred.

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Any delay of sea trial caused by such unfavorable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the DRILLSHIP.

3. How Conducted:

(a) The sea trial and any other tests and trials as per the Specifications shall be conducted in the manner prescribed in the Specifications, and shall prove full fulfillment of the performance requirements for the trial run as set forth in the Specifications.

(b) All risk and expenses in connection with the sea trial and any other tests and trials are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, fuel oil, lubes, stores and the necessary crew to comply with conditions of safe navigation.

(c) Notwithstanding above (b), the BUYER shall provide drilling crews at it’s own expense during tests and trials for drilling system. The crews shall perform the tests and trials under the BUILDER’s responsibility and risk and familiarized themselves with the system for the final take over of the Drillship.

4. Method of Acceptance or Rejection.

(a) Upon completion of the sea trial, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the DRILLSHIP to this Contract and the Specifications. The BUYER shall, within Five (5) days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the DRILLSHIP’s conformity to this Contract and Specifications.

(b) However, if the result of the sea trial is unacceptable, or if the DRILLSHIP, or any part or equipment thereof, (except a defect in the BUYER’s supplies not being the responsibility of the BUILDER) does not conform to the requirements of this Contract and/or the Specifications, or if the BUILDER is in agreement to nonconformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.

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Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER notice thereof by telefax confirmed in writing.

The BUYER shall, within Five (5) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the DRILLSHIP.

(c) In the event that the BUYER rejects the DRILLSHIP, the BUYER shall indicate in detail in its notice of rejection in what respect the DRILLSHIP, or any part or equipment thereof (except a defect in the BUYER’s supplies not the responsibility of the BUILDER) does not conform to this Contract and/or the Specifications.

(d) In the event that the BUYER fails to notify the BUILDER by telefax confirmed in writing of the acceptance of or the rejection together with the reason therefore of the DRILLSHIP within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the trial results and/or the DRILLSHIP, as appropriate.

(e) Any dispute between the BUILDER and the BUYER as to the conformity or nonconformity of the DRILLSHIP to the requirements of this Contract and/or the Specifications shall be submitted for final decision in accordance with Article XII hereof.

(f) The BUYER shall not be entitled to refuse acceptance of the DRILLSHIP by reason of any minor or insubstantial non-conformity with this Contract and the Specifications. For the purpose of this Sub-paragraph, a minor or insubstantial nonconformity shall mean a non-conformity that does not impair the safe or efficient operation of the DRILLSHIP and shall exclude any non-conformities affecting compliance with the rules and regulations of the Classification Society and other relevant Regulatory Bodies of the DRILLSHIP as defined in the Specifications. The BUILDER shall remain obliged to correct and/or remedy such minor or insubstantial non-conformities as soon as reasonably possible following delivery of the DRILLSHIP.

5. Effect of Acceptance:

Acceptance of the DRILLSHIP as above provided shall be final and binding so far as conformity of the DRILLSHIP to this Contract and the Specifications is concerned and

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shall preclude the BUYER from refusing formal delivery of the DRILLSHIP as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the DRILLSHIP shall not affect the BUYER’s rights under Article IX hereof.

6. Disposition of Surplus Consumable Stores:

Any fuel oil furnished and paid for by the BUILDER for sea trial remaining on board including in systems and pipes of the DRILLSHIP, at the time of acceptance of the DRILLSHIP by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and payment by the BUYER thereof shall be made at the time of delivery of the DRILLSHIP.

The BUILDER shall pay the BUYER at the time of delivery of the DRILLSHIP an amount for the consumed quantity during sea trial of any lubricating oil and greases which were furnished and paid for by the BUYER, if any, at the BUYER’s purchase price thereof.

(End of Article)

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ARTICLE VII - DELIVERY

1. Time and Place:

The DRILLSHIP shall be delivered by the BUILDER to the BUYER at the Shipyard on or before March 31, 2011 (unless delays occur in the construction of the DRILLSHIP or in any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date of delivery, in which event, the aforementioned date for delivery of the DRILLSHIP shall be changed accordingly) or, such earlier date after completion of the DRILLSHIP according to this Contract and the Specifications.

The aforementioned date, or such earlier or later date to which the requirement of delivery is advanced or postponed pursuant to this Contract, is herein called the “Delivery Date”.

2. When and How Effected:

Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the DRILLSHIP shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the DRILLSHIP by the BUILDER and acceptance thereof by the BUYER.

3. Documents to be delivered to BUYER:

Upon delivery and acceptance of the DRILLSHIP, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE.

(a) PROTOCOL OF TRIALS of the DRILLSHIP made pursuant to the Specifications.

(b) PROTOCOL OF INVENTORY of the equipment of the DRILLSHIP, including spare parts and the like, as specified in the Specifications.

(c) PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under paragraph 6 of Article VI hereof.

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(d) ALL CERTIFICATES including the BUILDER’s CERTIFICATE required to be furnished upon delivery of the DRILLSHIP pursuant to this Contract and the Specifications.

It is agreed that if, through no fault on the part of the BUILDER, the Classification certificates and/or other certificates are not available at the time of delivery of the DRILLSHIP, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.

Application and certificate for statutory inspections for the registry of the DRILLSHIP shall be arranged by the BUYER at its expense.

(e) DECLARATION OF WARRANTY of the BUILDER that the DRILLSHIP is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the DRILLSHIP is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities or any other Authorities, as well as all liabilities of the BUILDER to its subcontractors, employees and crew, and of all the liabilities arising from the operation of the DRILLSHIP in trial runs, or otherwise, prior to delivery.

(f) DRAWINGS AND PLANS and any other technical documentation pertaining to the DRILLSHIP as stipulated in the Specifications

(g) COMMERCIAL INVOICE.

(h) Bill of Sale to be notarized and apostiled

(i) Builder’s Resolution of Board of Directors to be notarized and apostiled

(j) Power of Attorney to be notarized and apostiled

(k) Goodstanding Certificate

(1) Confirmation by ABS to Malta Maritime Authority

(m) Builder’s Certificate

4. Tender of DRILLSHIP:

If the BUYER fails to take delivery of the DRILLSHIP after completion thereof according to this Contract and the Specifications without any justifiable reason, the BUILDER shall have the right to tender delivery of the DRILLSHIP after accomplishment of all BUILDER’s obligations as provided herein.

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5. Title and Risk:

Title to and risk of loss of the DRILLSHIP shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of damage to or loss of the DRILLSHIP and her equipment shall be in the BUILDER.

6. Removal of DRILLSHIP:

The BUYER shall take possession of the DRILLSHIP immediately upon delivery and acceptance thereof and shall remove the DRILLSHIP from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.

If the BUYER shall not remove the DRILLSHIP from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the DRILLSHIP.

(End of Article)

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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)

1. Causes of Delay (Force Majeure):

If, at any time either the construction or delivery of the DRILLSHIP or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, strikes, sabotage, lockouts, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, if any, or shortage of materials, machinery or equipment in inability to obtain delivery or delays in delivery of materials, machinery or equipment other than resulting from any act, omission or improvidence of the BUILDER or its agents, employees or Subcontractors, provided that at the time of ordering the same could reasonably be expected by the BUILDER to be delivered in time, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or delay in the construction of the BUILDER’s other new-building projects in the same dry-dock due to any such causes as described in this Article which in turn delay the keel laying and eventual delivery of the DRILLSHIP in view of the Shipyard’s overall building program or the BUILDER’s performance under this Contract, or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the DRILLSHIP, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under terms of this Contract, authorize and permit extension of the time for delivery of the DRILLSHIP, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the DRILLSHIP under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.

The BUILDER’s entitlement to extension of the Delivery Date due to any of the aforesaid events shall, however, always be subject to the delay, or any part of the delay, not being caused by the BUILDER’s error, neglect, act or omission or that of its agents, employees or Subcontactors, and that the BUILDER having taken all reasonable steps to mitigate the effect of the event upon the Delivery Date.

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2. Notice of Delay:

Within Ten (10) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Ten (10) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.

The BUILDER shall also notify promptly the BUYER of the period, by which in their opinion the Delivery Date is postponed by reason of such cause of delay. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.

Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Ten (10) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.

3. Definition of Permissible Delay:

Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.

4. Right to Rescind for Excessive Delay:

If the total accumulated time of all delays claimed by the BUILDER on account of the causes specified in Paragraph 1 of this Article, excluding other delays of the nature which under the terms of this Contract permit postponement of the Delivery Date, amounts to Two Hundred and Ten (210) days or more, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.

The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall

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make an election, in which case the BUYER shall, within Fourteen (14) working days after such demand is received by the BUYER either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date, which date BUILDER represents to BUYER is the earliest date BUILDER can deliver the DRILLSHIP to BUYER, based on the circumstances then known, it being understood by the parties hereto that if the DRILLSHIP is not delivered by such future date, the BUYER shall have the same right of rescission upon the same terms and conditions as hereinabove provided.

(End of Article)

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ARTICLE IX - WARRANTY OF QUALITY

1. Guarantee:

The BUILDER, for the period of Twelve (12) months after delivery of the DRILLSHIP (hereinafter called “Guarantee Period”), guarantees the DRILLSHIP and her engines, including all parts and equipment manufactured, furnished or installed by the BUILDER or its subcontractors under this Contract, and including the machinery, equipment and appurtenances thereof (including the installation work performed or required to be performed by BUILDER under this Contract for the BUYER supplied or furnished equipment), under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to defective material, design and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.

2. Notice of Defects:

The BUYER shall notify the BUILDER in writing, or by telefax confirmed in writing, of any Defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s written notice shall describe the nature, cause and extent of the Defects.

The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Fourteen (14) working days after the expiry of the Guarantee Period.

3. Remedy of Defects:

(a) The BUILDER shall remedy, at its expense, any Defect against which the DRILLSHIP is guaranteed under this Article, by making all necessary repairs or replacements at the Shipyard.

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(b) However, if it is impracticable to bring the DRILLSHIP to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the nearest airport or port from the DRILLSHIP, unless forwarding or supplying thereof would impair or delay the operation or working schedule of the DRILLSHIP. In the event that the BUYER proposes to cause the necessary repairs or replacements for the DRILLSHIP to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the DRILLSHIP is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax or telex after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall compensate the BUYER for such repairs or replacements a sum equal to the necessary and reasonable cost of making the same repairs or replacements in a competent shipyard at a reasonable location, at the prices prevailing at the time of such repairs or replacements are made. The reimbursement of the cost incurred in relation to guarantee works shall be paid after the repairs or replacements are made but if not made or the costs incurred for each such repair or replacement is below US$ 100,000, such costs shall be paid at the expiration of the guarantee period.

(c) The BUILDER guarantees repairs or replacements to the DRILLSHIP made under the guarantee in paragraph 1 of this Article for a further period of Twelve (12) months from the date of completion of such repair or replacement. In any case, the maximum guarantee period shall not exceed Eighteen (18) months.

(d) In any case, the DRILLSHIP shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.

(e) Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.

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4. Extent of BUILDER’s Responsibility

(a) The BUILDER shall have no responsibility or liability for any other defect whatsoever in the DRILLSHIP than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the DRILLSHIP to remedy such Defects.

(b) The BUILDER shall not be responsible for any defect in any part of the DRILLSHIP which may, subsequently to delivery of the DRILLSHIP, have been replaced or repaired in any way by any other contractor, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the DRILLSHIP on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other reason beyond control of the BUILDER.

(c) The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the DRILLSHIP by the BUILDER for and to the BUYER.

(End of Article)

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ARTICLE X - RESCISSION BY BUYER

1. Notice:

The payments made by the BUYER prior to delivery of the DRILLSHIP shall be in the nature of advances to the BUILDER, and in the event that the DRILLSHIP is rejected by the BUYER or the Contract is rescinded by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.

2. Refundment by BUILDER:

In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the DRILLSHIP, together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof. The BUILDER shall also return any BUYER’s Supplies, or if such cannot be returned, the BUILDER shall pay to the BUYER an amount equal to the BUYER’s costs for such equipment.

In the event of such rescission by the BUYER, the BUILDER shall pay the BUYER interest at the rate of six percent (6%) per annum on the amount required herein to be refunded to the BUYER, computed from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER, provided, however, that if the said rescission by the BUYER is made under the provisions of Paragraph 4 of Article VIII hereof, then in such event the BUILDER shall pay the BUYER interest at the rate of four and a half percent (4.5%) per annum on the sums refundable.

As security for refund of installments prior to delivery of the DRILLSHIP, the BUILDER shall furnish to BUYER, prior to the due date of the first installment, with an irrevocable letter of guarantee covering the amount of such pre-delivery installments and issued by KEXIM, KDB, or a bank acceptable to the BUYER in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit “4” annexed hereto.

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3. Discharge of Obligations:

Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged, without prejudice, however, to any claims either party may have resulting from the other party’s breach of any of its obligations under this Contract.

(End of Article)

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ARTICLE XI - BUYER’S DEFAULT

1. Definition of Default:

The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases:

(a) If the first installment is not paid in full by the BUYER within Five (5) banking days in New York after the signing of the Contract and the receipt of original Refundment Guarantee or if any of the second, third or fourth installment is not paid in full by the BUYER to the BUILDER within Three (3) banking days in New York after such installment becomes due and payable as provided in Article II hereof; or

(b) If a performance guarantee by Cardiff Marine Inc. is not presented to the BUILDER within 5 banking days from the Effective Date of this Contract.

(c) If the fifth installment, after adjustment pursuant to the relevant provisions of this Contract, is not paid in full by the BUYER to the BUILDER concurrently with the delivery of the DRILLSHIP as provided in Article II hereof; or

(d) If the BUYER, when the DRILLSHIP is duly tendered for delivery by the BUILDER in accordance with the provisions of this Contract, fails to accept the DRILLSHIP within Five (5) days from the tendered date without any specific and valid ground thereof under this Contract.

2. Effect of Default on or before Delivery of DRILLSHIP:

(a) Should the BUYER make default in payment of any installment of the Contract Price on or before delivery of the DRILLSHIP, the BUYER shall pay the installment(s) in default plus accrued interest thereon at the rate of six percent (6%) per annum computed from the due date of such installment provided in Paragraph 4 of Article II hereof up to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof, the Delivery Date of the DRILLSHIP shall be automatically extended by a period of continuance of such default by the BUYER.

In any event of default by the BUYER, the BUYER shall also pay all charges and expenses incurred to the BUILDER in direct consequence of such default.

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(b) If any default by the BUYER continues for a period of Fifteen (15) days, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.

Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any installment or installments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies already delivered to the Shipyard, if any.

3. Disposal of DRILLSHIP:

(a) In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the DRILLSHIP and sell the same, or sell the DRILLSHIP in its incomplete state, free of any right or claim of the BUYER. Such sale of the DRILLSHIP by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.

(b) In the event of such sale of the DRILLSHIP, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred to the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the DRILLSHIP incurred to the BUILDER less BUYER’s Supplies and the installments already paid by the BUYER, and then to the compensation to the BUILDER for a reasonable cost due to rescission of this Contract, and finally to the repayment to the BUYER if any balance is obtained.

(c) If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.

(End of Article)

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ARTICLE XII - ARBITRATION

1. Decision by the Classification Society:

If any dispute arises between the parties hereto in regard to the design and/or construction of the DRILLSHIP, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the Specifications, the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.

2. Proceedings of Arbitration in London UK.:

In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract, including any dispute regarding its validity and existence, or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London.

If the dispute or difference does not exceed the sum of Five Hundred Thousand United States Dollars (US$ 500,000) the arbitration shall be conducted in accordance with the London Maritime Arbitrators Association’s Small Claims Procedure current at the time when the arbitration proceedings are commenced.

For disputes of value above Five Hundred Thousand United States Dollars (US$ 500,000) each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.

If the two arbitrators are unable to agree upon an Umpire within Twenty (20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the Umpire, and the two arbitrators and the Umpire shall constitute the Arbitration Board.

Such arbitration shall be in accordance with and subject to the provisions of the British Arbitration Act 1996, or any statutory modification or re-enactment thereof for the time being in force.

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Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.

Within Fourteen (14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen (14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.

The award of the Arbitration Board shall be final and binding on both parties.

3. Notice of Award:

The award decision shall immediately be communicated to the BUYER and the BUILDER by facsimile and confirmed in writing.

4. Expenses:

The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses that each party shall bear.

5. Entry in Court:

In case of failure by either party to respect the award of the arbitration, the judgment may be entered in any proper court having jurisdiction thereof.

6. Alteration of Delivery Date:

In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the DRILLSHIP, the award may include any adjustment of the Delivery Date that the Arbitration Board may deem appropriate.

(End of Article)

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ARTICLE XIII - SUCCESSOR AND ASSIGNS

The BUILDER agrees that, prior to delivery of the DRILLSHIP, this Contract may, with the prior written approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be transferred to and the title thereof may be taken by another company.

In the event of any assignment or novation pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.

In the event of the assignment or novation from the BUYER to any other individual or company pursuant to this provision, the BUILDER shall be entitled to request issuance of a Performance Guarantee from the BUYER having identical form and contents as Exhibit “5” annexed hereto.

In the event of any resale, assignment or novation of the Contract, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale, assignment or novation of the Contract shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its Supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the DRILLSHIP and/or costs of construction (including, without limitation to, request for substantial change of ship type or excessive revision of design specification, etc.), the BUILDER shall be entitled to withhold its consent to the resale, assignment or novation of the Contract but in such situation the BUILDER may grant at its option consent to such resale, assignment or novation if the New BUYER will bear any and all direct and indirect costs attributable to such requests and changes resulting therefrom.

(End of Article)

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ARTICLE XIV - TAXES AND DUTIES

1. Taxes and Duties Incurred in Korea:

The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.

2. Taxes and Duties Incurred Outside Korea:

The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract as the BUYER, except for taxes and duties imposed upon those items to be procured by the BUILDER for construction.

(End of Article)

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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.

1. Patents:

BUILDER agrees to defend, indemnify and hold BUYER harmless from any liability or claims of infringement of patent rights, utility model rights, trade mark rights or copyrights, or any other intellectual property rights of any third party relating to the construction and supply of the DRILLSHIP.

With regard to the performance of the current Contract, notwithstanding anything to the contrary herein, BUYER shall defend, indemnify and hold BUILDER harmless from any liability or claims of infringement of patent rights, utility model rights, trade mark rights or copyrights, or any other intellectual property rights of any third party related to (i) process supplied by BUYER, (ii) BUYER’s Supplies and (iii) any construction, operation or use of the drilling system.

Except as otherwise provided for in this Contract, nothing contained herein shall be construed as transferring any rights in any patent, trademarks or copyrights utilized in the performance of this Contract.

2. General Plans, Specifications and Working Drawings:

The BUILDER retains all rights with respect to the Specifications, and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the DRILLSHIP, and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, such consent not to be unreasonably withheld, except where it is necessary for usual operation, repair and maintenance of the DRILLSHIP.

(End of Article)

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ARTICLE XVI - BUYER’S SUPPLIES

1. Responsibility of BUYER:

(a) The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the Specifications (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the complete, proper condition ready for installation in or on the DRILLSHIP, in accordance with the time schedule designated and advised by the BUILDER to the BUYER.

(b) In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the DRILLSHIP, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the Specifications. If so requested by the BUILDER, the BUYER, without any charge to the BUILDER, shall cause the representatives of the manufacturers of the BUYER’s Supplies to advise the BUILDER in installation thereof in or on the DRILLSHIP.

(c) Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.

(d) A delivery Schedule of the BUYER’s Supplies, if any of such have effect on the BUILDER’s construction of the DRILLSHIP, shall be finalized and settled within one hundred and fifty (150) calendar days from the date of the Contract signing. Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period that actually caused the delay in the delivery of the DRILLSHIP.

(e) If delay in delivery of any of the BUYER’s Supplies, having effect on the BUILDER’s construction of the DRILLSHIP, exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the DRILLSHIP without installation thereof in or on the DRILLSHIP as hereinabove provided, and the BUYER shall accept and take delivery of the DRILLSHIP so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.

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2. Responsibility of BUILDER:

The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the DRILLSHIP, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.

It will be the BUILDER’s responsibility to the BUYER to: (i) if applicable, assemble the BUYER’s Supplies; (ii) test the BUYER’s Supplies as necessary or appropriate; (iii) install the BUYER’s Supplies on the DRILLSHIP, in modules, as required, or otherwise as required, and to integrate the BUYER’s Supplies into the overall designed system of the DRILLSHIP. In no event will BUILDER charge any additional cost for any of the above. The BUILDER will perform above works under guidance of BUYER and the Vendors representative when required. Any rework involved due to no fault of the BUILDER shall be to BUYER’s cost and responsibility.

3. Title:

Title to the BUYER’s Supplies shall at all times remain with the BUYER during the Contract; however, the BUILDER shall have the risk of loss of or damage to such BUYER’s Supplies from the time set out in subparagraph 1(a) of this Article until delivery of the DRILLSHIP.

(End of Article)

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ARTICLE XVII - INSURANCE

1. Extent of Insurance Coverage:

From the time of the keel-laying until delivery of the DRILLSHIP, the BUILDER shall, at its own cost and expense fully insure the DRILLSHIP and all machinery, materials and equipment delivered to the Shipyard for the DRILLSHIP, including BUYER’s Supplies, built into or installed in or upon the DRILLSHIP against all risks under the “Institute Clauses for Builder’s Risks” with first class insurance company or underwriters in Korea. From the time of the first arrival of the BUYER’s Supplies in Korea until delivery of the DRILLSHIP, the BUILDER shall keep the BUYER’s Supplies fully insured with the aforementioned insurance companies or underwriters to cover BUILDER’s Risk.

The BUILDER shall promptly furnish the BUILDER with certified copies in the English language of the insurance policies taken out.

2. Application of the Recovered Amounts:

In the event that the DRILLSHIP shall be damaged from any insured cause at any time before delivery of the DRILLSHIP, and in the further event that such damage shall not constitute an actual or constructive total loss of the DRILLSHIP, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society and its requirements, and the BUYER shall accept the DRILLSHIP under this Contract if completed in accordance with this Contract and the Specifications, however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).

Should the DRILLSHIP from any cause become an actual or constructive total loss, the BUILDER shall by the mutual agreement between the parties hereto, either:

(a) Proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the DRILLSHIP, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair; or

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(b) Refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as installments in advance of delivery of the DRILLSHIP, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and shall be deemed rescinded for purposes of Article X hereof and all rights, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.

If the parties fail to reach such agreement within Sixty (60) days after the DRILLSHIP is determined to be an actual or constructive total loss, the provisions of sub-paragraph 2 (b) as above shall apply.

3. Termination of BUILDER’s Obligation to Insure:

The BUILDER shall be under no obligation to insure the DRILLSHIP hereunder after delivery thereof and acceptance by the BUYER.

(End of Article)

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ARTICLE XVIII - NOTICE

1. Address:

Any and all notices and communications in connection with this Contract shall be addressed as follows:

To the BUYER:
Drillship Paros Owners Inc. c/o Cardiff Marine Inc.
80 Kifissias Avenue,
GR- 151 25 Amaroussion,
Greece
Fax no. (+30)210 8090205
E-mail:	finance@cardiff.gr for the attention of Mr. Aristidis Ioannidis newbuildings@cardiff.gr for the attention of Mr. George Kourelis
To the BUILDER:
Samsung Heavy Industries Co., Ltd.
34th Floor, Samsung Life Insurance Seocho Tower 1321-15,
Seocho-Dong, Seocho-Gu, Seoul, Korea 137-857
Seoul, Korea 135-080
Facsimile No.: (+82) 2 3458 7369
Telephone No.: (+82)2 3458 73137
E-mail: harris.lee@samsung.com
or preferably to its Geoje Yard:
Samsung Heavy Industries Co., Ltd.
P.O. Box Gohyun 9
530, Jangpyung-ri, Sinhyun-up,
Geoje-city, Gyungnam, Korea
Facsimile No.: (+82 55 630 6070)

2. Language:

Any and all notices and communications in connection with this Contract shall be written in the English language.

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3. Effective Date of Notice:

The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.

(End of Article)

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ARTICLE XIX - EFFECTIVE DATE OF CONTRACT

This Contract shall become effective upon signing by the parties hereto.

(End of Article)

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ARTICLE XX - INTERPRETATION

1. Laws Applicable:

The parties hereto agree that the validity and the interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.

2. Discrepancies:

All general language or requirements embodied in the Specifications are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit an interpretation inconsistent with any provision of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the Specifications and Plans, the Specifications shall prevail and govern.

3. Entire Agreement:

This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertakings and agreements on any subject matter of this Contract.

4. Amendments and Supplements:

Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.

(End of Article)

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ARTICLE XXI - CONFIDENTIALITY

BUILDER and BUYER agree that the terms and conditions of this Contract shall remain confidential and neither party shall disclose any such terms and conditions of this Contract to any third party without first obtaining the prior written consent of the other, provided however, that either party shall be entitled to disclose any or all of the terms and conditions of the Contract to the extent it is necessary to do so to implement, effectuate and comply with the terms of the Contract or to otherwise exercise any right or discharge any obligation that party may have pursuant to this Contract or any laws, rules and regulations.

(End of Article)

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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER:		BUILDER:
For and on behalf of the BUYER:		For and on behalf of the BUILDER:
DRILLSHIP PAROS OWNERS INC.		SAMSUNG HEAVY INDUSTRIES CO., LTD
/s/ George Economou		/s/ J.W. Kim
By:	Mr. George Economou	By:	Mr. J.W. Kim
Title:	Authorized Signatory	Title:	President & CEO

WITNESSED BY		WITNESSED BY
/s/ Aristidis Ioannidis		/s/ H.Y. Lee
By:	Mr. Aristidis Ioannidis	By:	H.Y. Lee
Title:	General Manager of Cardiff Marine Inc.	Title:	Chief Marketing Officer

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EXHIBIT “1” VESSEL SPECIFICATION

The Vessel Specification of this Contract for HN. 1838 shall be based on AFC(Approved For Construction) Drawings and Specifications of HN.1674 as of the date of this Contract signing including all amendments, additions, deletions and variations (identified by italic boldic characters which shall prevail the Specification of HN. 1674) incorporated into the Specification (Doc. No. SP07146.FS02 of September 14^th, 2007) and Manufacturer List (Doc. No. SPO7146.ML02 of September 14^th 2007)

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EXHIBIT “2” TOPSIDE SPECIFICATION

The Topside Specification of this Contract for HN. 1838 shall be based on AFC (Approved for Construction) Drawings and Specifications of HN. 1674 as of the date of this Contract signing including all amendments, additions, deletions and variations incorporated into the Specification (Doc. No. SP07146.FS01 of September 14^th, 2007).

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EXHIBIT “3” DELIVERY AND CONSTRUCTION SCHEDULE

Drilling Package Delivery (DES Geoje)
	2009-11-01	Bulk tanks, Pumps for reserve & waste
	2009-12-01	Equipment in the Mud Process, Subsea Control & Mud Module
	2009-12-01	BOP & Diverter Control System
	2010-01-01	Equipment on Drillfloor, Catwalks, Utility winches
	2010-02-15	Derrick & Derrick Component, Hoists, Riser Tensioners, BOP Teststump
	2010-04-15	BOP/X-mas tree skidding system, Guidance system, LIR
	2010-06-15	Knuckle boom Cranes. BOP Cranes, Loose Equipment
	2010-10-15	BOP
	2010-11-15	Riser System

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EXHIBIT “4” LETTER OF REFUNDMENT GUARANTEE NO.

Gentlemen:

We hereby open our irrevocable letter of guarantee No. in favor of Drillship Paros Owners Inc. (hereinafter called the “BUYER”) for account of Samsung Heavy Industries, Seoul, Korea as follows in consideration of the Drillship contract dated 17^th September 2007 (hereinafter called the “Contract”) made by and among the BUYER and Samsung Heavy Industries Co., Ltd. (hereinafter called the “BUILDER”) for the construction of one (1) Drillship composed of hull part and topside part, having BUILDER’S Hull No.1838 (hereinafter called the “DRILLSHIP”).

If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the DRILLSHIP, we hereby irrevocably guarantee as primary obligor and not merely as surety the repayment of the same to the BUYER immediately on demand USD 91,105,500 (Say United States Dollars Ninety One Million One Hundred Five Thousand Five Hundred only) together with interest thereon at the rate of six percent (6%) per annum from the date following the date of receipt by the BUILDER to the date of remittance by telegraphic transfer of such refund.

The amount of this guarantee will be automatically increased, not more than three (3) times, upon BUILDER’S receipt of the respective installment: each time by the amount of instalment of USD 91,105,500, USD 91,105,500 and USD 91,105,500 respectively, plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of USD 364,422,000 (Say United States Dollars Three Hundred Sixty Four Million Four Hundred Twenty Two Thousand only) plus interest thereon at the rate of six per cent (6%) per annum from the date following the date of BUILDER’S receipt of each installment to the date of remittance by telegraphic transfer of the refund.

In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.

In the event of cancellation of the Contract being based on delays due to force majeure or other causes beyond the control of the BUILDER, as required by Article X of the Contract, interest shall be paid at the rate of Four and a half percent (4.5%) per annum from the date of following the date of Builder’s receipt of each installment to the date of remittance by telegraphic transfer of the refund.

60

This letter of guarantee is available against BUYER’S simple receipt and signed statement certifying that BUYER’S demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty (30) days after your demand to the BUILDER. Refund shall be made to you by telegraphic transfer in United States Dollars in freely transferable funds and free and clear of and without deduction for and on account of any set off, counterclaim or present or future tax, levy, impost, duty, charge, fee or other withholding of any nature whatsoever imposed and by whomsoever on yourselves. In the event we are required by law to make any deduction or withholding from any payment to be made by it pursuant to this letter of guarantee, we will pay to you whatever additional amount (after taking into account any additional taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after making the deduction or withholding, you receive a net sum equal to the sum which you would have received had no deduction or withholding been made.

This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of delivery of the DRILLSHIP in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until delivery or in the event of delayed delivery until such time as the DRILLSHIP is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.

Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by the Arbitration Board stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Sixty (60) days after the final award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitration Board. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.

This guarantee shall not be affected by any extension of time or concession granted by the BUYER to the BUILDER or any delay or failure of the BUYER in enforcing its rights under the Contract.

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The BUYER shall have the right to assign this guarantee and all of its benefits to any assignee to whom the Contract is assigned.

This guarantee shall be governed by the laws of England and the undersigned hereby submits to the non-exclusive jurisdiction of the courts of England. If we receive written or telefaxed notice from you or the BUILDER that there exists an arbitration between you and BUILDER or that you have made a formal demand of us under this Letter of Guarantee we shall within thirty (30) days of receipt of such notice irrevocably appoint an agent for service of process in respect of any proceedings in England and notify you of such appointment and undertake that, throughout the terms of this Letter of Guarantee, we will retain such agent in England for such purposes. If we fail to make such appointment and/or give such notification within thirty (30) day period we hereby appoint and be deemed to have appointed the London branch of our bank currently at 1^st Floor, Boston House 63-64 New Broad Street, London EC2M 1JJ United Kingdom.

Any notice or demand under this Letter of Guarantee required to be given by yourselves to us shall be addressed to us as follows:

Address: 16-1, Yoido-Dong, Yeongdeungpo-Gu, Seoul 150-996 Korea

Tel: +82-2-3779-6318

Fax: +82-2-3779-6745

Very truly yours,

The Export-Import Bank of Korea

62

EXHIBIT “5” PERFORMANCE GUARANTEE

Messrs.

Samsung Heavy Industries Co., Ltd.

34^th Floor, Samsung Life Insurance Seocho Tower

1324-15, Seocho-Dong, Seocho-Gu,

Seoul, Republic of Korea 137-857

In consideration of the assignment of a certain shipbuilding contract dated September 17^th 2007 (hereinafter called the “Contract”) by us to (hereinafter called the “BUYER”), for the construction of one (1) Drillship having your Hull No. 1838 (hereinafter called the “Drillship”) providing among other things for payment of the Contract Price amounting to United States Dollars Six Hundred Seven Million Three Hundred Seventy Thousand (US$ 607,370,000);

We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).

This Performance Guarantee shall be governed by the laws of England.

GUARANTOR: CARDIFF MARINE INC.

BY:

TITLE:

WITNESS:

63

EXHIBIT “6” OPTIONAL ITEMS

No	Items	Amount
1.1	Dual Drilling (Aux Rig):	US$	13,750,000
	a)      Travelling block
	b)      Retractable dolly
	c)      Elevated backup tong
	d)      Drawworks
	e)      Drill line & Reel
	f)      Deadline Anchor
	g)      Top drive
	h)      Mud standpipes manifold
	i)       Cement standpipe manifold
1.2	False rotary table in Aux well centre	US$	750,000
2	Personnel elevator in the Derrick	US$	952,000
3	Additional 3,000 ft of Riser	US$	15,000,000
4	7th Shale shaker	U$	425,000
5	Cutting dryer / Modification of conveyors	US$	1,060,000

Details for the above optional items are included in the Drillship Specification (Doc. No. SP07146.FS01 and Doc. No. SP07146.FS02 of September 14^th 2007)

64

EX-4.29

Exhibit 4.29

CONTRACT

FOR

CONSTRUCTION AND SALE

OF

A DRILLSHIP

(HULL NO. 1837)

BETWEEN

DRILLSHIP HYDRA OWNERS INC.

AND

SAMSUNG HEAVY INDUSTRIES CO., LTD.

INDEX

	PAGE
ARTICLE I - DESCRIPTION AND CLASS	6
1.      Description:	6
2.      Dimensions and Characteristics:	6
3.      The Classification, Rules and Regulations:	7
4.      HSE Analysis, studies and assessments	7
5.      Subcontracting	8
6.      Registration:	8
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	9
1.      Contract Price:	9
2.      Adjustment of Contract Price:	9
3.      Currency:	9
4.      Terms of Payment:	9
5.      Method of Payment:	11
6.      Notice of Payment before Delivery:	11
7.      Expenses:	12
8.      Prepayment:	12
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	13
1.      Delivery:	13
2.      Speed:	14
3.      Fuel Consumption for the Diesel Generator Prime Drivers:	15
4.      Variable Load Capacity:	15
5.      Effect of Rescission:	16
ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	17
1.      Approval of Plans and Drawings:	17
2.      Appointment of BUYER’s Supervisor:	17
3.      Inspection by the Supervisor:	18
4.      Facilities:	19
5.      Liability of BUILDER:	20
6.      Responsibility of BUYER:	20
7.      Delivery and Construction Schedule:	21
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	22
1.      How Effected:	22
2.      Changes in Rules of Classification Society, Regulations, etc.:	23
3.      Substitution of Materials:	24
ARTICLE VI - TRIALS AND ACCEPTANCE	25

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1.      Notice:	25
2.      Weather Condition:	25
3.      How Conducted:	26
4.      Method of Acceptance or Rejection	26
5.      Effect of Acceptance:	27
6.      Disposition of Surplus Consumable Stores:	28
ARTICLE VII - DELIVERY	29
1.      Time and Place:	29
2.      When and How Effected:	29
3.      Documents to be delivered to BUYER:	29
4.      Tender of DRILLSHIP:	30
5.      Title and Risk:	31
6.      Removal of DRILLSHIP:	31
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	32
1.      Causes of Delay (Force Majeure):	32
2.      Notice of Delay:	33
3.      Definition of Permissible Delay:	33
4.      Right to Rescind for Excessive Delay:	33
ARTICLE IX - WARRANTY OF QUALITY	35
1.      Guarantee:	35
2.      Notice of Defects:	35
3.      Remedy of Defects:	35
4.      Extent of BUILDER’s Responsibility	37
ARTICLE X - RESCISSION BY BUYER	38
1.      Notice:	38
2.      Refundment by BUILDER:	38
3.      Discharge of Obligations:	39
ARTICLE XI - BUYER’S DEFAULT	40
1.      Definition of Default:	40
2.      Effect of Default on or before Delivery of DRILLSHIP:	40
3.      Disposal of DRILLSHIP:	41
ARTICLE XII - ARBITRATION	42
1.      Decision by the Classification Society:	42
2.      Proceedings of Arbitration in London UK.:	42
3.      Notice of Award:	43
4.      Expenses:	43
5.      Entry in Court:	43
6.      Alteration of Delivery Date:	43

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ARTICLE XIII - SUCCESSOR AND ASSIGNS	44
ARTICLE XIV - TAXES AND DUTIES	45
1.      Taxes and Duties Incurred in Korea:	45
2.      Taxes and Duties Incurred Outside Korea:	45
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC	46
1.      Patents:	46
2.      General Plans, Specifications and Working Drawings:	46
ARTICLE XVI - BUYER’S SUPPLIES	47
1.      Responsibility of BUYER:	47
2.      Responsibility of BUILDER:	48
3.      Title:	48
ARTICLE XVII - INSURANCE	49
1.      Extent of Insurance Coverage:	49
2.      Application of the Recovered Amounts:	49
3.      Termination of BUILDER’s Obligation to Insure:	50
ARTICLE XVIII - NOTICE	51
1.      Address:	51
2.      Language:	51
3.      Effective Date of Notice:	52
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	53
ARTICLE XX - INTERPRETATION	54
1.      Laws Applicable:	54
2.      Discrepancies:	54
3.      Entire Agreement:	54
4.      Amendments and Supplements:	54
ARTICLE XXI - CONFIDENTIALITY	55
EXHIBIT “1” VESSEL SPECIFICATION	57
EXHIBIT “2” TOPSIDE SPECIFICATION	58
EXHIBIT “3” DELIVERY AND CONSTRUCTION SCHEDULE	59
EXHIBIT “4” LETTER OF REFUNDMENT GUARANTEE NO	60
EXHIBIT “5” PERFORMANCE GUARANTEE	63
EXHIBIT “6” OPTIONAL ITEMS	64

4

This Contract, made and entered into on this 17^th day of September 2007 by and between DRILLSHIP HYDRA OWNERS INC., a corporation incorporated and existing under the laws of Marshall Islands having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 (hereinafter called the “BUYER”), on the one part and SAMSUNG HEAVY INDUSTRIES CO., LTD., a corporation incorporated and existing under the laws of the Republic of Korea and having its registered office at 34^th Floor, Samsung Life Insurance Seocho Tower 1321-15, Seocho-Dong, Seocho-Gu, Seoul, Korea 137-857 (hereinafter called the “BUILDER”), on the other part.

W I T N E S S E T H:

In consideration of the mutual covenants herein contained, the BUILDER acknowledges that the Contract is a turn key contract for the construction and sale of a drillship constructed and tested out to be fully ready to drill and fully functioning in accordance with and subject to the terms and conditions of this Contract and Specifications and the BUILDER agrees as described in the Specifications to design, construct, build, launch, equip, test and complete One (1) Drillship composed of a hull part as described in the specification attached hereto as Exhibit “1” of this Contract (hereinafter referred to as the “VESSEL”) and topside part as described in the specification attached hereto as Exhibit “2” of this Contract (hereinafter referred to as “TOPSIDE”) (the VESSEL and TOPSIDE being hereinafter collectively referred to as the “DRILLSHIP”) and in accordance with the Delivery and Construction Schedule attached hereto as Exhibit “3” (said Exhibits 1 through 3 (including all amendments, additions, deletions and variations incorporated into the Specifications for HN. 1674 up to the Effective Date of this Contract) being hereinafter collectively called the “Specifications”) which Specifications have been initialed by representatives of the parties hereto for identification and which Specifications hereby are each incorporated herein by reference hereto and made an integral part of this Contract, at the BUILDER’s shipyard located in Geoje Island, Korea (hereinafter referred to as the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the DRILLSHIP from the BUILDER, upon the terms and conditions hereinafter set forth.

5

ARTICLE I - DESCRIPTION AND CLASS

1. Description:

The DRILLSHIP, having the BUILDER’s Hull No. 1837, shall be designed, constructed, built, launched, equipped, tested, completed and delivered in accordance with the provisions of this Contract, and the Specifications. To the extent not defined in the Specifications, the DRILLSHIP’s construction is to meet the first-class international shipbuilding and construction standards and practices, including without limitation such standards and practices relating to BUILDER’s Quality Assurance Programs.

2. Dimensions and Characteristics:

Length, overall	Max. 228 meters
Length, between perpendiculars	abt. 219.4 meters
Breadth, moulded	abt. 42 meters
Depth, moulded	abt. 19 meters
Scantling draft, moulded	abt. 13 meters

Speed, guaranteed: The trial speed shall not be less than 12.0 knots on the transit draught of 8.5 meters and at total thruster motor output of 28,700 KW.

Guaranteed Fuel Consumption, Diesel Generator Prime Drivers (in relation to each engine): The fuel consumption shall be not more than the engine manufacturers’ nominal fuel consumption plus five percent (5) % with engine driven pumps at manufacturer’s shop trial, burning marine diesel having the lower calorific value of 10,200 kCal/kg, at 85% MCR under the environment condition of ISO 3046/1-1986 specified in the Specifications.

Guaranteed Variable Load Capacity: The variable load capacity of the DRILLSHIP will be not less than 20,000 metric tons for drilling and survival conditions without extended well test oil on board as specified in the Specifications.

The details of the aforementioned particulars, as well as the definitions and the methods of measurements and calculations shall be as indicated in the Specifications.

6

3. The Classification, Rules and Regulations:

The DRILLSHIP, including its machinery, equipment and outfittings shall be constructed and classified in accordance with the rules and regulations (the editions and amendments thereto being in force) as of the signing date of this Contract and under special survey of American Bureau of Shipping (hereinafter called the “Classification Society”), and shall be distinguished in the register by the symbol of XA1 , “Drilling Unit”, XAMS, XACCU, XDPS-3, NBLES, SH-DLA, XCDS.

Decisions of the Classification Society as to compliance or non-compliance with the classification rules and regulations shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the Specifications.

The DRILLSHIP shall also comply with the rules, regulations and requirements of the regulatory bodies as described and listed in the Specifications.

The DRILLSHIP will be built and delivered (i) in accordance with the terms of this Contract and the Specifications, (ii) in full compliance and certification to and with the IMO MODU code with amendments, (iii) in full compliance with the regulations, provisions, and requirements included in the Specifications, (iv) in full compliance with the requirements of the Classification Society so as to be classed with the Classification Society as a MODU, and (v) so that the DRILLSHIP will be approved to operate in the United States Gulf of Mexico/the Outer Continental Shelf of the United States, the waters outside West Africa, Central Africa, South Africa, South America, South East Asia, UK, Australia, South Atlantic and in the Mediterranean. The BUILDER will take all action necessary, and remedy at its cost and expense, any deficiency that constitutes a failure to comply with the above requirements.

All fees and charges incidental to the Classification Society and in respect to compliance with the above referred rules, regulations and requirements, as well as all DRILLSHIP design fees and/or royalties (except any royalties for the BUYER’s Supplies), shall be for account of the BUILDER.

4. HSE Analysis, studies and assessments

The BUYER shall perform HSE Analysis, studies and assessments such as HAZID’s, Risk Analysis, HAZOP’s, Readability and Vulnerability analysis, Working Environment assessment of the DRILLSHIP.

7

If the finding of such HSE Analysis, studies and assessments demand changes to the design, layout and construction of the DRILLSHIP to make the DRILLSHIP meet the requirements of the Contract, then the BUILDER shall implement such changes in accordance with the findings.

Should the findings lead the BUYER to request changes to the Contract then a Variation Order shall be in accordance with Article V.

The BUILDER shall be responsible for obtaining the Classification Society’s approval of all required plans and drawings of the DRILLSHIP.

5. Subcontracting

The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the DRILLSHIP, provided that the work is carried out at a reputable yard in Korea or at the BUILDER’s wholly owned subsidiaries at Ningbo and Rongcheng in China, where the aggregate value of the works or services to be subcontracted equals or is below Five million five hundred thousand United States Dollars (US$ 5,500,000) but if exceeding such value the BUILDER shall obtain in writing the prior approval of the BUYER (whose approval shall not be unreasonably withheld), but any subcontracting shall always be subject to the condition that the BUILDER shall ensure that the rights of the BUYER and the requirements in the Contract are satisfied and provided for in such work. The BUILDER shall not be relieved from any of its obligations and liabilities under the Contract and shall be responsible for all work, acts, omissions and defaults of any subcontractors as fully as if they were the work, acts, omissions or defaults of the BUILDER.

6. Registration:

The DRILLSHIP, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under the Malta flag at the BUYER’s expenses.

(End of Article)

8

ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT

1. Contract Price:

The Contract price of the DRILLSHIP, net receivable by the BUILDER and exclusive of the BUYER’s Supplies (as defined in Paragraph 1 of Article XVI hereof) is Six Hundred Seven Million Three Hundred Seventy Thousand United States Dollars (US$ 607,370,000) (hereinafter referred to as the “Contract Price”). The Contract Price shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.

2. Adjustment of Contract Price:

Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery of the DRILLSHIP in the manner as hereinafter provided at article III.

The BUYER has the right to exercise the purchase the option as per Exhibit “6” within 3 months after the date of the signing contract. Should the BUYER exercise one of the options, the payment terms of the exercised option items shall be same with that of the Contract, provided that the amount of the first installment shall be paid at the same time of the second installment is due, and the BUILDER will reissue a Refundment Guarantee covering full amount of the adjusted Contract Price to replace the old Refundment Guarantee.

3. Currency:

Any and all payments by the BUYER to the BUILDER, or vice versa if any, which are due under this Contract shall be made in United States Dollars.

4. Terms of Payment:

The Contract Price shall be due and payable by the BUYER to the BUILDER in the installments as follows:

(a) First Installment:

9

The First Installment amounting to Ninety One Million One Hundred Five Thousand Five Hundred United States Dollars (15%, US$ 91,105,500), less the amount of Five Million United States Dollars (US$ 5,000,000) already paid by the BUYER to the BUILDER as Commitment Fee, making the net sum for this first installment Eighty Six Million One Hundred Five Thousand Five Hundred United States Dollars (US$ 86,105,500) shall be due and payable within five (5) banking days after the receipt of the original Refundment Guarantee.

(b) Second Installment:

The Second Installment amounting to Ninety One Million One Hundred Five Thousand Five Hundred United States Dollars (15%, US$ 91,105,500) shall be due and payable within three (3) banking days six months after the Effective Date of the Contract upon receipt of the BUILDER’s invoice therefore.

(c) Third Installment:

The Third Installment amounting to Ninety One Million One Hundred Five Thousand Five Hundred United States Dollars (15%, US$ 91,105,500) shall be due and payable within three (3) banking days from the receipt of the BUILDER’s invoice and a telefax notice from the BUILDER, countersigned by the classification surveyor, certifying that steel cutting for the Drillship has commence but not earlier than 16 months after the second installment.

(d) Fourth Installment:

The Fourth Installment amounting to Ninety One Million One Hundred Five Thousand Five Hundred United States Dollars (15%, US$ 91,105,500) shall be due and payable within three (3) banking days from the receipt of the BUILDER’s invoice and a telefax notice from the Builder, countersigned by the classification surveyor, certifying that keel laying for the DRILLSHIP has commenced but not earlier than 4 months after the third installment.

(e) Fifth Installment:

The Fifth Installment amounting to Two Hundred and Forty Two Million Nine Hundred Forty Eight Thousand United States Dollars (40%, US$ 242,948,000) plus or minus any adjustment of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery of the DRILLSHIP or upon tender for delivery of the DRILLSHIP referred to in Paragraph 4 of Article VII of this Contract.

10

5. Method of Payment:

(a) First Installment:

Within five (5) banking days after the receipt of the original Refundment Guarantee, the BUYER shall remit by telegraphic transfer the first installment to the account to be specified in advance in writing by the BUILDER.

(b) Second, Third and Fourth Installments:

Upon the due date of the second, third and fourth installments, in accordance with Article II, 4 (b), (c) and (d) as appropriate, the BUYER shall remit by telegraphic transfer each of the respective installments to the account to be specified in advance in writing by the BUILDER.

(c) Fifth Installment:

At least three (3) banking days prior to the anticipated delivery date of the DRILLSHIP, the BUYER shall remit by telegraphic transfer the fifth installment to the bank specified in advance in writing by the BUILDER in the name of the BUYER’s bank with instructions of the amount so remitted to be payable to the BUILDER against a copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE DRILLSHIP signed by the BUYER and the BUILDER.

Simultaneously with each of all such payment, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable or telefax.

No payment due under this Contract shall be delayed, suspended or withheld by the BUYER on account of any dispute or disagreement between the parties hereto. Any claim that the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.

6. Notice of Payment before Delivery:

With the exception of the first installment, the BUILDER shall give the BUYER Ten (10) banking days prior notice in writing or telefax or telex of the anticipated due date and amount of each installment payable on or before delivery of the DRILLSHIP.

11

7. Expenses:

Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees referred to in paragraph 2 of Article XIV of this Contract connected with such payment shall be for account of the BUYER.

8. Prepayment:

Prepayment of any installment due on or before delivery of the DRILLSHIP shall be subject to mutual agreement between the parties hereto.

(End of Article)

12

ARTICLE III - ADJUSTMENT OF CONTRACT PRICE

The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty):

1. Delivery:

(a) No adjustment shall be made and the Contract Price shall remain unchanged for the first 30 days of delay in delivery of the DRILLSHIP beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the 31^st day of delay).

(b) If the delivery of the DRILLSHIP is delayed more than 30 days after the Delivery Date, then, in such event, beginning at twelve o’clock midnight of the 31^st day after the Delivery Date, the Contract Price shall be reduced by the sum of Hundred and twenty thousand United States Dollars (US$ 120,000) for each full day for which thereafter delivery is delayed.

However, the total reduction in the Contract Price pursuant to this Paragraph (b) shall not be more than as would be the case for a delay of 180 days counting from midnight of the 31^st day after the Delivery Date at the above specified rate of reduction.

(c) However, if the delay in delivery of the DRILLSHIP should continue for a period of 210 days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.

The BUILDER may, at any time after the expiration of the aforementioned 210 days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the DRILLSHIP at a specified future date which date BUILDER represents to BUYER is the earliest date BUILDER can deliver the DRILLSHIP to BUYER under this Contract, based on the circumstances then known. If the BUYER shall not make an election within Twenty (20) days as

13

provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the DRILLSHIP is not delivered by such specified date, the BUYER shall have the same right of rescission upon the same terms and conditions as hereinabove provided.

(d) If, at the time of actual delivery the BUYER has entered into an unconditional charter contract providing for the immediate deployment of the DRILLSHIP to provide services in return for the payment of cash consideration upon delivery of the DRILLSHIP (the “Delivery Contract”), and, should Delivery occur before twelve o’clock midnight on the Delivery Date and the third party accepts to take such early delivery under the Delivery Contract, then in such event, the final installment of the Contract Price shall be increased by the sum of Seventy five thousand United States Dollars (US$ 75,000) for each full day of early delivery, beginning at the time of actual delivery of the DRILLSHIP until twelve o’clock midnight on December 31, 2010, provided that the aggregate increases to the Contract Price for early delivery of the DRILLSHIP shall not exceed Three million United States Dollars (US$ 3,000,000) (the “Bonus”).

(e) For the purpose of this Article, the delivery of the DRILLSHIP shall be deemed to be delayed when and if the DRILLSHIP, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.

2. Speed:

(a) The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the Specifications) being less than the guaranteed speed, if such variation is not more than 0.5 knots.

(b) However, commencing with and including such deficiency of 0.5 knots in trial speed below the guaranteed speed of the DRILLSHIP, the Contract Price shall be reduced by Eighty thousand United States Dollars (US$ 80,000) for each 0.1 knot below the guaranteed speed.

(c) If the deficiency in the speed upon final sea trial is more than one (1) knot below the guaranteed speed of the DRILLSHIP, then the BUYER may, at its option, reject the

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DRILLSHIP and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the DRILLSHIP at a reduction in the Contract Price at a rate of One Hundred Thousand United States Dollars (U$ 100,000) for each 0.1 knot below 11.5 knots.

3. Fuel Consumption for the Diesel Generator Prime Drivers:

(a) The Contract Price shall not be affected or changed in case the actual fuel consumption for each engine, as determined by the shop trial as specified in the Specifications, is not more than one percent (1%) in excess of the Guaranteed Fuel Consumption specified in Paragraph 3 of Article I.

(b) However, in the event that the actual fuel consumption of any engine at the shop trial is in excess of one percent (1%) of the Guaranteed Fuel Consumption, the Contract Price shall be reduced by the sum of Forty thousand United States Dollars (US$ 40,000) for each one percent (1%) per engine by which the actual fuel consumption of any engine exceeds the Guaranteed Fuel Consumption plus One percent (1%).

(c) The BUYER has an option to reject the DRILLSHIP and rescind the Contract in accordance with the provisions of Paragraphs 2, 3 and 4 of Article X - RESCISSION BY BUYER hereof in the event the actual fuel consumption of any engine is more than five percent (5%) in excess of the Guaranteed Fuel Consumption.

4. Variable Load Capacity:

(a) In the event that the actual Variable Load Capacity of the DRILLSHIP is more than 500 metric tons below the Guaranteed Variable Deck Load Capacity of the DRILLSHIP, then the Contract Price shall be reduced by Four thousand United States Dollars (US$ 4,000) per each metric ton of the shortfall below 19,500 metric tons.

(b) In the event that the actual Variable Load Capacity of the DRILLSHIP is more than 1,500 metric tons below the Guaranteed Variable Load Capacity of the DRILLSHIP, then the BUYER may at its option reject the DRILLSHIP and rescind the Contract in accordance with the provisions of Paragraphs 2, 3 and 4 of Article X - RESCISSION BY BUYER hereof or accept the DRILLSHIP at a reduction in the Contract Price of Four million United States Dollars (US$ 4,000,000).

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5. Effect of Rescission:

It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this Article, the BUYER shall not be entitled to any liquidated damages, or any other recourse unless by means of the provisions of Article X hereof.

(End of Article)

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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION

1. Approval of Plans and Drawings:

Approved plans and drawings of the BUILDER’s HN. 1674 (including all amendments, additions, deletions and variations incorporated into the Specification up to the date of this Contract signing) shall be deemed to be approved by the BUYER and shall be applied to the Drillship. The BUILDER shall be exempted from the approval of the BUYER for the plans and drawings in accordance with the Specifications. All plans and drawings, which are modified by the BUILDER shall, however, be subject to approval by the BUYER in accordance with Article V.

2. Appointment of BUYER’s Supervisor:

The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor (herein called the “Supervisor”) who shall be duly authorized in writing by the BUYER, which authorization shall be described in a separate letter to be sent to the BUILDER prior to the Supervisor’s arrival, to act on behalf of the BUYER in connection with the modifications of the Specifications, adjustments of the Contract Price and Delivery Date in writing, approval of the plans and drawings, attendance to the tests and inspections relating to the DRILLSHIP, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint assistant(s) to attend at the Shipyard for the purposes as aforesaid. In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the DRILLSHIP, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized to perform the supervision, each of them will form uniform opinions between them to keep the design and specifications so as not to adversely affect the Contract Price and Delivery of the DRILLSHIP. In the event of any additional costs attributable to dispatch of two or more Supervisors due to resale, novation, charter or any other occurrence otherwise resulting from the BUYER side, such costs shall be solely borne by the BUYER and the BUYER shall reimburse and hold harmless the BUILDER from any such costs and expenses.

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3. Inspection by the Supervisor:

The necessary inspections of the DRILLSHIP, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or the Supervisor throughout the entire period of construction in order to ensure that the design, construction, building, launching, equipping, testing and completion of the DRILLSHIP is duly performed in accordance with the Contract and the Specifications.

The BUILDER shall give a written notice to the Supervisors reasonably in advance of the date and place of tests and inspections for the convenience of their attendance. Failure of the Supervisors to be present at such tests and inspections after due notice to them as above provided, shall be deemed to be a waiver of their right to be present. In such cases, the BUYER shall be obliged to accept the results of such tests and inspections on the basis of the BUILDER’s certificate subject to acceptance by the Classification Society.

Whether or not the Supervisors have been present, the BUILDER shall promptly deliver to the BUYER or the Supervisors a copy of the results of all tests and inspections.

For tests or inspections outside the Shipyard sufficient advance notice to allow for the Supervisor to arrange transportation shall be given. This advance notice should not be less than three (3) days for tests or inspection that require air travel for attendance.

The inspection schedule must be reasonable at all times in order to allow the Supervisor to carry out their duties properly and inspections must be spread over reasonable time, but in follow building schedule at the same rate.

BUILDER may request BUYER’s Supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s Supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s Supervisor one (1) day in advance as a minimum.

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If any of the BUYER’s Supervisors discover any construction, material or workmanship which is not deemed to conform to the requirements of this Contract and/or the Specifications, the BUYER’s Supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon receipt of such notice from the BUYER’s Supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII and shall to the extent possible not prevent the progress of the construction and the timely delivery of the DRILLSHIP.

If, following such disagreement, the Classification Society or the arbitrator enters a determination in favor of the BUYER, then in such case the BUILDER shall immediately correct such non-conformity subject to Article VI 4. (b). If the Classification Society or the arbitrator enters a determination in favor of the BUILDER, then the time for delivery of the DRILLSHIP shall be extended for the period of any actual delay in construction, if any, occasioned by such proceedings (but not by any time by which the period is extended owing to the BUILDER’s own default), and the BUYER shall pay the BUILDER interest at the rate of five percent (5%) per annum on the outstanding Instalments of the Contract Price for the said period of delay.

In working hours during construction of the DRILLSHIP until delivery thereof, the BUYER’s Supervisors shall, subject to the reasonable requirements of the Shipyard’s work program and safety control, be permitted free and ready access to the DRILLSHIP, her machinery and equipment, and to any other place where work on the DRILLSHIP is being done, or materials are being processed or stored in connection with the construction of the DRILLSHIP, including the yards, workshops, stores and offices of the BUILDER, and the premises of subcontractors of the BUILDER, who are doing work or storing materials in connection with the DRILLSHIP’s construction.

4. Facilities:

The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.

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5. Liability of BUILDER:

The BUILDER agrees to fully protect, defend, indemnify and hold BUYER harmless from and against all liabilities, obligations, claims or actions for personal injury or death arising out of performance by BUILDER or BUYER of their obligations hereunder prior to the acceptance by BUYER of the DRILLSHIP, and asserted by or on behalf of,

(i) any employee, agent, contractor, or subcontractor of BUILDER, or

(ii) any employee of any agent, contractor, or subcontractor of BUILDER, regardless of the basis of such claims and even if such claims should arise out of the sole or concurrent fault or negligence of BUYER, or any employee, agent, contractor or subcontractor of BUYER.

Similarly, the BUYER agrees to fully protect, defend, indemnify and hold BUILDER harmless from and against all liabilities, obligations, claims or actions for personal injury or death arising out of performance by BUILDER or BUYER of their obligations hereunder prior to the acceptance by BUYER of the DRILLSHIP, and asserted by or on behalf of,

(i) any employee, agent, contractor, or subcontractor of BUYER, or

(ii) any employee of any agent, contractor, or subcontractor of BUYER, regardless of the basis of such claims and even if such claims should arise out of the sole or concurrent fault or negligence of BUILDER, or any employee, agent or subcontractor of BUILDER.

6. Responsibility of BUYER:

The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER, which BUILDER represents and confirms is in all material respects in accordance with normal shipbuilding practice and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the DRILLSHIP, and/or any disturbance in the construction schedule of the BUILDER.

The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the DRILLSHIP’s design, construction, building, launching, equipping, and completion. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently possible.

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7. Delivery and Construction Schedule:

Attached hereto as Exhibit “3” is a tentative Delivery and Construction Schedule, and within one hundred and eighty (180) days after the date of this Contract, BUILDER shall deliver or cause to be delivered to BUYER a final Delivery and Construction Schedule (herein, as from time to time amended with notice to the BUYER, referred to as the “Schedule”), prepared in reasonable detailed schedule and setting forth the estimated time table for the design, construction, building, launching, equipping, testing and completion of the DRILLSHIP, it being understood that the Schedule may be used by BUYER for purposes of verifying and measuring the progress being made under the terms of this Contract. In the event the actual progress of the construction of the DRILLSHIP is lagging behind the Schedule, the BUILDER shall issue a recovery plan to overcome such lagging so that the planned Delivery Date shall not be affected.

During the course of performance of this Contract the BUILDER shall submit to the BUYER on a monthly basis;

a) a status report on the DRILLSHIP’s construction as compared with the Schedule;

b) a report setting out the actual progress in performance of this Contract during the previous month as compared with the Schedule, including monthly progress photographs illustrating the progress of the construction;

c) a list of modifications or changes (if any) agreed during the previous month;

d) a document register showing the status of document preparation and planned and actual completion of documents.

(End of Article)

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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS

1. How Effected:

The Specifications may be modified and/or changed by written agreement of the parties, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the DRILLSHIP, other terms and conditions of this Contract and the Specifications occasioned by or resulting from such modifications and/or changes. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time that is reasonably possible.

Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the DRILLSHIP together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the Specifications occasioned by such modifications and/or changes.

The aforementioned agreement to modify and/or change the Specifications may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the Specifications, and such letters and message shall be incorporated into this Contract and made a part hereof.

The failure of the parties to agree on the increase or decrease in the Contract Price, or extension or reduction in the time of delivery, if any, for any modifications or changes requested by the BUYER shall not prevent the BUILDER from performing any agreed work so as not to prevent the proper progress of the DRILLSHIP’s design, construction, building, launching, equipping, testing and completion, but shall be dealt with in accordance with Article XII.

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The BUILDER may make minor changes to the Specifications, if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’S approval that shall not be unreasonably withheld.

2. Changes in Rules of Classification Society, Regulations, etc.:

If, after the Effective Date of this Contract, any requirements as to Classification Society, or as to the rules and regulations to which the construction of the DRILLSHIP is required to conform, are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto, upon receipt of information thereof, shall transmit such information in full to the other party in writing within fourteen (14) days after receipt of the said information and thereafter the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the DRILLSHIP or not, in the BUYER’S sole discretion.

(a) However, if such alterations or changes are compulsory for the construction of DRILLSHIP, the BUILDER shall incorporate such alterations or changes into the construction of the DRILLSHIP, provided that the parties shall agree on any increase or decrease in the Contract Price, extension or reduction in time of delivery of the DRILLSHIP and other terms and conditions of this Contract and the Specifications occasioned by or resulting from such alterations or changes.

(b) If such alterations or changes are not compulsory for the construction of the DRILLSHIP, but the BUYER desires to incorporate such alterations or changes into the construction of the DRILLSHIP, then the BUYER shall notify the BUILDER in writing of such intention within fourteen (14) days after receipt of the said information. The BUILDER shall accept such alterations or changes, provided that the parties shall agree on any increase or decrease in the Contract Price, extension or reduction in time of delivery of the DRILLSHIP and other terms and conditions of this Contract and the Specifications occasioned by or resulting from such alterations or changes.

Such agreement of the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the Specifications. The failure of the parties to agree on the increase or decrease in the Contract Price, or extension or reduction in the time of delivery, if any, for any modifications or changes requested by the BUYER shall not prevent the BUILDER from performing any agreed work so as not to prevent the proper progress of the DRILLSHIP’s design, construction, building, launching, equipping, testing and completion, but shall be dealt with in accordance with Article XII.

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3. Substitution of Materials:

In the event that any of the materials required by the Specifications or otherwise under this Contract for the construction of the DRILLSHIP can not be procured in time to effect timely delivery of the DRILLSHIP, or are in short supply, (other than as the result of any neglect or omission on the part of the BUILDER) the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the DRILLSHIP must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include decrease or increase in the Contract Price and other terms and conditions of this Contract affected by such substitution.

(End of Article)

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ARTICLE VI - TRIALS AND ACCEPTANCE

1. Notice:

The sea trial shall start when the DRILLSHIP is reasonably completed in all material respects according to the Specifications, and otherwise any and all tests or trials shall be performed and notified as per the Specifications.

The BUILDER shall give the BUYER at least Thirty (30) days estimated prior notice and seven (7) days confirming prior notice in writing or by telefax confirmed in writing of the time and place of the sea trial of the DRILLSHIP, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representative and his assistant(s) on board the DRILLSHIP to witness such sea trial.

Failure in attendance of the BUYER’S representative at the sea trial of the DRILLSHIP for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the DRILLSHIP at the sea trial, and the BUILDER may conduct the sea trial without attendance of the BUYER’S representative, and in such case the BUYER shall be obligated to accept the DRILLSHIP on the basis of certificates of the Classification Society and a certificate of the BUILDER stating that the DRILLSHIP, upon sea trial, is found to conform to this Contract and the Specifications.

2. Weather Condition:

The sea trial and any other tests and trials of the DRILLSHIP as per the Specifications shall be carried out under the weather condition that is deemed favorable enough by the judgment of both the BUYER and the BUILDER and as per the Specifications. In the event of unfavorable weather on the date specified for the sea trial or other tests and trials as per the Specifications, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the sea trial or other tests and trials of the DRILLSHIP as per the Specifications, the weather should suddenly become so unfavorable that orderly conduct of the test or trial can no longer be continued, the test or trial shall be discontinued and postponed until the first favorable day next following, unless the BUYER shall assent in writing to acceptance of the DRILLSHIP on the basis of the tests and trials already made before such discontinuance has occurred.

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Any delay of sea trial caused by such unfavorable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the DRILLSHIP.

3. How Conducted:

(a) The sea trial and any other tests and trials as per the Specifications shall be conducted in the manner prescribed in the Specifications, and shall prove full fulfillment of the performance requirements for the trial run as set forth in the Specifications.

(b) All risk and expenses in connection with the sea trial and any other tests and trials are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, fuel oil, lubes, stores and the necessary crew to comply with conditions of safe navigation.

(c) Notwithstanding above (b), the BUYER shall provide drilling crews at it’s own expense during tests and trials for drilling system. The crews shall perform the tests and trials under the BUILDER’S responsibility and risk and familiarized themselves with the system for the final take over of the Drillship.

4. Method of Acceptance or Rejection.

(a) Upon completion of the sea trial, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the DRILLSHIP to this Contract and the Specifications. The BUYER shall, within Five (5) days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the DRILLSHIP’s conformity to this Contract and Specifications.

(b) However, if the result of the sea trial is unacceptable, or if the DRILLSHIP, or any part or equipment thereof, (except a defect in the BUYER’S supplies not being the responsibility of the BUILDER) does not conform to the requirements of this Contract and/or the Specifications, or if the BUILDER is in agreement to non conformity as specified in the BUYER’S notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.

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Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER notice thereof by telefax confirmed in writing.

The BUYER shall, within Five (5) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the DRILLSHIP.

(c) In the event that the BUYER rejects the DRILLSHIP, the BUYER shall indicate in detail in its notice of rejection in what respect the DRILLSHIP, or any part or equipment thereof (except a defect in the BUYER’S supplies not the responsibility of the BUILDER) does not conform to this Contract and/or the Specifications.

(d) In the event that the BUYER fails to notify the BUILDER by telefax confirmed in writing of the acceptance of or the rejection together with the reason therefore of the DRILLSHIP within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the trial results and/or the DRILLSHIP, as appropriate.

(e) Any dispute between the BUILDER and the BUYER as to the conformity or non conformity of the DRILLSHIP to the requirements of this Contract and/or the Specifications shall be submitted for final decision in accordance with Article XII hereof.

(f) The BUYER shall not be entitled to refuse acceptance of the DRILLSHIP by reason of any minor or insubstantial non-conformity with this Contract and the Specifications. For the purpose of this Sub-paragraph, a minor or insubstantial non conformity shall mean a non-conformity that does not impair the safe or efficient operation of the DRILLSHIP and shall exclude any non-conformities affecting compliance with the rules and regulations of the Classification Society and other relevant Regulatory Bodies of the DRILLSHIP as defined in the Specifications. The BUILDER shall remain obliged to correct and/or remedy such minor or insubstantial non-conformities as soon as reasonably possible following delivery of the DRILLSHIP.

5. Effect of Acceptance:

Acceptance of the DRILLSHIP as above provided shall be final and binding so far as conformity of the DRILLSHIP to this Contract and the Specifications is concerned and

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shall preclude the BUYER from refusing formal delivery of the DRILLSHIP as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’S acceptance of the DRILLSHIP shall not affect the BUYER’S rights under Article IX hereof.

6. Disposition of Surplus Consumable Stores:

Any fuel oil furnished and paid for by the BUILDER for sea trial remaining on board including in systems and pipes of the DRILLSHIP, at the time of acceptance of the DRILLSHIP by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’S purchase price for such supply in Korea and payment by the BUYER thereof shall be made at the time of delivery of the DRILLSHIP.

The BUILDER shall pay the BUYER at the time of delivery of the DRILLSHIP an amount for the consumed quantity during sea trial of any lubricating oil and greases which were furnished and paid for by the BUYER, if any, at the BUYER’S purchase price thereof.

(End of Article)

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ARTICLE VII - DELIVERY

1. Time and Place:

The DRILLSHIP shall be delivered by the BUILDER to the BUYER at the Shipyard on or before December 31, 2010 (unless delays occur in the construction of the DRILLSHIP or in any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date of delivery, in which event, the aforementioned date for delivery of the DRILLSHIP shall be changed accordingly) or, such earlier date after completion of the DRILLSHIP according to this Contract and the Specifications.

The aforementioned date, or such earlier or later date to which the requirement of delivery is advanced or postponed pursuant to this Contract, is herein called the “Delivery Date”.

2. When and How Effected:

Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the DRILLSHIP shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the DRILLSHIP by the BUILDER and acceptance thereof by the BUYER.

3. Documents to be delivered to BUYER:

Upon delivery and acceptance of the DRILLSHIP, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE.

(a) PROTOCOL OF TRIALS of the DRILLSHIP made pursuant to the Specifications.

(b) PROTOCOL OF INVENTORY of the equipment of the DRILLSHIP, including spare parts and the like, as specified in the Specifications.

(c) PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under paragraph 6 of Article VI hereof.

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(d) ALL CERTIFICATES including the BUILDER’S CERTIFICATE required to be furnished upon delivery of the DRILLSHIP pursuant to this Contract and the Specifications.

It is agreed that if, through no fault on the part of the BUILDER, the Classification certificates and/or other certificates are not available at the time of delivery of the DRILLSHIP, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.

Application and certificate for statutory inspections for the registry of the DRILLSHIP shall be arranged by the BUYER at its expense.

(e) DECLARATION OF WARRANTY of the BUILDER that the DRILLSHIP is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’S title thereto, and in particular that the DRILLSHIP is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities or any other Authorities, as well as all liabilities of the BUILDER to its subcontractors, employees and crew, and of all the liabilities arising from the operation of the DRILLSHIP in trial runs, or otherwise, prior to delivery.

(f) DRAWINGS AND PLANS and any other technical documentation pertaining to the DRILLSHIP as stipulated in the Specifications

(g) COMMERCIAL INVOICE.

(h) Bill of Sale to be notarized and apostiled

(i) Builder’s Resolution of Board of Directors to be notarized and apostiled

(j) Power of Attorney to be notarized and apostiled

(k) Goodstanding Certificate

(1) Confirmation by ABS to Malta Maritime Authority

(m) Builder’s Certificate

4. Tender of DRILLSHIP:

If the BUYER fails to take delivery of the DRILLSHIP after completion thereof according to this Contract and the Specifications without any justifiable reason, the BUILDER shall have the right to tender delivery of the DRILLSHIP after accomplishment of all BUILDER’S obligations as provided herein.

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5. Title and Risk:

Title to and risk of loss of the DRILLSHIP shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of damage to or loss of the DRILLSHIP and her equipment shall be in the BUILDER.

6. Removal of DRILLSHIP:

The BUYER shall take possession of the DRILLSHIP immediately upon delivery and acceptance thereof and shall remove the DRILLSHIP from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.

If the BUYER shall not remove the DRILLSHIP from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the DRILLSHIP.

(End of Article)

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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)

1. Causes of Delay (Force Majeure):

If, at any time either the construction or delivery of the DRILLSHIP or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, strikes, sabotage, lockouts, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, if any, or shortage of materials, machinery or equipment in inability to obtain delivery or delays in delivery of materials, machinery or equipment other than resulting from any act, omission or improvidence of the BUILDER or its agents, employees or Subcontractors, provided that at the time of ordering the same could reasonably be expected by the BUILDER to be delivered in time, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or delay in the construction of the BUILDER’S other new-building projects in the same dry-dock due to any such causes as described in this Article which in turn delay the keel laying and eventual delivery of the DRILLSHIP in view of the Shipyard’s overall building program or the BUILDER’S performance under this Contract, or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the DRILLSHIP, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under terms of this Contract, authorize and permit extension of the time for delivery of the DRILLSHIP, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the DRILLSHIP under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.

The BUILDER’S entitlement to extension of the Delivery Date due to any of the aforesaid events shall, however, always be subject to the delay, or any part of the delay, not being caused by the BUILDER’S error, neglect, act or omission or that of its agents, employees or Subcontractors, and that the BUILDER having taken all reasonable steps to mitigate the effect of the event upon the Delivery Date.

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2. Notice of Delay:

Within Ten (10) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Ten (10) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.

The BUILDER shall also notify promptly the BUYER of the period, by which in their opinion the Delivery Date is postponed by reason of such cause of delay. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.

Failure of the BUYER to acknowledge to the BUILDER’S claim for postponement of the Delivery Date within Ten (10) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.

3. Definition of Permissible Delay:

Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.

4. Right to Rescind for Excessive Delay:

If the total accumulated time of all delays claimed by the BUILDER on account of the causes specified in Paragraph 1 of this Article, excluding other delays of the nature which under the terms of this Contract permit postponement of the Delivery Date, amounts to Two Hundred and Ten (210) days or more, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.

The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall

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make an election, in which case the BUYER shall, within Fourteen (14) working days after such demand is received by the BUYER either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date, which date BUILDER represents to BUYER is the earliest date BUILDER can deliver the DRILLSHIP to BUYER, based on the circumstances then known, it being understood by the parties hereto that if the DRILLSHIP is not delivered by such future date, the BUYER shall have the same right of rescission upon the same terms and conditions as hereinabove provided.

(End of Article)

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ARTICLE IX - WARRANTY OF QUALITY

1. Guarantee:

The BUILDER, for the period of Twelve (12) months after delivery of the DRILLSHIP (hereinafter called “Guarantee Period”), guarantees the DRILLSHIP and her engines, including all parts and equipment manufactured, furnished or installed by the BUILDER or its subcontractors under this Contract, and including the machinery, equipment and appurtenances thereof (including the installation work performed or required to be performed by BUILDER under this Contract for the BUYER supplied or furnished equipment), under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to defective material, design and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.

2. Notice of Defects:

The BUYER shall notify the BUILDER in writing, or by telefax confirmed in writing, of any Defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’S written notice shall describe the nature, cause and extent of the Defects.

The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Fourteen (14) working days after the expiry of the Guarantee Period.

3. Remedy of Defects:

(a) The BUILDER shall remedy, at its expense, any Defect against which the DRILLSHIP is guaranteed under this Article, by making all necessary repairs or replacements at the Shipyard.

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(b) However, if it is impracticable to bring the DRILLSHIP to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the nearest airport or port from the DRILLSHIP, unless forwarding or supplying thereof would impair or delay the operation or working schedule of the DRILLSHIP. In the event that the BUYER proposes to cause the necessary repairs or replacements for the DRILLSHIP to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the DRILLSHIP is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax or telex after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’S acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall compensate the BUYER for such repairs or replacements a sum equal to the necessary and reasonable cost of making the same repairs or replacements in a competent shipyard at a reasonable location, at the prices prevailing at the time of such repairs or replacements are made. The reimbursement of the cost incurred in relation to guarantee works shall be paid after the repairs or replacements are made but if not made or the costs incurred for each such repair or replacement is below US$ 100,000, such costs shall be paid at the expiration of the guarantee period.

(c) The BUILDER guarantees repairs or replacements to the DRILLSHIP made under the guarantee in paragraph 1 of this Article for a further period of Twelve (12) months from the date of completion of such repair or replacement. In any case, the maximum guarantee period shall not exceed Eighteen (18) months.

(d) In any case, the DRILLSHIP shall be taken, at the BUYER’S cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.

(e) Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.

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4. Extent of BUILDER’S Responsibility

(a) The BUILDER shall have no responsibility or liability for any other defect whatsoever in the DRILLSHIP than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the DRILLSHIP to remedy such Defects.

(b) The BUILDER shall not be responsible for any defect in any part of the DRILLSHIP which may, subsequently to delivery of the DRILLSHIP, have been replaced or repaired in any way by any other contractor, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the DRILLSHIP on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other reason beyond control of the BUILDER.

(c) The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the DRILLSHIP by the BUILDER for and to the BUYER.

(End of Article)

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ARTICLE X - RESCISSION BY BUYER

1. Notice:

The payments made by the BUYER prior to delivery of the DRILLSHIP shall be in the nature of advances to the BUILDER, and in the event that the DRILLSHIP is rejected by the BUYER or the Contract is rescinded by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.

2. Refundment by BUILDER:

In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the DRILLSHIP, together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof. The BUILDER shall also return any BUYER’S Supplies, or if such cannot be returned, the BUILDER shall pay to the BUYER an amount equal to the BUYER’S costs for such equipment.

In the event of such rescission by the BUYER, the BUILDER shall pay the BUYER interest at the rate of six percent (6%) per annum on the amount required herein to be refunded to the BUYER, computed from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER, provided, however, that if the said rescission by the BUYER is made under the provisions of Paragraph 4 of Article VIII hereof, then in such event the BUILDER shall pay the BUYER interest at the rate of four and a half percent (4.5%) per annum on the sums refundable.

As security for refund of installments prior to delivery of the DRILLSHIP, the BUILDER shall furnish to BUYER, prior to the due date of the first installment, with an irrevocable letter of guarantee covering the amount of such pre-delivery installments and issued by KEXIM, KDB, or a bank acceptable to the BUYER in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit “4” annexed hereto.

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3. Discharge of Obligations:

Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged, without prejudice, however, to any claims either party may have resulting from the other party’s breach of any of its obligations under this Contract.

(End of Article)

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ARTICLE XI - BUYER’S DEFAULT

1. Definition of Default:

The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases:

(a) If the first installment is not paid in full by the BUYER within Five (5) banking days in New York after the signing of the Contract and the receipt of original Refundment Guarantee or if any of the second, third or fourth installment is not paid in full by the BUYER to the BUILDER within Three (3) banking days in New York after such installment becomes due and payable as provided in Article II hereof; or

(b) If a performance guarantee by Cardiff Marine Inc. is not presented to the BUILDER within 5 banking days from the Effective Date of this Contract.

(c) If the fifth installment, after adjustment pursuant to the relevant provisions of this Contract, is not paid in full by the BUYER to the BUILDER concurrently with the delivery of the DRILLSHIP as provided in Article II hereof; or

(d) If the BUYER, when the DRILLSHIP is duly tendered for delivery by the BUILDER in accordance with the provisions of this Contract, fails to accept the DRILLSHIP within Five (5) days from the tendered date without any specific and valid ground thereof under this Contract.

2. Effect of Default on or before Delivery of DRILLSHIP:

(a) Should the BUYER make default in payment of any installment of the Contract Price on or before delivery of the DRILLSHIP, the BUYER shall pay the installment(s) in default plus accrued interest thereon at the rate of six percent (6%) per annum computed from the due date of such installment provided in Paragraph 4 of Article II hereof up to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof, the Delivery Date of the DRILLSHIP shall be automatically extended by a period of continuance of such default by the BUYER.

In any event of default by the BUYER, the BUYER shall also pay all charges and expenses incurred to the BUILDER in direct consequence of such default.

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(b) If any default by the BUYER continues for a period of Fifteen (15) days, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.

Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any installment or installments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies already delivered to the Shipyard, if any.

3. Disposal of DRILLSHIP:

(a) In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the DRILLSHIP and sell the same, or sell the DRILLSHIP in its incomplete state, free of any right or claim of the BUYER. Such sale of the DRILLSHIP by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.

(b) In the event of such sale of the DRILLSHIP, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred to the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the DRILLSHIP incurred to the BUILDER less BUYER’s Supplies and the installments already paid by the BUYER, and then to the compensation to the BUILDER for a reasonable cost due to rescission of this Contract, and finally to the repayment to the BUYER if any balance is obtained.

(c) If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.

(End of Article)

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ARTICLE XII - ARBITRATION

1. Decision by the Classification Society:

If any dispute arises between the parties hereto in regard to the design and/or construction of the DRILLSHIP, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the Specifications, the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.

2. Proceedings of Arbitration in London UK.:

In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract, including any dispute regarding its validity and existence, or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London.

If the dispute or difference does not exceed the sum of Five Hundred Thousand United States Dollars (US$ 500,000) the arbitration shall be conducted in accordance with the London Maritime Arbitrators Association’s Small Claims Procedure current at the time when the arbitration proceedings are commenced.

For disputes of value above Five Hundred Thousand United States Dollars (US$ 500,000) each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.

If the two arbitrators are unable to agree upon an Umpire within Twenty (20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the Umpire, and the two arbitrators and the Umpire shall constitute the Arbitration Board.

Such arbitration shall be in accordance with and subject to the provisions of the British Arbitration Act 1996, or any statutory modification or re-enactment thereof for the time being in force.

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Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.

Within Fourteen (14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen (14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.

The award of the Arbitration Board shall be final and binding on both parties.

3. Notice of Award:

The award decision shall immediately be communicated to the BUYER and the BUILDER by facsimile and confirmed in writing.

4. Expenses:

The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses that each party shall bear.

5. Entry in Court:

In case of failure by either party to respect the award of the arbitration, the judgment may be entered in any proper court having jurisdiction thereof.

6. Alteration of Delivery Date:

In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the DRILLS HIP, the award may include any adjustment of the Delivery Date that the Arbitration Board may deem appropriate.

(End of Article)

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ARTICLE XIII - SUCCESSOR AND ASSIGNS

The BUILDER agrees that, prior to delivery of the DRILLSHIP, this Contract may, with the prior written approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be transferred to and the title thereof may be taken by another company.

In the event of any assignment or novation pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.

In the event of the assignment or novation from the BUYER to any other individual or company pursuant to this provision, the BUILDER shall be entitled to request issuance of a Performance Guarantee from the BUYER having identical form and contents as Exhibit “5” annexed hereto.

In the event of any resale, assignment or novation of the Contract, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale, assignment or novation of the Contract shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its Supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the DRILLSHIP and/or costs of construction (including, without limitation to, request for substantial change of ship type or excessive revision of design specification, etc.), the BUILDER shall be entitled to withhold its consent to the resale, assignment or novation of the Contract but in such situation the BUILDER may grant at its option consent to such resale, assignment or novation if the New BUYER will bear any and all direct and indirect costs attributable to such requests and changes resulting therefrom.

(End of Article)

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ARTICLE XIV - TAXES AND DUTIES

1. Taxes and Duties Incurred in Korea:

The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.

2. Taxes and Duties Incurred Outside Korea:

The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract as the BUYER, except for taxes and duties imposed upon those items to be procured by the BUILDER for construction.

(End of Article)

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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.

1. Patents:

BUILDER agrees to defend, indemnify and hold BUYER harmless from any liability or claims of infringement of patent rights, utility model rights, trade mark rights or copyrights, or any other intellectual property rights of any third party relating to the construction and supply of the DRILLSHIP.

With regard to the performance of the current Contract, notwithstanding anything to the contrary herein, BUYER shall defend, indemnify and hold BUILDER harmless from any liability or claims of infringement of patent rights, utility model rights, trade mark rights or copyrights, or any other intellectual property rights of any third party related to (i) process supplied by BUYER, (ii) BUYER’s Supplies and (iii) any construction, operation or use of the drilling system.

Except as otherwise provided for in this Contract, nothing contained herein shall be construed as transferring any rights in any patent, trademarks or copyrights utilized in the performance of this Contract.

2. General Plans, Specifications and Working Drawings:

The BUILDER retains all rights with respect to the Specifications, and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the DRILLSHIP, and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, such consent not to be unreasonably withheld, except where it is necessary for usual operation, repair and maintenance of the DRILLSHIP.

(End of Article)

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ARTICLE XVI - BUYER’S SUPPLIES

1. Responsibility of BUYER:

(a) The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the Specifications (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the complete, proper condition ready for installation in or on the DRILLSHIP, in accordance with the time schedule designated and advised by the BUILDER to the BUYER.

(b) In order to facilitate installation by the BUILDER of the BUYER’S Supplies in or on the DRILLSHIP, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the Specifications. If so requested by the BUILDER, the BUYER, without any charge to the BUILDER, shall cause the representatives of the manufacturers of the BUYER’s Supplies to advise the BUILDER in installation thereof in or on the DRILLSHIP.

(c) Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.

(d) A delivery Schedule of the BUYER’s Supplies, if any of such have effect on the BUILDER’s construction of the DRILLSHIP, shall be finalized and settled within one hundred and fifty (150) calendar days from the date of the Contract signing. Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period that actually caused the delay in the delivery of the DRILLSHIP.

(e) If delay in delivery of any of the BUYER’s Supplies, having effect on the BUILDER’s construction of the DRILLSHIP, exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the DRILLSHIP without installation thereof in or on the DRILLSHIP as hereinabove provided, and the BUYER shall accept and take delivery of the DRILLSHIP so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.

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2. Responsibility of BUILDER:

The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the DRILLSHIP, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.

It will be the BUILDER’s responsibility to the BUYER to: (i) if applicable, assemble the BUYER’s Supplies; (ii) test the BUYER’s Supplies as necessary or appropriate; (iii) install the BUYER’s Supplies on the DRILLSHIP, in modules, as required, or otherwise as required, and to integrate the BUYER’s Supplies into the overall designed system of the DRILLSHIP. In no event will BUILDER charge any additional cost for any of the above. The BUILDER will perform above works under guidance of BUYER and the Vendors representative when required. Any rework involved due to no fault of the BUILDER shall be to BUYER’s cost and responsibility.

3. Title:

Title to the BUYER’s Supplies shall at all times remain with the BUYER during the Contract; however, the BUILDER shall have the risk of loss of or damage to such BUYER’s Supplies from the time set out in subparagraph 1(a) of this Article until delivery of the DRILLSHIP.

(End of Article)

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ARTICLE XVII - INSURANCE

1. Extent of Insurance Coverage:

From the time of the keel-laying until delivery of the DRILLSHIP, the BUILDER shall, at its own cost and expense fully insure the DRILLSHIP and all machinery, materials and equipment delivered to the Shipyard for the DRILLSHIP, including BUYER’s Supplies, built into or installed in or upon the DRILLSHIP against all risks under the “Institute Clauses for Builder’s Risks” with first class insurance company or underwriters in Korea. From the time of the first arrival of the BUYER’s Supplies in Korea until delivery of the DRILLSHIP, the BUILDER shall keep the BUYER’s Supplies fully insured with the aforementioned insurance companies or underwriters to cover BUILDER’s Risk.

The BUILDER shall promptly furnish the BUILDER with certified copies in the English language of the insurance policies taken out.

2. Application of the Recovered Amounts:

In the event that the DRILLSHIP shall be damaged from any insured cause at any time before delivery of the DRILLSHIP, and in the further event that such damage shall not constitute an actual or constructive total loss of the DRILLSHIP, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society and its requirements, and the BUYER shall accept the DRILLSHIP under this Contract if completed in accordance with this Contract and the Specifications, however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).

Should the DRILLSHIP from any cause become an actual or constructive total loss, the BUILDER shall by the mutual agreement between the parties hereto, either:

(a) Proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the DRILLSHIP, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair; or

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(b) Refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as installments in advance of delivery of the DRILLSHIP, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and shall be deemed rescinded for purposes of Article X hereof and all rights, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.

If the parties fail to reach such agreement within Sixty (60) days after the DRILLSHIP is determined to be an actual or constructive total loss, the provisions of sub-paragraph 2 (b) as above shall apply.

3. Termination of BUILDER’s Obligation to Insure:

The BUILDER shall be under no obligation to insure the DRILLSHIP hereunder after delivery thereof and acceptance by the BUYER.

(End of Article)

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ARTICLE XVIII - NOTICE

1. Address:

Any and all notices and communications in connection with this Contract shall be addressed as follows:

To the BUYER:

Drillship Hydra Owners Inc. c/o Cardiff Marine Inc.

80 Kifissias Avenue,

GR-151 25 Amaroussion,

Greece

Fax no. (+30)210 8090205

E-mail: finance@cardiff.gr for the attention of Mr. Aristidis Ioannidis

             newbuildings@cardiff.gr for the attention of Mr. George Kourelis

To the BUILDER:

Samsung Heavy Industries Co., Ltd.

34^th Floor, Samsung Life Insurance Seocho Tower 1321-15,

Seocho-Dong, Seocho-Gu, Seoul, Korea 137-857

Seoul, Korea 135-080

Facsimile No.: (+82) 2 3458 7369

Telephone No.: (+82) 2 3458 73137

E-mail: harris.lee@samsung.com

or preferably to its Geoje Yard:

Samsung Heavy Industries Co., Ltd.

P.O. Box Gohyun 9

530, Jangpyung-ri, Sinhyun-up,

Geoje-city, Gyungnam, Korea

Facsimile No.: (+82 55 630 6070)

2. Language:

Any and all notices and communications in connection with this Contract shall be written in the English language.

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3. Effective Date of Notice:

The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.

(End of Article)

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ARTICLE XIX - EFFECTIVE DATE OF CONTRACT

This Contract shall become effective upon signing by the parties hereto.

(End of Article)

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ARTICLE XX - INTERPRETATION

1. Laws Applicable:

The parties hereto agree that the validity and the interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.

2. Discrepancies:

All general language or requirements embodied in the Specifications are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit an interpretation inconsistent with any provision of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the Specifications and Plans, the Specifications shall prevail and govern.

3. Entire Agreement:

This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertakings and agreements on any subject matter of this Contract.

4. Amendments and Supplements:

Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.

(End of Article)

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ARTICLE XXI - CONFIDENTIALITY

BUILDER and BUYER agree that the terms and conditions of this Contract shall remain confidential and neither party shall disclose any such terms and conditions of this Contract to any third party without first obtaining the prior written consent of the other, provided however, that either party shall be entitled to disclose any or all of the terms and conditions of the Contract to the extent it is necessary to do so to implement, effectuate and comply with the terms of the Contract or to otherwise exercise any right or discharge any obligation that party may have pursuant to this Contract or any laws, rules and regulations.

(End of Article)

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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER:	BUILDER:
For and on behalf of the BUYER: DRILLSHIP-HYDRA OWNERS INC.	For and on behalf of the BUILDER: SAMSUNG HEAVY INDUSTRIES CO., LTD
/s/ George Economou	/s/ J.W. Kim
By: Mr. George Economou	By: Mr. J.W. Kim
Title: Authorized Signatory	Title: President & CEO
WITNESSED BY	WITNESSED BY
/s/ Aristidis Ioannidis	/s/ H.Y. Lee
By: Mr. Aristidis Ioannidis	By: H.Y. Lee
Title: General Manager of Cardiff Marine Inc.	Title: Chief Marketing Officer

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EXHIBIT “1” VESSEL SPECIFICATION

The Vessel Specification of this Contract for HN. 1837 shall be based on AFC(Approved For Construction) Drawings and Specifications of HN. 1674 as of the date of this Contract signing including all amendments, additions, deletions and variations (identified by italic boldic characters which shall prevail the Specification of HN.1674) incorporated into the Specification (Doc. No. SP07146.FS02 of September 14^th, 2007) and Manufacturer List (Doc. No. SPO7146.ML02 of September 14^th 2007)

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EXHIBIT “2” TOPSIDE SPECIFICATION

The Topside Specification of this Contract for HN.1837 shall be based on AFC (Approved for Construction) Drawings and Specifications of HN. 1674 as of the date of this Contract signing including all amendments, additions, deletions and variations incorporated into the Specification (Doc. No. SP07146.FS01 of September 14^th, 2007).

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EXHIBIT “3” DELIVERY AND CONSTRUCTION SCHEDULE

Drilling Package Delivery (DES Geoje)
2009-11-01	Bulk tanks. Pumps for reserve & waste
2009-12-01	Equipment in the Mud Process. Subsea Control & Mud Module
2009-12-01	BOP A Diverter Control System
2010-01-01	Equipment on Drillfloor, Catwalks, Utility winches
2010-02-15	Derrick A Derrick Component, Hoists, Riser Tensioners, BOP Teststump
2010-04-15	BOP/X-mas tree skidding system, Guidance system, UR
2010-06-15	Knuckle boom Cranes. BOP Cranes, Loose Equipment
2010-10-15	BOP
2010-11-15	Riser System

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EXHIBIT “4” LETTER OF REFUNDMENT GUARANTEE NO.

Gentlemen:

We hereby open our irrevocable letter of guarantee No. in favor of Drillship Hydra Owners Inc. (hereinafter called the “BUYER”) for account of Samsung Heavy Industries, Seoul, Korea as follows in consideration of the Drillship contract dated 17^th September 2007 (hereinafter called the “Contract”) made by and among the BUYER and Samsung Heavy Industries Co., Ltd. (hereinafter called the “BUILDER”) for the construction of one (1) Drillship composed of hull part and topside part, having BUILDER’S Hull No. 1837 (hereinafter called the “DRILLSHIP”).

If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payments) made to the BUILDER prior to the delivery of the DRILLSHIP, we hereby irrevocably guarantee as primary obligor and not merely as surety the repayment of the same to the BUYER immediately on demand USD 91,105,500 (Say United States Dollars Ninety One Million One Hundred Five Thousand Five Hundred only) together with interest thereon at the rate of six percent (6%) per annum from the date following the date of receipt by the BUILDER to the date of remittance by telegraphic transfer of such refund.

The amount of this guarantee will be automatically increased, not more than three (3) times, upon BUILDER’S receipt of the respective installment: each time by the amount of instalment of USD 91,105,500, USD 91,105,500 and USD 91,105,500 respectively, plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of USD 364,422,000 (Say United States Dollars Three Hundred Sixty Four Million Four Hundred Twenty Two Thousand only) plus interest thereon at the rate of six per cent (6%) per annum from the date following the date of BUILDER’S receipt of each installment to the date of remittance by telegraphic transfer of the refund.

In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.

In the event of cancellation of the Contract being based on delays due to force majeure or other causes beyond the control of the BUILDER, as required by Article X of the Contract, interest shall be paid at the rate of Four and a half percent (4.5%) per annum from the date of following the date of Builder’s receipt of each installment to the date of remittance by telegraphic transfer of the refund.

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This letter of guarantee is available against BUYER’S simple receipt and signed statement certifying that BUYER’S demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty (30) days after your demand to the BUILDER. Refund shall be made to you by telegraphic transfer in United States Dollars in freely transferable funds and free and clear of and without deduction for and on account of any set off, counterclaim or present or future tax, levy, impost, duty, charge, fee or other withholding of any nature whatsoever imposed and by whomsoever on yourselves. In the event we are required by law to make any deduction or withholding from any payment to be made by it pursuant to this letter of guarantee, we will pay to you whatever additional amount (after taking into account any additional taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after making the deduction or withholding, you receive a net sum equal to the sum which you would have received had no deduction or withholding been made.

This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of delivery of the DRILLSHIP in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until delivery or in the event of delayed delivery until such time as the DRILLSHIP is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.

Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by the Arbitration Board stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Sixty (60) days after the final award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitration Board. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.

This guarantee shall not be affected by any extension of time or concession granted by the BUYER to the BUILDER or any delay or failure of the BUYER in enforcing its rights under the Contract.

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The BUYER shall have the right to assign this guarantee and all of its benefits to any assignee to whom the Contract is assigned.

This guarantee shall be governed by the laws of England and the undersigned hereby submits to the non-exclusive jurisdiction of the courts of England. If we receive written or telefaxed notice from you or the BUILDER that there exists an arbitration between you and BUILDER or that you have made a formal demand of us under this Letter of Guarantee we shall within thirty (30) days of receipt of such notice irrevocably appoint an agent for service of process in respect of any proceedings in England and notify you of such appointment and undertake that, throughout the terms of this Letter of Guarantee, we will retain such agent in England for such purposes. If we fail to make such appointment and/or give such notification within thirty (30) day period we hereby appoint and be deemed to have appointed the London branch of our bank currently at 1^st Floor, Boston House 63-64 New Broad Street, London EC2M 1JJ United Kingdom.

Any notice or demand under this Letter of Guarantee required to be given by yourselves to us shall be addressed to us as follows:

Address: 16-1, Yoido-Dong, Yeongdeungpo-Gu, Seoul 150-996 Korea

Tel: +82-2-3779-6318

Fax: +82-2-3779-6745

Very truly yours,

The Export-Import Bank of Korea

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EXHIBIT “5” PERFORMANCE GUARANTEE

Messrs.

Samsung Heavy Industries Co., Ltd.

34^th Floor, Samsung Life Insurance Seocho Tower

1324-15, Seocho-Dong, Seocho-Gu,

Seoul, Republic of Korea 137-857

In consideration of the assignment of a certain shipbuilding contract dated September 17^th 2007 (hereinafter called the “Contract”) by us to (hereinafter called the “BUYER”), for the construction of one (1) Drillship having your Hull No. 1837 (hereinafter called the “Drillship”) providing among other things for payment of the Contract Price amounting to United States Dollars Six Hundred Seven Million Three Hundred Seventy Thousand (US$ 607,370,000);

We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).

This Performance Guarantee shall be governed by the laws of England.

GUARANTOR : CARDIFF MARINE INC.

BY:

TITLE :

WITNESS :

63

EXHIBIT “6” OPTIONAL ITEMS

No	Items	Amount
1.1	Dual Drilling (Aux Rig): a) Travelling block b) Retractable dolly c) Elevated backup tong d) Drawworks e) Drill line & Reel f) Deadline Anchor g) Top drive h) Mud standpipes manifold i) Cement standpipe manifold	US$	13,750,000
1.2	False rotary table in Aux well centre	US$	750,000
2	Personnel elevator in the Derrick	US$	952,000
3	Additional 3,000 ft of Riser	US$	15,000,000
4	7th Shale shaker	US$	425,000
5	Cutting dryer / Modification of conveyors	US$	1,060,000

Details for the above optional items are included in the Drillship Specification (Doc. No. SP07146.FS01 and Doc. No. SP07146.FS02 of September 14^th 2007)

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EX-4.35

Exhibit 4.35

Dated 12 December 2008

ANNAPOLIS SHIPPING COMPANY LIMITED

ATLAS OWNING COMPANY LIMITED

FARAT SHIPPING COMPANY LIMITED and

LANSAT SHIPPING COMPANY LIMITED

as Borrowers

-and-

PIRAEUS BANK A.E

FIRST SUPPLEMENTAL AGREEMENT

in relation to a Loan Agreement dated

13 March 2008 in respect of a loan

facility of (originally) US$130,000,000

WATSON, FARLEY & WILLIAMS

Piraeus

INDEX

Clause		Page
1	DEFINITIONS	1
2	REPRESENTATIONS AND WARRANTIES	2
3	AGREEMENT OF THE BANK	3
4	CONDITIONS	4
5	VARIATIONS TO LOAN AGREEMENT	5
6	CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS	6
7	EXPENSES	6
8	NOTICES	7
9	APPLICABLE LAW	7

THIS FIRST SUPPLEMENTAL AGREEMENT is dated 12 December 2008 and made

BETWEEN:

(1) ANNAPOLIS SHIPPING COMPANY LIMITED (“Annapolis”), FARAT SHIPPING COMPANY LIMITED (“Farat”) and LANSAT SHIPPING COMPANY LIMITED (“Lansat”), each a company incorporated in Malta whose registered office is at 5/2, Merchants Street, Valletta, Malta and ATLAS OWNING COMPANY LIMITED (“Atlas”), a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 (together the “Borrowers” and each a “Borrower”); and

(2) PIRAEUS BANK A.E., acting through its branch at 47-49 Akti Miaouli, 185 36 Piraeus, Greece as “Bank”

IS SUPPLEMENTAL to a Loan Agreement dated 13 March 2008 (the “Loan Agreement”) made between (i) the Borrowers, as joint and several borrowers, and (ii) the Bank, as lender, whereby the Bank has made available to the Borrowers a loan facility of (originally) One hundred and Thirty million United States Dollars (US$130,000,000) (the “Loan”) upon the terms and for the purposes therein specified.

WHEREAS, pursuant to a request from the Borrowers, and subject to the terms and conditions herein contained, the Bank has agreed to:

(A) the transfer of ownership of the Maltese flag ship “LANIKAI” (tbr “DELRAY”) (“DELRAY”) by Annapolis to Lotis Traders Inc. of the Marshall Islands (the “New Owner”) and the subsequent registration of the ship on the same flag in the ownership of the New Owner with the name “DELRAY” on terms that the New Owner executes:

(a) a guarantee of the obligations of the Borrowers under the Loan Agreement;

(b) a first priority Maltese statutory mortgage over “DELRAY”;

(c) a first priority assignment of the earnings, insurances and requisition compensation of “DELRAY”;

(d) a first priority assignment of any time charter entered or to be entered into in respect of “DELRAY”;

(e) a pledge of any earnings account opened or to be opened in the name of the New Owner with the Bank; and

(B) release and discharge Atlas from its obligations under the Loan Agreement and the other Finance Documents to which it is a party.

NOW THEREFORE IT IS HEREBY AGREED

1 DEFINITIONS

1.1 Words and expressions defined in the Loan Agreement (as hereby amended) and the recitals hereto and not otherwise defined herein shall have the same meanings when used in this First Supplemental Agreement.

1.2 In this First Supplemental Agreement the words and expressions specified below shall have the meanings attributed to them below:

“New Deed of Covenant” means the first priority deed of covenant collateral to the New Mortgage executed or to be executed by the New Owner in favour of the Bank in such form as the Bank may approve or require;

“New Charterparty Assignment” means, relation to “DELRAY”, the specific assignment of any Approved Charter in respect thereof executed or to be executed by the New Owner in favour of the Bank in such form as the Bank may approve or require;

“New Earnings Account” means an account opened or to be opened in the name of the New Owner with the Bank for receipt of the Earnings or such other account or accounts as may be established for this purpose with the prior consent of the Bank;

“New Earnings Account Pledge” means the first priority pledge over the New Earnings Account to be executed by the New Owner in favour of the Bank in such form as the Bank may approve or require;

“New General Assignment” means, relation to “DELRAY”, a first priority general assignment of the Earnings, Insurances and Requisition Compensation in respect thereof executed or to be executed by the New Owner in favour of the Bank in such form as the Bank may approve or require;

“New Guarantee” means the guarantee of the obligations of the Borrowers under the Loan Agreement executed or to be executed by the New Owner in favour of the Bank in such form as the Bank may approve or require;

“New Finance Documents” means, together, the New Guarantee, the New Mortgage, the New Deed of Covenant, the New General Assignment, the New Charterparty Assignment and the New Earnings Account Pledge;

“New Mortgage” means the first priority Maltese statutory mortgage over “DELRAY” executed or to be executed by the New Owner in favour of the Bank in such form as the Bank may approve or require;

“New Owner” means Lotis Traders Inc., a corporation organised and existing under the laws of the Marshall Islands and having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH96960, Marshall Islands; and

“Remaining Borrowers” means, together, Annapolis Farat and Lansat and, in the singular, means any of them.

1.3 Where the context so admits words importing the singular number only shall include the plural and vice versa and words importing persons shall include firms and corporations. Clause headings are inserted for convenience of reference only and shall be ignored in construing this First Supplemental Agreement, References to Clauses are to clauses of this First Supplemental Agreement save as may be otherwise expressly provided in this First Supplemental Agreement.

2 REPRESENTATIONS AND WARRANTIES

2.1 Each Borrower hereby jointly and severally represents and warrants to the Bank, as at the date of this First Supplemental Agreement, that the representations and warranties set forth in Clause 8 of the Loan Agreement (updated mutatis mutandis to the date of this First Supplemental Agreement) are true and correct as if all references therein to “this Agreement” were references to the Loan Agreement as further amended by this First Supplemental Agreement.

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2.2 Each Borrower hereby further jointly and severally represents and warrants to the Bank that as at the date of this First Supplemental Agreement:

(a) each Borrower is duly incorporated and validly existing and in good standing under the laws of Malta or, in the case of Atlas, the Republic of the Marshall Islands and has full power to enter into and perform its obligations under this First Supplemental Agreement and has complied with all statutory and other requirements relative to its business, and does not have an established place of business in any part of the United Kingdom or the United States of America;

(b) all necessary governmental or other official consents, authorisations, approvals, licences, consents or waivers for the execution, delivery, performance, validity and/or enforceability of this First Supplemental Agreement and all other documents to be executed in connection with the amendments to the Loan Agreement as contemplated hereby have been obtained and will be maintained in full force and effect, from the date of this First Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and while all or any part of the Commitment remains outstanding;

(c) each Borrower has taken all necessary corporate and other action to authorise the execution, delivery and performance of its obligations under this First Supplemental Agreement and such other documents to which it is a party and such documents do or will upon execution thereof constitute the valid and binding obligations of each Borrower enforceable in accordance with their respective terms;

(d) the execution, delivery and performance of this First Supplemental Agreement and all such other documents as contemplated hereby does not and will not, from the date of this First Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and while all or any part of the Commitment remains outstanding, constitute a breach of any contractual restriction or any existing applicable law, regulation, consent or authorisation binding on each Borrower or on any of its property or assets and will not result in the creation or imposition of any security interest, lien, charge or encumbrance (other than under the Finance Documents) on any of such property or assets; and

(e) each Borrower has fully disclosed in writing to the Bank all facts which it knows or which it should reasonably know and which are material for disclosure to the Bank in the context of this First Supplemental Agreement and all information furnished by such Borrower or on its behalf relating to its business and affairs in connection with this First Supplemental Agreement was and remains true, correct and complete in all material respects and there are no other material facts or considerations the omission of which would render any such information misleading,

3 AGREEMENT OF THE BANK

3.1 The Bank, relying upon each of the representations and warranties set out in Clauses 2.1 and 2.2 of this First Supplemental Agreement, hereby agrees with the Borrowers, subject to and upon the terms and conditions of this First Supplemental Agreement and in particular, but without limitation, subject to the fulfillment of the conditions precedent set out in Clause 4, to:

(a) the acquisition by the New Owner of “DELRAY” from Annapolis;

(b) the release of the Mortgage, the Deed of Covenant, the General Assignment and the Charterparty Assignment relative to “DELRAY” and the Earnings Account Pledge over the Earnings Account relevant to Annapolis; and

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(c) the release and discharge of Atlas from its obligations under the Loan Agreement and the Finance Documents to which it is a party.

3.2 The Remaining Borrowers agree and confirm that the Loan Agreement and the Finance Documents to which they are a party shall remain in full force and effect and they shall remain liable under the Loan Agreement and the Finance Documents to which they are a party for all obligations and liabilities assumed by the Borrowers thereunder.

4 CONDITIONS

4.1 The agreements of the Bank contained in Clause 3.1 of this First Supplemental Agreement shall all be expressly subject to the condition that the Bank shall have received in form and substance satisfactory to the Bank and its legal advisers on or before the date of this First Supplemental Agreement:

(a) evidence that the persons executing this First Supplemental Agreement on behalf of each Borrower are duly authorised to execute the same on behalf of such Borrower;

(b) a certificate of an Officer of the New Owner confirming the names of all the Directors and Shareholders of the New Owner and having attached thereto true and complete copies of its incorporation and constitutional documents;

(c) true and complete copies of the resolutions passed at separate meetings of the Sole Director and Shareholders of the New Owner authorising and approving the execution of the New Finance Documents and any other document or action to which it is or is to be a party and authorising its directors or other representatives to execute the same on its behalf;

(d) the original of any power of attorney issued by the New Owner pursuant to such resolutions aforesaid;

(e) evidence that “DELRAY” is:

(i) registered in the name of New Owner under the laws and flag of the Malta; and

(ii) insured in accordance with the relevant provisions of the New Mortgage and all requirements thereof in respect of such insurance have been fulfilled; and

(f) the New Finance Documents, duly executed by the New Owner together with evidence that:

(i) the New Mortgage has been registered against “DELRAY” with first priority in accordance with the laws of Malta;

(ii) all notices required to be given under the New Deed of Covenant, the New General Assignment and the New Charterparty Assignment have been given and acknowledged in the manner therein provided; and

(iii) save for the charges created by or created by or pursuant to the New Mortgage, the New Deed of Covenant, the New General Assignment and the New Charterparty Assignment there is no lien, charge or encumbrance of any kind whatsoever on “DELRAY” or her Earnings, Insurances or Requisition Compensation.

(g) a certified true copy of any Approved Charter entered into in respect of “DELRAY”;

(h) evidence that the New Earnings Account has been opened;

4

(i) documents establishing that “DELRAY” is managed by the Approved Manager;

(j) a letter of undertaking executed by the Approved Manager in favour of the Bank in the terms required by the Bank agreeing certain matters in relation to the management of “DELRAY” and subordinating the rights of the Approved Manager against “DELRAY” and the New Owner to the rights of the Bank under the Finance Documents;

(k) copies of ISM DOC and SMC and the International Ship Security Certificate under the ISPS Code in respect of “DELRAY”;

(l) certified copies of all documents (with a certified translation if an original is not in English) evidencing any other necessary action, approvals or consents with respect to this First Supplemental Agreement and the New Finance Documents (including without limitation) all necessary governmental and other official approvals and consents in such pertinent jurisdictions as the Bank deems appropriate;

(m) such legal opinions as the Bank may require in respect of the matters contained in this First Supplemental Agreement and the New Finance Documents; and

(n) evidence that the agent referred to in Clause 9.4 has accepted its appointment as agent for service of process under this First Supplemental Agreement and the New Finance Documents.

5 VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS

5.1 In consideration of the agreement of the Bank contained in Clause 3.1 of this First Supplemental Agreement the Borrowers hereby agree with the Bank that upon satisfaction of the conditions referred to in Clause 4.1, the provisions of the Loan Agreement shall be varied and/or amended and/or supplemented as follows:

(a) by deleting sub-paragraphs (a) and (b) in the definition of “Account” contained in clause 1.1 thereof;

(b) by deleting the definitions “LACERTA” and “MENORCA” contained in clause 1.1 thereof;

(c) by adding to the definition of “Finance Documents” in clause 1.1 thereof new sub-paragraph (k) as follows:

“(k) the New Finance Documents; and”;

(d) by redesignating the existing sub-paragraph (k) of the definition of “Finance Documents” in clause 1.1 thereof as a new sub-paragraph (1);

(e) by adding the following new definition in clause 1.1 thereof:

““DELRAY” means the 1994-built bulk carrier vessel of 71,860 metric tons deadweight, having IMO Number 9071600 and registered in the ownership of the New Owner under the Maltese flag with the name “DELRAY”;

(f) by adding after the words “the Corporate Guarantor” the words “the New Owner” in the definition of “Security Party” in clause 1.1 thereof;

(g) by deleting the words “LACERTA” and “MENORCA” from the definition of “Ship” contained in clause 1.1 thereof and replacing them with the word “DELRAY”;

(h) by adding the words “or, as the case may be, the New Owner” after the word “Ship” in:

5

(i) the fifth line of sub-paragraph (e) of the definition of “Permitted Security Interests” in clause 1.1 thereof;

(ii) the second line of sub-paragraph (b)(ii) of the definition of “Total Loss Date” in clause 1.1 thereof; and

(iii) the second line of the definition of “obligatory insurances” in clause 1,2 thereof;

(i) by inserting the words “or the New Owner” after the words “any Borrower” in the second line of clause 18.1(k) thereof;

(j) by construing all references therein to “this Agreement” where the context admits as being references to “this Agreement as the same is amended and supplemented by this First Supplemental Agreement and as the same may from time to time be further supplemented and/or amended”; and

(k) by construing references to each of the Finance Documents as being references to each such document as it is from time to time supplemented and/or amended.

5.2 Amendments to Finance Documents. With effect on and from the date of this First Supplemental Agreement each of the Finance Documents other than the Loan Agreement shall be, and shall be deemed by this Agreement to have been, amended as follows:

(a) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement and any of the other Finance Documents shall be construed as if the same referred to the Loan Agreement and those Finance Documents as amended and supplemented by this First Supplemental Agreement; and

(b) by construing references throughout each of the Finance Documents to “this Agreement”, “this Deed”, “hereunder and other like expressions as if the same referred to such Finance Documents as amended and supplemented by this First Supplemental Agreement.

5.3 Finance Documents to remain in full force and effect. The Finance Documents shall remain in full force and effect as amended and supplemented by:

(a) the amendments to the Finance Documents contained or referred to in Clauses 5.1 and 5.2; and

(b) such further or consequential modifications as may be necessary to make the same consistent with, and to give full effect to, the terms of this First Supplemental Agreement.

6 CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS

6.1 Save for the alterations to the Loan Agreement made or to be made pursuant to this First Supplemental Agreement and such further modifications (if any) thereto as may be necessary to make the same consistent with the terms of this First Supplemental Agreement, the Loan Agreement shall remain in full force and effect and the security constituted by the security Documents shall continue and remain valid and enforceable.

7 EXPENSES

7.1 The Borrowers agree to pay to the Bank upon demand and from time to time all costs, charges and expenses (including legal fees) incurred by the Bank in connection with the preparation, negotiation, execution and (if required) registration or preservation of rights under the enforcement or attempted enforcement of the Loan Agreement, this First Supplemental Agreement and the Finance Documents or otherwise in connection with the

6

Loan or any part thereof. Without prejudice to the foregoing, the Borrowers hereby irrevocably authorise the Bank to debit any of the Accounts with the amount necessary to settle the Bank’s lawyers’ legal fees and disbursements.

8 NOTICES

8.1 The provisions of Clause 27 (Notices and other matters) of the Loan Agreement shall apply to this First Supplemental Agreement as if the same were set out herein in full.

9 APPLICABLE LAW

9.1 This First Supplemental Agreement shall be governed by and construed in accordance with English law.

9.2 Subject to Clause 9.3, the courts of England shall have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this First Supplemental Agreement.

9.3 Clause 9.2 is for the exclusive benefit of the Bank which reserves the right:

(a) to commence proceedings in relation to any matter which arises out of or in connection with this First Supplemental Agreement in the courts of any country other than England and which have or claim jurisdiction to that matter; and

(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

None of the Borrowers shall commence any proceedings in any country other than England in relation to a matter which arises out of or in connection with this First Supplemental Agreement.

9.4 Each Borrower irrevocably appoints Ince Process Agents Ltd. for the time being presently of 5th Floor, International House, 1 St. Katharine’s Way, London ElW 1 AY, England for the time being to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this First Supplemental Agreement.

9.5 Nothing in this Clause 9 shall exclude or limit any right which the Bank may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

9.6 In this Clause 9, “proceedings” means proceedings of any kind, including an application for a provisional or protective measure.

IN WITNESS WHEREOF the parties hereto have caused this First Supplemental Agreement to be duly executed the day and year first above written.

BORROWERS
SIGNED by	)	/s/ Eugenia Papapontikou
	)
for and on behalf of	)
ANNAPOLIS SHIPPING COMPANY LIMITED	)
in the presence of:	)

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SIGNED by	)	/s/ Eugenia Papapontikou
	)
for and on behalf of	)
ATLAS OWNING COMPANY LIMITED	)
in the presence of	)
/s/ Christoforos Bismpikos
CHRISTOFOROS BISMPIKOS
SOLICITOR
WATSON, FARLEY & WILLIAMS
2, DEFTERAS MERARCHIAS
PIRAEUS 18538 - GREECE
SIGNED by	)	/s/ Eugenia Papapontikou
	)
for and on behalf of	)
FARAT SHIPPING COMPANY LIMITED	)
in the presence of:	)
/s/ Christoforos Bismpikos
CHRISTOFOROS BISMPIKOS
SOLICITOR
WATSON, FARLEY & WILLIAMS
2, DEFTERAS MERARCHIAS
PIRAEUS 18538 - GREECE
SIGNED by	)	/s/ Eugenia Papapontikou
	)
for and on behalf of	)
LANSAT SHIPPING COMPANY LIMITED	)
in the presence of:	)
/s/ Christoforos Bismpikos
CHRISTOFOROS BISMPIKOS
SOLICITOR
WATSON, FARLEY & WILLIAMS
2, DEFTERAS MERARCHIAS
PIRAEUS 18538 - GREECE
LENDER
SIGNED by	)	/s/ Jason Kriempardis /s/ Jason Dallas
	)
for and on behalf of	)
PIRAEUS BANK A.E.	)
in the presence of:	)
/s/ Pat Skala
PAT SKALA
WATSON, FARLEY & WILLIAMS
2, DEFTERAS MERARCHIAS
PIRAEUS 18538 - GREECE

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COUNTERSIGNED this 12 December 2008 by Dryships Inc. which, by its execution hereof confirms and acknowledges that it has read and understood the terms and conditions of the above First Supplemental Agreement, that it agrees in all respects to the same and that the Finance Documents to which it is a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrowers under the Loan Agreement.

for and on behalf of
DRYSHIPS INC.	/s/ Eugenia Papapontikou
in the presence of:
	/s/ Christoforos Bismpikos
	CHRISTOFOROS BISMPIKOS
	SOLICITOR
	WATSON, FARLEY & WILLIAMS
	2, DEFTERAS MERARCHIAS
	PIRAEUS 18538 - GREECE

9

EX-4.36

Exhibit 4.36

Dated 30 July 2009

ANNAPOLIS SHIPPING COMPANY LIMITED

FARAT SHIPPING COMPANY LIMITED and

LANSAT SHIPPING COMPANY LIMITED

as Borrowers

-and-

PIRAEUS BANK A.E

as Lender

SECOND SUPPLEMENTAL AGREEMENT

in relation to a Loan Agreement dated

13 March 2008 (as amended and supplemented

by a first supplemental agreement dated 12 December 2008)

in respect of a loan facility of (originally) US$130,000,000

WATSON, FARLEY & WILLIAMS

Piraeus

INDEX

Clause		Page
1	DEFINITIONS	1
2	REPRESENTATIONS AND WARRANTIES	3
3	AGREEMENT OF THE LENDER	4
4	CONDITIONS	4
5	VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS	6
6	CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS	13
7	EXPENSES	13
8	NOTICES	13
9	APPLICABLE LAW	13

THIS SECOND SUPPLEMENTAL AGREEMENT is dated 30 July 2009 and made

BETWEEN:

(1) ANNAPOLIS SHIPPING COMPANY LIMITED (“Annapolis”), FARAT SHIPPING COMPANY LIMITED (“Farat”) and LANSAT SHIPPING COMPANY LIMITED (“Lansat”), each a company incorporated in Malta whose registered office is at 5/2, Merchants Street, Valletta, Malta (together the “Borrowers” and each a “Borrower”); and

(2) PIRAEUS BANK A.E., acting through its branch at 47-49 Akti Miaouli, 185 36 Piraeus, Greece as “Lender”

IS SUPPLEMENTAL to a Loan Agreement dated 13 March 2008 (as amended and supplemented by a first supplemental agreement dated 12 December 2008, the “Loan Agreement”) made between (i) the Borrowers as joint and several borrowers and (ii) the Lender as lender whereby the Lender has made available to the Borrowers a loan facility of (originally) One hundred and Thirty million United States Dollars (US$130,000,000) (the “Loan”) upon the terms and for the purposes therein specified.

WHEREAS pursuant to a request from the Borrowers, and subject to the terms and conditions herein contained, the Lender has agreed to waive the applications of certain covenants during the period 31 December 2008 until 31 March 2011 subject to the following conditions:

(A) the Lender will receive certain additional security for the obligations of the Borrowers under the Loan Agreement and the other Finance Documents; and

(B) the entry by the Borrowers into this Second Supplemental Agreement whereby certain provisions of the Loan Agreement and certain other Finance Documents will be amended and/or varied.

NOW THEREFORE IT IS HEREBY AGREED

1 DEFINITIONS

1.1 Words and expressions defined in the Loan Agreement (as hereby amended) and the recitals hereto and not otherwise defined herein shall have the same meanings when used in this Second Supplemental Agreement.

1.2 In this Second Supplemental Agreement the words and expressions specified below shall have the meanings attributed to them below:

“Additional Charterparty Assignment” means, in relation to each Additional Ship, a second priority specific assignment of any Approved Charter in respect thereof executed or to be executed by the Additional Owner owning that Additional Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Earnings Account” means, in relation to each Additional Owner, an account opened or to be opened in the name of that Additional Owner with the Lender for receipt of the Earnings of its Additional Ship or such other account or accounts as may be established for this purpose with the prior consent of the Lender and, in the plural, means both of them;

“Additional Earnings Account Pledge” means, in relation to each Additional Earnings Account, a second priority pledge over that Additional Earnings Account to be executed by the relevant Additional Owner in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Finance Documents” means, together, the Additional Guarantees, the Additional Mortgages, the Additional Deeds of Covenant, the Additional General Assignments, the Additional Charterparty Assignments and the Additional Earnings Account Pledges and, in the singular, means any of them;

“Additional General Assignment” means, in relation to each Additional Ship, a second priority general assignment of the Earnings, Insurances and Requisition Compensation in respect thereof executed or to be executed by the Additional Owner owning that Additional Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Guarantee” means, in relation to each Additional Owner, the guarantee of the obligations of the Borrowers under the Loan Agreement executed or to be executed by that Additional Owner in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Mortgage” means, in relation to each Additional Ship, the second priority Maltese statutory mortgage over that Additional Ship executed or to be executed by the Additional Owner owning that Additional Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Additional Owner” means each of Boone and Iokasti and, in the plural, means both them;

“Additional Ship” means each of “SAMATAN” and “PACHINO” and, in the plural, means both of them;

“Boone” means Boone Star Owners Inc., a corporation incorporated in the Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960;

“Deed of Covenant” means, in relation to each Additional Ship, the second priority deed of covenant collateral to the relevant Additional Mortgage executed or to be executed by the Additional Owner owning that Additional Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Deposit Account” means a deposit account either in the joint names of the Borrowers or in the name of the Corporate Guarantor with the Lender designated [name of account holder] - Deposit Account;

“Deposit Account Pledge” means the deed of pledge in respect of Deposit Account to be executed by the Borrower or, as the case may be, the Corporate Guarantor in favour of the Lender in such form as the Lender may approve or require;

“Iokasti” means Iokasti Owning Company Limited, a corporation incorporated under the laws of Republic of Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960;

“Minimum Deposit” means at any relevant date during the Waiver Period, an amount in aggregate equal to the repayment instalments payable during the consecutive 12-month period immediately following such date pursuant to this Agreement;

“Mortgage Addendum” means, in relation to each Original Ship, the first addendum, to the Mortgage on that Original Ship, executed or to be executed by:

(a) in the case of “TORO”, Farat; and

(b) in the case of “DELRAY” the New Owner,

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in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them;

“Original Ship” means each of “DELRAY” and “TORO” and, in the plural, means both of them;

“PACHINO” means the 2002-built bulk carrier vessel of 30,928 gross registered tons and 16,341 net registered tons, having IMO Number 9257060 and registered in the ownership of Iokasti under Maltese flag with the name “PACHINO”;

“SAMATAN” means the 2001-built bulk carrier vessel of 40,437 gross registered tons and 25,855 net registered tons, having IMO Number 9236171 registered in the ownership of Boone under Maltese flag with the name “SAMATAN”; and

“Waiver Period” has the meaning ascribed to it in Recital (A) above.

1.3 Where the context so admits words importing the singular number only shall include the plural and vice versa and words importing persons shall include firms and corporations. Clause headings are inserted for convenience of reference only and shall be ignored in construing this Second Supplemental Agreement. References to Clauses are to clauses of this Second Supplemental Agreement save as may be otherwise expressly provided in this Second Supplemental Agreement.

2 REPRESENTATIONS AND WARRANTIES

2.1 Each Borrower hereby jointly and severally represents and warrants to the Lender, as at the date of this Second Supplemental Agreement, that the representations and warranties set forth in Clause 8 of the Loan Agreement (updated mutatis mutandis to the date of this Second Supplemental Agreement) are true and correct as if all references therein to “this Agreement” were references to the Loan Agreement as further amended by this Second Supplemental Agreement.

2.2 Each Borrower hereby further jointly and severally represents and warrants to the Lender that as at the date of this Second Supplemental Agreement:

(a) each Borrower is duly incorporated and validly existing and in good standing under the laws of Malta and has full power to enter into and perform its obligations under this Second Supplemental Agreement and has complied with all statutory and other requirements relative to its business, and does not have an established place of business in any part of the United Kingdom or the United States of America;

(b) all necessary governmental or other official consents, authorisations, approvals, licences, consents or waivers for the execution, delivery, performance, validity and/or enforceability of this Second Supplemental Agreement and all other documents to be executed in connection with the amendments to the Loan Agreement as contemplated hereby have been obtained and will be maintained in full force and effect, from the date of this Second Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and while all or any part of the Commitment remains outstanding;

(c) each Borrower has taken all necessary corporate and other action to authorise the execution, delivery and performance of its obligations under this Second Supplemental Agreement and such other documents to which it is a party and such documents do or will upon execution thereof constitute the valid and binding obligations of each Borrower enforceable in accordance with their respective terms;

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(d) the execution, delivery and performance of this Second Supplemental Agreement and all such other documents as contemplated hereby does not and will not, from the date of this Second Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and while all or any part of the Commitment remains outstanding, constitute a breach of any contractual restriction or any existing applicable law, regulation, consent or authorisation binding on each Borrower or on any of its property or assets and will not result in the creation or imposition of any security interest, lien, charge or encumbrance (other than under the Finance Documents) on any of such property or assets; and

(e) each Borrower has fully disclosed in writing to the Lender all facts which it knows or which it should reasonably know and which are material for disclosure to the Lender in the context of this Second Supplemental Agreement and all information furnished by such Borrower or on its behalf relating to its business and affairs in connection with this Second Supplemental Agreement was and remains true, correct and complete in all material respects and there are no other material facts or considerations the omission of which would render any such information misleading.

3 AGREEMENT OF THE LENDER

3.1 The Lender, relying upon each of the representations and warranties set out in Clauses 2.1 and 2.2 of this Second Supplemental Agreement, hereby agrees with the Borrowers, subject to and upon the terms and conditions of this Second Supplemental Agreement and in particular, but without limitation, subject to the fulfillment of the conditions precedent set out in Clause 4, to:

(a) waive the application of certain covenants contained within the Loan Agreement; and

(b) the amendments and/or variations of certain other provisions of the Loan Agreement set out in this Second Supplemental Agreement.

3.2 Each Borrower agrees and confirms that the Loan Agreement and the Finance Documents to which it is a party shall remain in full force and effect and that Borrower shall remain liable under the Loan Agreement and the Finance Documents to which it is a party for all obligations and liabilities assumed by it thereunder.

4 CONDITIONS

4.1 The agreements of the Lender contained in Clause 3.1 of this Second Supplemental Agreement shall all be expressly subject to the condition that the Lender shall have received in form and substance satisfactory to the Lender and its legal advisers on or before the date of this Second Supplemental Agreement:

(a) evidence that the persons executing this Second Supplemental Agreement on behalf of each Borrower are duly authorised to execute the same on behalf of such Borrower;

(b) a certificate from an officer of each Additional Owner confirming the names of all the directors and Shareholders of that Additional Owner and having attached thereto true and complete copies of its incorporation and constitutional documents;

(c) true and complete copies of the resolutions passed at separate meetings of all the directors and shareholders of Farat, the New Owner and each Additional Owner authorising and approving the execution of, in the case of Farat and the New Owner the Mortgage Addendum and in the case of each Additional Owner the Additional Finance Documents to which it is a party and any other document or action to which it is or is to be a party and authorising its directors or other representatives to execute the same on its behalf;

4

(d) the original of any power of attorney issued by Farat, the New Owner and each Additional Owner pursuant to such resolutions aforesaid;

(e) evidence that each Additional Ship is:

(i) registered in the ownership of the relevant Additional Owner under the laws and flag of the Malta; and

(ii) insured in accordance with the relevant provisions of the Additional Deed of Covenant relative to that Additional Ship and all requirements thereof in respect of such insurance have been fulfilled; and

(f) the Additional Finance Documents and the Mortgage Addenda, duly executed by the Additional Owners or, in the case of each Mortgage Addendum, Farat or the New Owner together with evidence that:

(i) each Additional Mortgage has been registered against the relevant Additional Ship with first priority in accordance with the laws of Malta;

(ii) each Mortgage Addendum in connection with the relevant Original Ship has been duly registered in accordance with the laws of Malta;

(iii) all notices required to be given under each Additional Deed of Covenant, each Additional General Assignment and each Additional Charterparty Assignment have been given and acknowledged (other than in the case of a Charterparty Assignment in which case the Borrower or, as the case may be, the Owner which is a party thereto shall procure that the Lender receives the relevant acknowledgement only if an Event of Default has occurred) in the manner therein provided; and

(iv) save for the charges created by or pursuant to the Additional Mortgages, the Additional Deeds of Covenant, the Additional General Assignments and the Additional Charterparty Assignments there is no lien, charge or encumbrance of any kind whatsoever on either Additional Ship or her Earnings, Insurances or Requisition Compensation.

(g) a certified true copy of any Approved Charter entered into in respect of either Additional Ship;

(h) the original of any mandates or other documents required in connection with the opening or operation of the Additional Earnings Accounts and the Deposit Account;

(i) evidence that the applicable Minimum Deposit is standing to the credit of the Deposit Account;

(j) documents establishing that each Additional Ship is managed by the Approved Manager;

(k) a letter of undertaking executed by the Approved Manager in favour of the Lender in the terms required by the Lender agreeing certain matters in relation to the management of each Additional Ship and subordinating the rights of the Approved Manager against that Additional Ship and the Additional Owner owning that Additional Ship to the rights of the Lender under the Finance Documents;

(1) copies of ISM DOC and SMC and the International Ship Security Certificate under the ISPS Code in respect of each Additional Ship;

5

(m) each Additional Ship maintains the highest available class with such first-class classification society which is a member of the IACS as the Lender may approve free of all recommendations and conditions of such classification society;

(n) evidence that each Additional Owner is a direct or indirect subsidiary of the Corporate Guarantor;

(o) certified copies of all documents (with a certified translation if an original is not in English) evidencing any other necessary action, approvals or consents with respect to this Second Supplemental Agreement and the Additional Finance Documents (including without limitation) all necessary governmental and other official approvals and consents in such pertinent jurisdictions as the Lender deems appropriate;

(p) such legal opinions as the Lender may require in respect of the matters contained in this Second Supplemental Agreement and the Additional Finance Documents and the Mortgage Addenda; and

(q) evidence that the agent referred to in Clause 9.4 has accepted its appointment as agent for service of process under this Second Supplemental Agreement and the Additional Finance Documents.

5 VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS

5.1 In consideration of the agreement of the Lender contained in Clause 3.1 of this Second Supplemental Agreement the Borrowers hereby agree with the Lender that upon satisfaction of the conditions referred to in Clause 4.1, the provisions of the Loan Agreement, the New Guarantee and the Guarantee shall be varied and/or amended and/or supplemented as follows:

(a) by inserting in clause 1.1 of the Loan Agreement the definitions of “Additional Guarantee”, “Additional Charterparty Assignment”, “Additional Owner”, “Additional Ships, “Boone”, “Deposit Account”, “Deposit Account Pledge”, “Iokasti”, “Mortgage Addendum”, “Original Ship”, “PACHINO” and “SAMATAN” set out in Clause 1.2 of this Second Supplemental Agreement;

(b) the definition of, and references throughout each of the Finance Documents to, the Mortgage relevant to each Original Ship, shall be construed as if the same referred to that Mortgage as amended and supplemented by the relevant Mortgage Addendum;

(c) by adding the following new paragraphs (e) and (f) in the definition of “Account” contained in clause 1.1 of the Loan Agreement;

“(e) in the case of “SAMATAN”, an earnings account in the name of Boone with the Lender designated “Boone Star Owners Inc. - Earnings Account; and

(f) in the case of “PACHINO”, an earnings account in the name of Iokasti with the Lender designated “Iokasti Shipping Company Limited - Earnings Account”;”;

(d) by adding the following new definitions of “Owner” and Relevant Charter in clause 1.1 of the Loan Agreement:

““Owner” means each of the Additional Owners and the New Owner and, in the plural, means all of them;

“Relevant Charter” has the meaning given to it in Clause 14.3;”;

6

(e) by deleting the word “and” after the words “Documents;” in sub-paragraph (k) in the definition of “Finance Documents” in clause 1.1 of the Loan Agreement;

(f) by adding the following new paragraphs (1), (m) and (n) in the definition of “Finance Documents” in clause 1.1 of the Loan Agreement:

“(1) the Additional Guarantees;

(m) any Additional Charterparty Assignment;

(n) the Deposit Account Pledge; and”;

(g) by redesignating the existing sub-paragraph (1) of the definition of “Finance Documents” in clause 1.1 thereof as a new sub-paragraph (n);

(h) by deleting the words “New Owner” after the words “the Corporate Guarantor” and replacing them with the words “, the Owners” in the definition of “Security Party” in clause 1.1 of the Loan Agreement;

(i) by deleting in the definition of “Ship” contained in clause 1.1 of the Loan Agreement and substituting the same with the following:

““Ships” means, together, the Original Ships and the Additional Ships and, in the singular, means any of them;”;

(j) by adding the words “or, as the case may be, Owner” after the words “Borrower” in:

(i) the second line of the definition of “Account Pledge” in clause 1.1 of the Loan Agreement;

(ii) the second line of the definition of “Approved Charter” in clause 1.1 of the Loan Agreement;

(iii) the fifth line of the definition of “Approved Manager’s Undertaking” in clause 1.1 of the Loan Agreement;

(iv) the second line of the definition of “Charter Assignment” in clause 1.1 of the Loan Agreement;

(v) the second line of sub-paragraph (a) in the definition of “Earnings” in clause 1.1 of the Loan Agreement;

(vi) the third line of the definition of “General Assignment” in clause 1.1 of the Loan Agreement; and

(vii) in the second line of clause 18.1 (k) of the Loan Agreement.

(k) by deleting the words “New Owner” and replacing them with the words “, the Owners” after the word “Ship” in:

(i) the fifth line of sub-paragraph (e) of the definition of “Permitted Security Interests” in clause 1.1 of the Loan Agreement;

(ii) the second line of sub-paragraph (b)(ii) of the definition of “Total Loss Date” in clause 1.1 of the Loan Agreement; and

7

(iii) the second line of the definition of “obligatory insurances” in clause 1.2 of the Loan Agreement;

(1) by deleting the definition of “Margin” in clause 1.1 of the Loan Agreement and replacing it with the following new definition:

““Margin” means:

(a) during the period commencing on 1 April 2009 and ending on the last day of the Waiver Period, 2 per cent, per annum; and

(b) at all times thereafter and subject to the terms of Clause 4.10, 1.5 per cent per annum;”;

(m) by deleting clauses 4.4 to 4.12 (inclusive) of the Loan Agreement and replacing them with the following new clauses:

“4.4 Notification of market disruption. The Lender shall promptly notify the Borrowers if:

(a) no rate is quoted on Reuters BBA Page LIBOR 01; or

(b) for any reason the Lender is unable to obtain Dollars in the London Interbank Market in order to fund or continue to fund the Loan (or any part thereof) during any Interest Period; or

(c) LIBOR for that Interest Period does not adequately reflect the Lender’s cost of funding for that Interest Period.

4.5 Suspension of drawdown. If the Lender’s notice under Clause 4.4 is served before the Loan is made, the Lender’s obligation to make the Loan shall be suspended while the circumstances referred to in the Lender’s notice continue.

4.6 Application of alternative rate of interest. Following the service of a notice by the Lender pursuant to Clause 4.4, but before the commencement of the Interest Period to which that notice relates, the Lender shall have the right to:

(a) reduce (in its sole discretion) the duration of the Interest Period selected by the Borrowers, unless a shorter period is not available in which case the Lender shall have the right to amend (in its sole discretion) the duration of the Interest Period selected by the Borrowers; and/or

(b) determine (in its sole discretion) the relevant rate of interest which shall apply to the Loan during that Interest Period and which shall be the aggregate of (i) the applicable Margin and (ii) either:

(i) the arithmetic mean of the rates per annum offered, on the relevant Quotation Date, for deposits in Dollars for a period equal to, or as near as possible to, the relevant Interest Period which appear on the electronic pages (together, the “Applicable Screen Rates”) of (aa) KLIEMM (Carl Kliem GmbH), (bb) USDDEPO=ICAP (leap Plc) and (cc) USDDEPO=TTLK (Tullet Prebon Plc) on the Reuters Money News Services or

(ii) if:

(A) for any reason, there are no Applicable Screen Rates available on the relevant Quotation Date; or

8

(B) the Applicable Screen Rates (or any of them) do not reflect the rates given in the interbank market on that Quotation Date,

the rate per annum, expressed as a percentage, which reflects the cost to the Lender of funding the Loan (or any part thereof) during that Interest Period from whichever alternative sources are available to the Lender (and as it may select in its sole discretion) in Dollars or in any available currency,

(the “Alternative Rate”)

The Lender shall promptly notify the Borrowers in writing of any Alternative Rate and any change to the Interest Period selected initially by the Borrower arising through the operation of this Clause 4.6.

4.7 Negotiation of alternative basis for funding. If the Borrowers do not agree with the Alternative Rate they shall notify the Lender in writing not later than 2 days after the date on which the Lender serves its notice pursuant to Clause 4.6. The Borrowers and the Lender shall use reasonable endeavours to agree, within 10 days after the date on which the Borrowers serve their notice of objection to the Alternative Rate (the “Negotiation Period”), an alternative basis (including, but not limited to, an alternative interest period, funding in an alternative currency or currencies and an alternative margin which, for the avoidance of doubt, shall reflect the Lender’s cost of funding) for the Lender to continue to fund the Loan during the Interest Period concerned.

4.8 Application of alternative rate of interest. Any Alternative Rate or an alternative basis for the Lender to continue to fund the Loan shall take effect in accordance with the terms notified by the Lender pursuant to Clause 4.6 or, as the case may be, upon the terms agreed pursuant to Clause 4.7. The alternative basis shall continue to apply if the relevant circumstances are continuing at the end of the applicable Interest Period (in the case of the Alternative Rate) or interest period so set by the Lender (in each other case) and for so long as the Lender and the Borrowers are in agreement as to the alternative basis for funding.

4.9 Prepayment. If the Borrowers do not agree with the Interest Period and/or Alternative Rate set by the Lender pursuant to Clause 4.6 and an alternative basis for funding the Loan (or any part thereof) is not agreed pursuant to Clause 4.7 within the Negotiation Period, the Borrowers shall prepay the Loan upon demand by the Lender together with all accrued interest thereon at the applicable rate plus the applicable Margin.

4.10 Application of Margin. The Margin shall be reduced at the end of the Waiver Period to 1.5 per cent, per annum and shall at all times thereafter remain at such rate Provided that:

(a) no Event of Default or Potential Event of Default has occurred; and

(b) the Borrowers are in compliance with the terms of Clause 14.1.”;

(n) by deleting the number “1,” at the beginning of clause 5.2(a) of the Loan Agreement;

9

(o) by deleting clause 7.7 of the Loan Agreement and substituting the same with the following:

“7.7 Mandatory prepayment. The Borrowers shall be obliged to prepay (I) the Relevant Amount if an Original Ship is sold or becomes a Total Loss during the Waiver Period or (2) the Relevant Fraction of the Loan if an Original Ship is sold or becomes a Total Loss at any other time:

(a) if an Original Ship is sold, on or before the date on which the sale is completed by delivery of such Ship to the buyer; or

(b) if an Original Ship becomes a Total Loss, on the earlier of the date falling 180 days after the Total Loss Date and the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss,

and in this Clause 7.7:

“Relevant Amount” means, in relation to an Original Ship which has been sold or become a Total Loss during the Waiver Period, an amount equal to the whole of the sale or insurance proceeds relating to the Total Loss of that Original Ship; and

“Relevant Fraction” is a fraction whose:

(i) numerator is the Market Value of the Original Ship being sold or which has become a Total Loss on the date on which such sale is completed or (as the case may be) the date on which the Total Loss occurred; and

(ii) denominator is the aggregate Market Value of all the Original Ships on the date on which the relevant Original Ship which is subject to a Mortgage is sold or becomes a Total Loss;”

(p) by adding the words “or, in the case of an Additional Owner, an Additional Charterparty Assignment” after the word “Assignment” in the third line of clause 10.16 of the Loan Agreement;

(q) by adding new clauses 10.17 and 10.18 in the Loan Agreement as follows:

“10.17 Information on Relevant Charter. The Borrowers shall, and shall procure that each Owner shall, immediately inform the Lender if the charterer which has entered into a Relevant Charter with that Borrower or, as the case may be, Owner is in breach of its obligations under that Relevant Charter.

10.18 No amendment to Relevant Charter etc. No Borrower or, as the case may be, Owner will agree to any amendment or supplement to, or waive or fail to enforce the Relevant Charter to which it is or will become a party or any of its provisions.”;

(r) by adding the following new sub-paragraph (g) in clause 11.3 of the Loan Agreement:

“(g) during the period 31 December 2008 to 31 December 2009, pay any dividends or make any other form of distribution (other than any dividends which are distributed in the form of shares);”;

(s) by adding the words “at any time (other than during the Waiver Period)” after the word “Borrowers” in the second line of clause 14.1 of the Loan Agreement;

(t) by deleting clause 14.3 of the Loan Agreement and substituting the same as follows:

“14.3 Valuation of Ships. The Market Value of a Ship at any date is that shown by a valuation prepared:

(a) as at a date not more than 14 days previously;

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(b) by an independent sale and purchase shipbroker which the Lender has appointed and the Borrower has approved (such approval not to be unreasonably withheld) for the purpose;

(c) with or without physical inspection of the relevant Ship (as the Lender may require);

(d) on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms as between a willing seller and a willing buyer;

(e) free of any existing charter or other contract of employment (other than:

(i) in the case of a Ship, any Relevant Charter to which that Ship may be subject and which has an unexpired duration of at least 11 months; and

(ii) in the case of a Fleet Vessel, any charterparty to which that Fleet Vessel may be subject, which is made between the owner of that Fleet Vessel and a charterer acceptable to the Lender and has an unexpired duration of at least 11 months,

in which case such Relevant Charter or, as the case may be, charterparty, shall be taken into account in determining the Market Value of the relevant Ship Provided that, in the case of a Relevant Charter, the Lender is satisfied that the parties to such Relevant Charter are in full compliance with the terms thereof); and

(f) after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale.

In this Clause 14.3 “Relevant Charter” means, in relation to a Ship, any time charter party in respect of that Ship entered into by the relevant Borrower or, as the case may be, Owner and a charterer in all respects acceptable to the Lender, exceeding or which, by virtue of any optional extensions is capable of exceeding, 11 months in duration (as the same may be amended or supplemented from time to time) on terms and substance in all respects acceptable to the Lender.”;

(u) by deleting clause 14.6 of the Loan Agreement and substituting the same as follows:

“14.6 Frequency of valuation. The Borrowers acknowledge and agree that the Lender may commission a valuation of each Ship:

(a) at the end of each 3-month period ending on 31 March, 30 June, 30 September and 31 December in each year;

(b) if the Lender provides its consent pursuant to Clause 10.18 in respect of any amendment and/or variation of a Relevant Charter, immediately after such amendment and/or variation has been effected, and

(c) at any other time as the Lender may determine (including, but not limited to, if, in the opinion of the Lender, any charterer in respect of a Relevant Charter is not in compliance with the terms of that Relevant Charter) in its absolutely discretion.”;

11

(v) by adding the words “(other than during the period 31 December 2008 to 31 December 2009)” after the words “financial year” in the second line of clause 11.11(b) of the Corporate Guarantee;

(w) by deleting clause 11.11(d) of the Corporate Guarantee in its entirety;

(x) by adding the words “(other than any reorganisation, spin-off, redomiciliation or transfer of ownership of the Guarantor (i) in respect of any corporate entity whose business primarily consists of activities in the oil and gas sector and is a subsidiary of the Guarantor and (ii) which will (A) include the transfer of any Security Interest currently existing in respect of or registered over such corporate entity or any of its assets (other than any Security Interest created or registered in connection with any guarantee which has been executed by the Guarantor securing such entity’s obligations under an existing loan agreement to which such entity is a borrower), (B) be made on terms consistent with the conditions applying in the international debt and equity markets on the date of such reorganisation, spin-off, redomiciliation or transfer, (C) not create any Financial Indebtedness (other than any Financial Indebtedness which may occur in connection with any guarantee which has or will be executed by the Guarantor securing such entity’s obligations under a loan agreement to which such entity is or will be a borrower) to, or any Security Interest over, the assets (or any of them) of, the Guarantor or the Group and (D) not cause any material adverse change in the financial position, state of affairs or prospects of the Guarantor or the Group)” after the words “reorganisation” in the second line of clause 11.14 of the Corporate Guarantee;

(y) by adding the first line of clause 11.15 of the Corporate Guarantee after the word “that the words “(other than during the Waiver Period subject to no Event of Default being in existence at the relevant time)”;

(z) by adding a new clause 11.4 in the Loan Agreement as follows:

“11.4 Minimum Liquidity. The Borrower shall ensure that at all times during the Waiver Period the credit balance on the Deposit Account shall be at least equal to the Minimum Deposit”;

(aa) by adding a new clause 11.18 in the Corporate Guarantee as follows:

“11.18 Minimum Liquidity”. The Guarantor shall ensure that at all times during the Waiver Period the credit balance on the Deposit Account shall be at least equal to the Minimum Deposit”;

(bb) by construing all references therein to “this Agreement” where the context admits as being references to “this Agreement as the same is amended and supplemented by this Second Supplemental Agreement and as the same may from time to time be further supplemented and/or amended”; and

(cc) by construing references to each of the Finance Documents as being references to each such document as it is from time to time supplemented and/or amended.

5.2 Amendments to Finance Documents. With effect on and from the date of this Second Supplemental Agreement each of the Finance Documents other than the Loan Agreement shall be, and shall be deemed by this Agreement to have been, amended as follows:

(a) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement and any of the other Finance Documents shall be construed as if the same referred to the Loan Agreement and those Finance Documents as amended and supplemented by this Second Supplemental Agreement; and

12

(b) by construing references throughout each of the Finance Documents to “this Agreement”, “this Deed”, “hereunder and other like expressions as if the same referred to such Finance Documents as amended and supplemented by this Second Supplemental Agreement.

5.3 Finance Documents to remain in full force and effect. The Finance Documents shall remain in full force and effect as amended and supplemented by:

(a) the amendments to the Finance Documents contained or referred to in Clauses 5.1 and 5.2; and

(b) such further or consequential modifications as may be necessary to make the same consistent with, and to give full effect to, the terms of this Second Supplemental Agreement.

6 CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS

Save for the alterations to the Loan Agreement made or to be made pursuant to this Second Supplemental Agreement and such further modifications (if any) thereto as may be necessary to make the same consistent with the terms of this Second Supplemental Agreement, the Loan Agreement shall remain in full force and effect and the security constituted by the security Documents shall continue and remain valid and enforceable.

7 EXPENSES

The Borrowers agree to pay to the Lender upon demand and from time to time all costs, charges and expenses (including legal fees) incurred by the Lender in connection with the preparation, negotiation, execution and (if required) registration or preservation of rights under the enforcement or attempted enforcement thereof, this Second Supplemental Agreement and the Finance Documents or otherwise in connection with the Loan or any part of thereof. Without prejudice to the foregoing, the Borrowers hereby irrevocably authorise the Lender to debit any of the Accounts with the amount necessary to settle the Lender’s lawyers’ legal fees and disbursements.

8 NOTICES

The provisions of Clause 27 (Notices) of the Loan Agreement shall apply to this Second Supplemental Agreement as if the same were set out herein in full.

9 APPLICABLE LAW

9.1 This Second Supplemental Agreement shall be governed by and construed in accordance with English law.

9.2 Subject to Clause 9.3, the courts of England shall have exclusive jurisdiction to settle any Disputes which may arise out of or in connection with this Second Supplemental Agreement.

9.3 Clause 9.2 is for the exclusive benefit of the Lender which reserves the right:

(a) to commence proceedings in relation to any matter which arises out of or in connection with this Second Supplemental Agreement in the courts of any country other than England and which have or claim jurisdiction to that matter; and

(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

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None of the Borrowers shall commence any proceedings in any country other than England in relation to a matter which arises out of or in connection with this Second Supplemental Agreement.

9.4 Each Borrower irrevocably appoints Ince Process Agents Ltd. for the time being presently of 5th Floor, International House, 1 St. Katharine’s Way, London E1W 1AY, England for the time being to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this Second Supplemental Agreement.

9.5 Nothing in this Clause 9 shall exclude or limit any right which the Lender may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

9.6 In this Clause 9, “proceedings” means proceedings of any kind, including an application for a provisional or protective measure.

IN WITNESS WHEREOF the parties hereto have caused this Second Supplemental Agreement to be duly executed the day and year first above written.

BORROWERS

SIGNED by	)	/s/ Alexandros Mylonas
	)
for and on behalf of	)
ANNAPOLIS SHIPPING COMPANY LIMITED	)
in the presence of:	)
/s/ Pat Skala
PAT SKALA
WATSON, FARLEY & WILLIAMS
89 AKTI MIAOULI
PIRAEUS 185 38 - GREECE
SIGNED by	)	/s/ Alexandros Mylonas
	)
for and on behalf of	)
FARAT SHIPPING COMPANY LIMITED	)
in the presence of:	)
/s/ Pat Skala
PAT SKALA
WATSON, FARLEY & WILLIAMS
89 AKTI MIAOULI
PIRAEUS 185 38 - GREECE
SIGNED by	)	/s/ Alexandros Mylonas
	)
for and on behalf of	)
LANSAT SHIPPING COMPANY LIMITED	)
in the presence of:	)
LENDER
/s/ Pat Skala
PAT SKALA
WATSON, FARLEY & WILLIAMS
89 AKTI MIAOULI
PIRAEUS 185 38 - GREECE

14

SIGNED by	)
	)	/s/ Jason Dallas
for and on behalf of	)	/s/ Krikor Janikian
PIRAEUS BANK A.E.	)
in the presence of:	)

15

COUNTERSIGNED this 30 July 2009 by each of Dryships Inc. and Lotis Traders Inc which, by its execution hereof confirms and acknowledges that it has read and understood the terms and conditions of the above Second Supplemental Agreement, that it agrees in all respects to the same and that the Finance Documents to which each is a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrowers under the Loan Agreement.

/s/ Alexandros Mylonas

for and on behalf of

DRYSHIPS INC.

/s/ Alexandros Mylonas

for and on behalf of

LOTIS TRADERS INC.

Dated 30 July 2009

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EX-4.38

Exhibit 4.38

Commerzbank AG, Postfach, 20349 Hamburg	Global Banking  |  Asset Finance
	Maritime Transportation & Logistics
Dalian Star Owners Inc. c/o Cardiff Marine Inc.	Jan H. Meyer
Mr. Aris Ioannidis and Mr. Dimitrios Glynos 80, Kifissias Avenue 15125 Amaroussion Greece	Postanschrift: Postfach, 20349 Hamburg Geschäftsräume: Jungfernsueg 22. 20354 Hamburg Telefon +49 (0)40 3501-3178 Fax    +49 (0)40 3501-2287 jan.meyer@commerzbank.com

22. October 2009

Loan Agreement dd. 05.05.2009 for the vessel MYSTIC

Waiver Terms

Dear Mr. Ioannidis, dear Mr. Glynos,

Referring to the Loan Agreement dated 05.05.2009 to finance the Capesize vessel MYSTIC, the intensive discussions we had with each other during the past months and the indicative waiver terms signed by Dalian Star Owners Inc. and DryShips Inc. dated 24.09.2009, we are glad to inform you that the Lenders, both WestLB and Commerzbank, have received their formal credit approvals for the Waiver Terms as outlined below:

1. Waiver Period

From February 12, 2009 to and including September 30, 2010 or earlier if all original covenants of the Loan Agreement and the Guarantee are fully back in compliance.

2. Increase of Margin

Starting on October 1^st, 2009, until the end of the Waiver Period the Margin shall be increased to 1.85% p.a.

3. Restructuring Fee

For the restructuring of the Loan, a Restructuring Fee will be charged amounting to USD 100,000, payable upon signing of the Waiver Terms.

Vorsitzender des Aufsichtsrats: Klaus-Peter Müller	Commerzbank Aktlengesellschaft, Frankfurt am Main
Vorstand: Martin Blessing (Vorsitzender),	Handelsregister: Amtsgericht Frankfurt am Main, HRB 32000
Frank Annuscheit, Markus Beumer, Achim Kassow, Jochen Klösges,	USi-ldNr.: DE114 103 514
Michael Reuther, Stefan Schmittmann, Ulrich Sleber, Eric Strutz

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	Maritime Transportation & Logistics

4. Waiver

Clauses 4.a until 4.d shall be in place until the end of the Waiver Period:

(a) Financial Covenants (Clause 11.16)

(i) Market Adjusted Equity Ratio

From December 22, 2008 to and including June 30, 2009 the Market Adjusted Equity Ratio shall be not less than zero per cent (0%). From July 1, 2009 until the end of the Waiver Period the Market Adjusted Equity Ratio shall not be less than 0.15:1. Temporary fluctuations may lead to a Market Adjusted Equity Ratio not less than 0.05:1.

For the duration of the Waiver Period new interest bearing liabilities to be used only to (i) prepay secured debt and/or (ii) finance New Investments and Permitted Investments, provided that the resulting equity portion of New Investments and Permitted Investments shall not be lower than thirty-two point five (32.5) percent.

(ii) Interest Coverage Ratio

For the duration of the Waiver Period the Interest Coverage Ratio shall not be less than 2:1.

(iii) Market Value Adjusted Net Worth

From February 12, 2009 to and including June 30, 2009 the Market Adjusted Net Worth shall be not less than zero (0). From July 1, 2009 until the end of the Waiver Period the Market Value Adjusted Net Worth of the Group shall not be less than

• $ 100,000,000 for the period July 1, 2009 until December 31, 2009; and thereafter

• $ 150,000,000 plus 100% of the net quarterly profits of DryShips Inc. in the financial year 2010, until September 30, 2010.

(b) Disposal of assets/spin-off of the offshore business of the Guarantor

The Guarantor shall only be allowed to dispose any of its assets on an arm’s-length basis. The Guarantor will not spin-off of or otherwise dispose of the offshore business of the Group (“the Spin-Off”) unless that the following conditions are met:

(i) DryShips to maintain $ 80,000,000 cash (including any amount standing to the credit of the Applicable Amount Account) after the Spin-Off; and

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	Maritime Transportation & Logistics

(ii) DryShips Inc. will be released from all obligations relating to the offshore business of the Group including the $ 800,000,000 acquisition financing of Ocean Rig ASA but except DryShips Inc.’s credit support guarantee for the pre- and post-delivery financing of the drill ship newbuildings hull nos. 1865 and 1866 arranged by Deutsche Bank AG.

(iii) DryShips Inc. to secure latest six months prior to delivery a cash break-even employment contract (i.e. operating expenses and debt service fully covered) for at least two (2) years for the drill ship newbuildings hull nos. 1865 and 1866 (please note: this is a condition subsequent to the Waiver i.e. such condition does not need to be fulfilled upon the effective date of the Waiver).

(iv) DryShips Inc. must use its best endeavours to be released from its guarantee obligations for newbuildings hull nos. 1865 and 1866 for the pre- and post-delivery facility period.

(c) No cash dividend payments (Clause 11.15) or any other return of capital to shareholders including stock buyback or any other form of distribution effective from the date of the amendment to the end of the Waiver Period. In relation to the spin-off of the offshore business of the Group the conditions under above mentioned waiver clause 4 (b) apply.

(d) No further investments or capital expenditure by the Borrower or Guarantor allowed during the Waiver Period (other than that used for the maintenance of vessels in the normal course of business) without the consent of the Lenders, unless the equity used for such investments or expenditure has been raised from the proceeds of equity offerings.

(e) Minimum security cover (Clause 15.1; Market Value divided by Loan and Swap Exposure; taking into account any cash held at the Retention Account) shall not be less than

(i)	From now on until 31.12.2010	80%
(ii)	On 01.01.2011 and thereafter until 30.06.2011	111%
(iii)	On 01.07.2011 and thereafter:	125%	(according to the
			Loan Agreement)

(f) The Borrower and the Guarantor will provide monthly updated cash flow statements

Commerzbank AG

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	Maritime Transportation & Logistics

5. Retention Account and Excess Cash Flow Clause

(a) The Borrower must ensure that all charter earnings remain at a Retention Account set up with the Agent until the payment of the next instalment due on 29.12.2009.

(b) Following the next repayment instalment, amounting to USD 10,000,000, due on 29.12.2009, the Borrower shall only dispose of an amount exceeding USD 3,000,000 to be held at the Retention Account (Excess Cash Flow Clause),

6. Notice of Assignment

The Borrower to sign the “Notice of Assignment to Charterer” (the draft has already been provided to the Borrower). The Lenders agree not to send the “Notice of Assignment to Charterer” unless (i) an Event of Default occurs or (ii) the Borrower is not in compliance with the Retention Account and/or the Excess Cash Flow Clause.

7. Pari Passu Ranking

The Guarantor shall procure that its liabilities under the Guarantee do and will rank at least pari passu with all its other present and future liabilities, except for liabilities which are mandatorily preferred by law.

Please note that these Waiver Terms are only binding until 30.10.2009. We kindly ask you to revert the signed copy of the Waiver Terms by e-mail and by fax message so that we can instruct the law firm Watson, Farley & Williams to conduct the documentation work.

Kind regards
Commerzbank AG
/s/ Holger Ferber	/s/ Jan H. Meyer
Holger Ferber	Jan H. Meyer

We agree with the Waiver Terms.
/s/ Illegible	/s/ Illegible
Dalian Star Owners Inc. as Borrower	DryShips Inc. as Guarantor
Date / City:	Date / City:

EX-4.44

Exhibit 4.44

DATED 25 FEBRUARY 2010

IONIAN TRADERS INC,

NORWALK STAR OWNERS INC.

(as Borrowers)

-and-

DRYSHIPS INC.

(as Guarantor)

-and-

DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT

UNICREDIT BANK AG

(as Lenders)

-and-

DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT

(as agent)

-and-

DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT

UNICREDIT BANK AG

(as Swap Providers)

-and-

DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT

(as Security Agent)

FIRST SUPPLEMENTAL AGREEMENT TO SECURED

LOAN FACILITY AGREEMENT DATED 13 MAY 2008

STEPHENSON HARWOOD

Piraeus Office

Ariston Building

2 Filellinon Street and Akti Miaouli

Piraeus 185 36, Greece

Tel:+30 210 4295 160

Fax: +30 210 4295 166

Ref: F09.242

CONTENTS

	Page
1       Interpretation	2
2       Conditions	4
3       Representations and Warranties	6
4       Amendments to Loan Agreement	6
5       Confirmation and Undertaking	18
6       Communications, Law and Jurisdiction	18
Schedule 1 The Lenders, the Commitments and the Swap Providers	19
Schedule 2 Effective Date Confirmation	20

SUPPLEMENTAL AGREEMENT

Dated: 25 February 2010

BETWEEN:

(1) NORWALK STAR OWNERS INC. (“Norwalk”), and IONIAN TRADERS INC. (“Ionian”), both companies incorporated under the laws of the Republic of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960, (together the “Borrowers” and each a “Borrower”) jointly and severally; and

(2) DRYSHIPS INC., a company incorporated according to the law of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960; and

(4) DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT, acting as lender through its office at 17, Domshof, 28195, Bremen, Federal Republic of Germany and UNICREDIT BANK AG (formerly known as Bayerische Hypo- und Vereinsbank AG), of Kardinal-Faulhaber-Strasse 1, 8033 Munich, acting as lender through its office at Alter Wall 22, D-20457 Hamburg, Federal Republic of Germany (together the “Lenders” and each a “Lender”); and

(5) DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT, acting as agent through its office at 17, Domshof, 28195, Bremen, Federal Republic of Germany (in that capacity the “Agent”); and

(6) DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT, acting as swap provider through its office at 17, Domshof, 28195, Bremen, Federal Republic of Germany and UNICREDIT BANK AG (formerly known as Bayerische Hypo- und Vereinsbank AG), of Kardinal-Faulhaber-Strasse 1, 8033 Munich, acting as swap provider through its office at Alter Wall 22, D-20457 Hamburg, Federal Republic of Germany (together, the “Swap Provider” and each a “Swap Provider”); and

(7) DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT, acting as security agent through its office at 17, Domshof, 28195, Bremen, Federal Republic of Germany (in that capacity the “Security Agent”).

SUPPLEMENTAL TO a secured loan agreement dated 13 May 2008 (the “Loan Agreement”) made between the Borrower, the Lenders, the Agent, the Swap Providers and the Security Agent on the terms and subject to the conditions of which each of the Lenders has agreed to advance to the Borrowers on a joint and several basis its Commitment (aggregating, with all the other Commitments, an amount not exceeding the lesser of (i) $125,000,000 and (ii) sixty per cent (60%) of the Fair Market Value on the Drawdown Date) to assist the Borrowers to finance part of the aggregate Purchase Price of the Vessels (the “Loan”).

WHEREAS:

(A) (i) The Guarantor is currently in breach of the financial covenants as set out in clause 6.6 of the Guarantee and (ii) the Borrowers are currently in breach of clauses 10.4 (Additional security) and 12.2 of the Loan Agreement.

(B) The Borrowers and the Guarantor have requested that the Lenders agree to amend the requirements in clauses 10.4 (Additional security) and 12.2 of the Loan Agreement clause 6.6 of the Guarantee during the Waiver Period.

(C) The Lenders are willing to agree to all the foregoing subject to the terms and conditions set forth in this Supplemental Agreement, including, but not limited to, the amendments to be made to the Loan Agreement and the Guarantee in accordance with the terms and conditions contained herein.

IT IS AGREED THAT:

1 Interpretation

1.1 In this Supplemental Agreement:-

“Additional Security Documents” means the Account Pledge, the Mortgage Amendments and this Supplemental Agreement.

“Account Pledge” means the account pledge to be granted by each Borrower in favour of the Security Agent in respect of each Earnings Account.

“Charter” means:-

(i) in respect of “POSITANO” the time charterparty dated 3 September 2008 made between Ionian, as owner and a Charterer, as charterer (as same may be supplemented, novated and/or replaced from time to time); and

2

(ii) in respect of “CAPRI” the time charterparty dated 6 May 2008 made between Norwalk, as owner and a Charterer, as charterer (as same may be supplemented, novated and/or replaced from time to time),

or any other charter or contract of employment in relation to a Vessel in each case, in form and substance acceptable to the Lenders and “Charters” means both of them.

“Charterer” means a charterer who may enter into a Charter in respect of a Vessel and “Charterers” means both of them.

“Earnings Accounts” means the bank accounts opened in the names of the Borrowers with the Agent and designated respectively “Ionian Traders Inc.—Earnings Account” and “Norwalk Star Owners Inc.—Earnings Account” and each an “Earnings Account”.

“Effective Date” means the date on which the Agent confirms to the Borrower in writing substantially in the form set out in Schedule 2 that all of the conditions referred to in Clause 2.1 have been satisfied, which confirmation the Agent shall be under no obligation to give if an Event of Default shall have occurred.

“Finance Parties” means the Agent, the Security Agent, the Swap Providers and the Lenders.

“Mortgage Amendments” means the amendments to the Mortgages in favour of the Security Agent in such form and containing such terms and conditions as the Security Agent shall require, and “Mortgage Amendment” means any one of them.

“Security Parties” means all parties to this Supplemental Agreement other than the Finance Parties.

“Waiver Period” means the period commencing on 1 January 2009 and expiring at midnight 31 December 2010.

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1.2 All words and expressions defined in the Loan Agreement shall have the same meaning when used in this Supplemental Agreement unless the context otherwise requires, and clause 1.2 of the Loan Agreement shall apply to the interpretation of this Supplemental Agreement as if it were set out in full.

1.3 All obligations, representations, warranties, covenants and undertakings of the Borrowers under or pursuant to this Supplemental Agreement shall, unless otherwise expressly provided, be entered into, made or given by them jointly and severally.

2 Conditions

2.1 As conditions for the agreement of the Finance Parties to the requests specified in Recital (B) above and for the effectiveness of Clause 4, the Borrower shall deliver or cause to be delivered to or to the order of the Agent the following documents and evidence:

2.1.1 a certificate from a duly authorised officer of each of the Security Parties confirming that none of the documents delivered to the Agent pursuant to Schedule 2, Part I, 1 (a), (c), (d), (g) of the Loan Agreement have been amended or modified in any way since the date of their delivery to the Agent, or copies, certified by a duly authorised officer of the Security Party in question as true, complete, accurate and neither amended nor revoked, of any which have been amended or modified;

2.1.2 a copy, certified by a director or the secretary of the Security Party in question as true, complete and accurate and neither amended nor revoked, of a resolution of the directors of each Security Party and a resolution of the shareholders of each Borrower (together, where appropriate, with signed waivers of notice of any directors’ or shareholders’ meetings) approving, and authorising or ratifying the execution of, this Supplemental Agreement and any document to be executed by that Security Party pursuant to this Supplemental Agreement;

2.1.3 a notarially attested and legalised power of attorney of each of the Security Parties under which this Supplemental Agreement and any documents required pursuant to it are to be executed by that Security Party;

4

2.1.4 a certificate of goodstanding in respect of each Security Party;

2.1.5 the Additional Security Documents, duly executed and, in the case of the Amendment Mortgage, registered against the Vessel with first priority, together with all other documents required by any of them, including, without limitation, all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients.

2.1.6 a legal opinion, in draft form, of the legal advisers to the Lenders in each relevant jurisdiction, substantially in the form or forms provided to the Agent prior to signing this Agreement or confirmation satisfactory to the Agent that such an opinion will be given;

2.1.7 the Charters;

2.1.8 evidence of payment to the Agent (for the account of the Lenders) of an amendment fee of one hundred and twenty five thousand Dollars ($125,000); and

2.1.9 evidence of payment to the Agent (for the account of the Lenders) of the difference between the interest payable calculated on the basis of the Margin applicable during the Waiver Period (being 1.9% per annum) and the interest actually paid and calculated on the basis of the Margin applicable during all other times during the Facility Period (being 1.15% per annum) for the period commencing on 1 January 2009 and ending on the Effective Date.

2.2 All documents and evidence delivered to the Agent pursuant to this Clause shall:

2.2.1 be in form and substance acceptable to the Agent;

2.2.2 be accompanied, if required by the Agent, by translations into the English language, certified in a manner acceptable to the Agent; and

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

5

3 Representations and Warranties

Each of the representations and warranties contained in clause 11 of the Loan Agreement shall be deemed repeated by the Borrower at the date of this Supplemental Agreement and at the Effective Date, by reference to the facts and circumstances then pertaining, as if references to the Finance Documents included this Supplemental Agreement.

4 Amendments to Loan Agreement and the Guarantee

With effect from the Effective Date:

4.1 the following additional definitions shall be added in clause 1.1 of the Original Loan Agreement, and the alphabetical and numerical order of the remaining definitions in such clause shall be amended accordingly:-

“Additional Security Documents” means the Account Pledge, the Mortgage Amendments and this Supplemental Agreement.

“Account Pledge” means the account pledge to be granted by each Borrower in favour of the Security Agent in respect of each Earnings Account.

“Cash” means cash in hand which is not subject to any charge back or other Encumbrance and to which the Guarantor has free, immediate and direct access.

“Charter” means:-

(i) in respect of “POSITANO” the time charterparty dated 3 September 2008 made between Ionian, as owner and a Charterer, as charterer (as same may be supplemented, novated and/or replaced from time to time); and

(ii) in respect of “CAPRI” the time charterparty dated 6 May 2008 made between Norwalk, as owner and a Charterer, as charterer (as same may be supplemented, novated and/or replaced from time to time),

or any other charter or contract of employment in relation to a Vessel in each case, in form and substance acceptable to the Lenders,

“Charterers” means the charterers who may enter into a Charter in respect of a Vessel and “Charterer” means any one of them.

6

“Debt Service” means the aggregate (as of the date of calculation) of all obligations of a member of the Group then outstanding for the payment or repayment of principal plus interest thereon plus bareboat charter obligations owed by a member of the Group to any third party, as stated in the financial statements then most recently required to be delivered pursuant to Clause 12.1.1.

“Drillships 1837/1838” means the drillship newbuildings currently under construction at the yard of the Drillships Builder with hull number 1837, scheduled for delivery on December 2010 and hull number 1838, scheduled for delivery on March 2011 and “Drillship 1837/1838” means either of them.

“Drillships 1865/1866” means the drillship newbuildings currently under construction at the yard of the Drillships Builder with hull number 1865, scheduled for delivery on June 2011 and hull number 1866, scheduled for delivery on September 2011 and “Drillship 1865/1866” means either of them.

“Drillships Builder” means Samsung Heavy Industries Co., Ltd. of the Republic of Korea.

“Drillship Milestones” means the financing of the following instalments under the building contracts in relation to the Drillships 1837/1838:-

(a) to be arranged on or before 15 February 2010 in relation to the fourth instalment under the relevant building contract in respect of hull number 1837 in the amount of $110,422,472 due on 15 February 2010;

(b) to be arranged on or before 15 June 2010 in relation to the fourth instalment under the relevant building contract in respect of hull number 1838 in the amount of $110,422,472 due on 15 June 2010;

(c) to be arranged on or before 15 September 2010 in relation to the fifth (delivery) instalment under the relevant building contract in respect of hull number 1837 in the amount of $291,881,013 due on 15 December 2010; and

(d) to be arranged on or before 15 December 2010 in relation to the fifth (delivery) instalment under the relevant building contract in respect of hull number 1838 in the amount of $288,874,107 due on 15 March 2011.

7

Any of the above dates can be moved to a later date in accordance with any deferral of the relevant repayment instalments as may be agreed with the Drillships Builder PROVIDED THAT evidence of such agreement in form and substance acceptable to the Lenders are provided to the Agent not later than three (3) Business Days prior to the dates when the relevant instalments are due.

“Earnings Accounts” means the bank accounts opened in the names of the Borrowers with the Agent and designated respectively “Ionian Traders Inc.—Earnings Account” and “Norwalk Star Owners Inc.—Earnings Account” and each an “Earnings Account”.

“Employment Requirements” means in respect of each of the Drillships 1837/1838 an employment contract being in place not later than six (6) months prior to the delivery date of a Drillship 1837/1838, which covers fully that Drillship’s 1837/1838 Debt Service of a period of duration of at least three (3) years.

“First Supplemental Agreement” means the first supplemental agreement entered or to be entered into by and between the Borrowers, the Lenders, the Swap Providers, the Agent and the Security Agent.”

“Fleet Market Value” means the aggregate of the value of the Fleet Vessels based on the average of two valuations for each Fleet Vessel prima facie determined by a reputable, independent and first class firm of shipbrokers appointed by and reporting to the Agent on the basis of a charter-free sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing seller and a willing buyer.

“Fleet Vessels” means any vessel (including, without limitation, any drill-ships owned or ordered by any member of the Group) from time to time owned more than fifty per cent (50%) by any member of the Group.

“Group” means each of the Borrowers, the Guarantor and each of their direct or indirect Subsidiaries.

“Mortgage Amendments” means the amendments to the Mortgages in favour of the Security Agent in such form and containing such terms and conditions as the Security Agent shall require, and “Mortgage Amendment” means any one of them.

8

“New Investment” means any further investments or capital expenditure other than any Permitted Investments or the maintenance of the Fleet Vessels in the ordinary course of business, PROVIDED THAT:-

(a) the equity portion of any such further investments has been raised from proceeds of equity offerings; and

(b) the Guarantor maintains Cash in an amount not less than eighty million Dollars ($80,000,000); and

(c) any such investments shall be made on normal arms’ length terms and on terms consistent with the conditions applying in the applicable market at the relevant time.”

“Operating Expenses” means expenses properly and reasonably incurred by a member of the Group in connection with the operation, employment, maintenance, repair and insurance of a Fleet Vessel.

“Permitted Investments” means the building contracts relating to the newbuilding vessels:-

(a) the panamax bulk carriers m.v. “OLIVA” (ex hull number 1519A), delivered in August 2009 and registered under the flag of the Republic of Malta and m.v. “RAPALLO” (ex hull number 1518A), delivered in June 2009 and registered under the flag of the Republic of Malta;

(b) the Drillships 1865/1866; and

(c) the Drillships 1837/1838 PROVIDED THAT evidence in form and substance satisfactory to the Lenders has been provided that (i) the Drillships Milestones and (ii) the Employment Requirements are met.

“Subsidiaries” means any company or entity directly or indirectly controlled by such person, and for this purpose “control” means either the ownership of more than fifty per cent (50%) of the voting share capital (or equivalent rights of ownership) of such company or entity or the power to direct its policies and management, whether by contract or otherwise and “Subsidiary” means any one of them.

9

“Waiver Period” means the period commencing on 1 January 2009 and expiring at midnight 31 December 2010.

4.2 the definition of “Security Documents” set out in clause 1.1 of the Loan Agreement shall be amended so as to include the Additional Security Documents;

4.3 the definition of “Margin” set out in clause 1.1 of the Loan Agreement shall be deleted and replaced as follows:-

“Margin” means:-

(a) one point nine per cent (1 .9%) per annum during the Waiver Period; and

(b) one point one five per cent (1.15%) per annum at all other times during the Facility Period.

4.4 clause 5.1 of the Loan Agreement shall be deleted and replaced as follows:-

“5.1 Repayment of Loan The Borrowers agree to repay the Loan to the Agent for the account of the Lenders by thirty two (32) consecutive quarterly instalments the first ten (1^st- 10^th) such repayment instalments each in the sum of six million five hundred thousand Dollars ($6,500,000), the following twenty one (ll^th-31^st) such repayment instalments each in the sum of two million two hundred and fifty thousand Dollars ($2,250,000) and the thirty second (32^nd) and final such repayment instalment in the sum of twelve million seven hundred and fifty thousand Dollars ($12,750,000) (comprising an instalment of two million two hundred and fifty thousand Dollars ($2,250,000) and a balloon amount of ten million five hundred thousand Dollars ($10,500,000)), the first instalment falling due on the date which is three calendar months after the earlier to occur of the Second Drawdown Date and the Availability Termination Date and subsequent instalments falling due at consecutive intervals of three calendar months thereafter.”;

4.5 clause 10.4 of the Loan Agreement shall be deleted and replaced as follows:-

“10.4 Additional security If at any time the aggregate of the Fair Market Value of the Vessels and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by

10

appropriate advisers appointed by the Agent (in the case of other charged assets), and determined by the Agent in its discretion (in all other cases)) for the time being provided to the Security Agent under this Clause 10.4 is less than (a) seventy seven per cent (77%) of the Loan, for a period commencing from the beginning of the Waiver Period and ending on 30 June 2010 (inclusive), (b) ninety one per cent (91%) of the Loan, from a period commencing on 1 July 2010 and ending on the end of the Waiver Period, and (c) one hundred and twenty five per cent (125%) of the Loan, at all other times during the Facility Period, the Borrowers shall, within thirty (30) days of the Agent’s request, at the Borrowers’ option:

10.4.1 pay to the Security Agent or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Security Agent as additional security for the payment of the Indebtedness; or

10.4.2 give to the Security Agent other additional security in amount and form acceptable to the Security Agent in its discretion; or

10.4.3 prepay the amount of the Indebtedness which will ensure that the aggregate of the Fair Market Value of the Vessels and the value of any such additional security is not less than (a) seventy seven per cent (77%) of the Loan, for a period commencing from the beginning of the Waiver Period and ending on 30 June 2010 (inclusive), (b) ninety one per cent (91%) of the Loan, from a period commencing on 1 July 2010 and ending on the end of the Waiver Period, and (c) one hundred and twenty five per cent (125%) of the Loan, at all other times during the Facility Period.

Clauses 5.3 (Reborrowing), 6.2.3 (Voluntary prepayment of Loan) and 6.4 (Restrictions) shall apply, mutatis mutandis, to any prepayment made under this Clause 10.4 and the value of any additional security provided shall be determined as stated above,”;

11

4.6 clause 12.2 (Financial covenants) of the Loan Agreement shall be deleted and replaced as follows:-

“12.2 Financial covenants The Borrowers shall procure that at all times the Guarantor’s financial condition, as evidenced by the most recent financial statements, shall be such that:

12.2.1 the Guarantor maintains Interest Coverage which exceeds (a) 2:1 throughout the Waiver Period and (b) 3:1 at all other times during the Facility Period; and

12.2.2 Minimum Net Worth is not lower than:-

(a) one hundred and eighty million Dollars ($180,000,000) for the financial year ending 31 December 2008;

(b) one hundred million Dollars ($100,000,000) for the financial year ending 31 December 2009;

(c) one hundred and fifty million Dollars ($150,000,000) plus the net quarterly profits of the Guarantor, as evidenced by the Guarantor’s most recent financial statements supplied to the Agent pursuant to Clause 12.1.1 from 1 January 2010 and until the end of the Waiver Period;

(d) two hundred and twenty five million Dollars ($225,000,000) thereafter; and

12.2.3 throughout the Facility Period the Guarantor maintains aggregate Minimum Liquidity in an amount in excess of thirty five million Dollars ($35,000,000); and

12.2.4 the Guarantor maintains a Market Adjusted Equity Ratio of:-

(a) not lower than (i) twenty five per cent (25%) in respect of the financial year ending 31 December 2008 (ii) fifteen per cent (15%) throughout the Waiver Period and (iii) forty per cent (40%) thereafter; or

(b) not lower than five per cent (5%) PROVIDED THAT:-

12

(i) the Agent, in its absolute discretion, determines that such fall in the Market Adjusted Equity Ratio has resulted from the reduction of the Fleet Market Value or the mark to market position of any swap or other derivative transactions entered into by the Borrower and other members of the Group; and

(ii) the Agent recalculates the Market Adjusted Equity Ratio on the basis of the Fleet Market Value and the mark to market position of any swap or other derivative transactions entered into by the Borrower and other members of the Group as at 31 December 2008 to be at least fifteen per cent (15%).

The financial covenants contained in this Clause 12.2 shall be tested semi-annually on the basis of the annual financial statements provided under Clause 12.1.1 and shall be confirmed in the relevant Compliance Certificate. For the avoidance of doubt, the financial covenants test on December 31, 2010 shall be based on the financial covenants during the Waiver Period as stipulated in Clauses 12.1.1, 12.2.2 and 12.2.4.”;

4.7 a new clause 12.3.19 shall be added in the Loan Agreement:-

“12.3.19 New Financial Indebtedness The Borrowers shall procure that, during the Waiver Period, any Financial Indebtedness incurred by either of the Borrowers or any member of the Group shall only be used (a) to prepay any Financial Indebtedness secured on any asset of the Group and (b) in or towards financing any New Investment or any Permitted Investment PROVIDED THAT the equity contribution of that Borrower or that member of the Group (as applicable) in such New Investment or Permitted Investment is no less than thirty two point five per cent (32.5%) of the acquisition cost such New Investment or Permitted Investment.”;

13

4.8 a new clause 12.3.20 shall be added in the Loan Agreement:-

“12.3.20 New investment The Borrowers shall procure that, during the Waiver Period, the Guarantor or any other member of the Group does not enter into any further investments or capital expenditure other than any Permitted Investments or the maintenance of the Fleet Vessels or any New Investment.”;

4.9 a new clause 12.3.21 shall be added in the Loan Agreement:-

“12.3.21 Shares The Borrowers shall procure that, during the Waiver Period, Mr. George Economou does not divest any of his interests in any of the issued shares in the Guarantor which were held on 1 November 2009.”;

4.10 a new clause 12.3.22 shall be added in the Loan Agreement:-

“12.3.22 Disposal of assets The Borrowers shall procure that the Guarantor does not spin-off or otherwise dispose of any of its assets unless:-

(a) the Guarantor maintains Cash in an amount not less than eighty million Dollars ($80,000,000); and

(b) such disposal or spin-off is conducted on arm’s length basis on current market conditions; and

(c) the Guarantor is released from all its obligations relating to the offshore business of the Group except the guarantee granted in favour of Deutsche Bank AG, relating to the pre- and post delivery financing of the Drillships 1865/1866; and

(d) the Guarantor secures six (6) months prior to the delivery of each Drillship 1865/1866 an employment contract which covers fully each that Drillship’s 1865/1866 Operating Expenses and Debt Service of a period of duration of at least two (2) years; and

(e) the Guarantor uses its best endeavours to be released from its obligations under the guarantee granted in favour of Deutsche Bank AG, relating to the pre- and post delivery financing of the Drillships 1865/1866.”

14

4.11 a new clause 12.3.23 shall be added in the Loan Agreement:-

“12.3.23 No dividends during Waiver Period During the Waiver Period the Borrowers shall not and shall procure that the Guarantor and any member of the Group shall not pay any dividends or make any other distribution to shareholders (including, but not limited to, any stock buyback). In respect of the payment of dividends relating to any disposal of assets or spin-off by the Guarantor Clause 12.3.22 (Disposal of Assets) shall apply.”;

4.12 clause 6.6 of the Guarantee shall be deleted and replaced as follows:-

“6.6 The Guarantor covenants that, throughout the Facility Period its financial condition, as evidenced by the most recent financial statements, shall be such that:

6.6.1 the Guarantor maintains Interest Coverage which exceeds (a) 2:1 throughout the Waiver Period and (b) 3:1 at all other times during the Facility Period; and

6.6.2 the Guarantor’s Minimum Net Worth is not lower than:-

(a) one hundred and eighty million Dollars ($180,000,000) for the financial year ending 31 December 2008;

(b) one hundred million Dollars ($100,000,000) for the financial year ending 31 December 2009;

(c) one hundred and fifty million Dollars ($150,000,000) plus the net quarterly profits of the Guarantor, as evidenced by the Guarantor’s most recent financial statements supplied to the Agent pursuant to Clause 6.4 from 1 January 2010 and until the end of the Waiver Period;

(d) two hundred and twenty five million Dollars ($225,000,000) thereafter; and

15

6.6.3 throughout the Facility Period the Guarantor maintains aggregate Minimum Liquidity in an amount in excess of thirty five million Dollars ($35,000,000); and

6.6.4 the Guarantor maintains a Market Adjusted Equity Ratio of:-

(a) not lower than (i) twenty five per cent (25%) in respect of the financial year ending 31 December 2008 (ii) fifteen per cent (15%) throughout the Waiver Period and (iii) forty per cent (40%) thereafter; or

(b) not lower than five percent PROVIDED THAT:-

(i) the Agent, in its absolute discretion, that such fall in the Market Adjusted Equity Ratio has resulted from the reduction of the Fleet Market Value or the mark-market position of any swap or other derivative transactions entered into by the Borrower and other members of the Group; and

(ii) the Agent recalculates the Market Adjusted Equity Ratio on the basis of the Fleet Market Value and the mark-market position of any swap or other derivative transactions entered into by the Borrower and other members of the Group as at 31 December 2008 to be at least fifteen per cent (15%).

The financial covenants contained in this Clause 6.6 shall be tested annually on the basis of the annual financial statements provided under Clause 6.4. For the avoidance of doubt, the financial covenants test on December 31, 2010 shall be based on the financial covenants during the Waiver Period as stipulated in Clauses 6.6.1, 6.6.2 and 6.6.4.”;

4.13 a new clause 6.7 shall be added in the Guarantee:-

“6.7 New Financial Indebtedness The Guarantor shall procure that, during the Waiver Period, any Financial Indebtedness incurred by either of the Borrowers or any member of the Group shall only be

16

used (a) to prepay any Financial Indebtedness secured on any asset of the Group and (b) in or towards financing any New Investment or any Permitted Investment.”;

4.14 a new clause 6.8 shall be added in the Guarantee:-

“6.8 New investment The Guarantor shall not and shall procure that, during the Waiver Period, any other member of the Group does not, enter into any further investments or capital expenditure other than any Permitted Investments or the maintenance of the Fleet Vessel or any New Investment.”;

4.15 a new clause 6.9 shall be added in the Guarantee:-

“6.9 Shares The Guarantor shall procure that, during the Waiver Period, Mr. George Economou does not divest any of his interests in any of the issued shares which were held on 1 November 2009 in the Guarantor.”;

4.16 a new clause 6.10 shall be added in the Guarantee:-

“6.10 Disposal of assets The Guarantor shall not, and shall procure that no member of the Group shall not, spin-off or otherwise dispose of any of its assets any unless:-

(a) the Guarantor maintains Cash in an amount not less than eighty million Dollars ($80,000,000); and

(b) such disposal or spin-off is conducted on arm’s length basis on current market conditions; and

(c) the Guarantor is released from all its obligations relating to the offshore business of the Group except the guarantee granted in favour of Deutsche Bank AG, relating to the pre- and post delivery financing of the Drillships 1865/1866; and

(d) the Guarantor secures six (6) months prior to the delivery of each Drillship 1865/1866 an employment contract which covers fully each that Drillship’s 1865/1866 Operating Expenses and Debt Service of a period of duration of at least two (2) years; and

17

(e) the Guarantor uses its best endeavours to be released from its obligations under the guarantee granted in favour of Deutsche Bank AG, relating to the pre- and post delivery financing of the Drillships 1865/1866.”;

4.17 a new clause 6.11 shall be added in the Guarantee:-

“6.11 No dividends during Waiver Period During the Waiver Period the Guarantor shall not and shall procure that any member of the Group shall not pay any dividends or make any other distribution to shareholders (including, but not limited to, any stock buyback). In respect of the payment of dividends relating to any disposal of assets or spin-off by the Guarantor Clause 6.10 (Disposal of Assets’) shall apply “.

All other terms and conditions of the Loan Agreement and the Security Documents shall remain unaltered and in full force and effect.

5 Confirmation and Undertaking

5.1 Each of the Security Parties confirms that all of its respective obligations under or pursuant to each of the Security Documents to which it is a party remain in full force and effect, despite the amendments to the Loan Agreement made in this Supplemental Agreement, as if all references in any of the Security Documents to the Loan Agreement were references to the Loan Agreement as amended and supplemented by this Supplemental Agreement.

5.2 The definition of any term defined in any of the Security Documents shall, to the extent necessary, be modified to reflect the amendments to the Loan Agreement made in or pursuant to this Supplemental Agreement.

6 Communications, Law and Jurisdiction

The provisions of clauses 19 and 24 of the Loan Agreement shall apply to this Supplemental Agreement as if they were set out in full and as if references to the Loan Agreement were references to this Supplemental Agreement and references to the Borrower were references to the Security Parties.

18

Schedule 1

The Lenders, the Commitments and the Swap Providers

The Lenders	The Commitments
DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT	$	62,500,000
Domshof 17
28195 Bremen
Federal Republic of Germany
Fax no: 0049 421 3609329
Contact Person: Loan Department
UNICREDIT BANK AG
(formerly known as Bayerische Hypo- und Vereinsbank AG)	$	62,500,000
Alter Wall 22
D-20457 Hamburg
Federal Republic of Germany
Fax No.: +49 40 3692 3696
Contact Person: Mr. Jan-Philipp Kathmann
The Swap Providers
DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT Domshof 17 28195 Bremen Federal Republic of Germany Fax no: 0049 421 3609329 Contact Person: Loan Department
UNICREDIT BANK AG
(formerly known as Bayerische Hypo- und Vereinsbank AG) Alter Wall 22 D-20457 Hamburg Federal Republic of Germany Fax No.: +49 40 3692 3696 Contact Person: Mr. Jan-Philipp Kathmann

19

Schedule 2

Effective Date Confirmation

To: NORWALK STAR OWNERS INC.

IONIAN TRADERS INC.

Trust Company Complex

Ajeltake Road

Ajeltake Island

Majuro

Marshall Islands MH 96960

We, DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT, refer to the supplemental agreement dated             2010 (the “Supplemental Agreement”) relating to a secured loan agreement dated 13 May 2008 (the “Loan Agreement”) made between you as the Borrower, the banks listed in it as the Lenders, ourselves as the Agent the banks listed in it as the Swap Providers and ourselves as the Security Agent in respect of a loan to you from the Lenders of up to $125,000,000,

We hereby confirm that all conditions precedent referred to in Clause 2.1 of the Supplemental Agreement have been satisfied. In accordance with Clauses 1,1 and 4 of the Supplemental Agreement the Effective Date is the date of this confirmation and the amendments to the Loan Agreement are now effective.

Dated:	2010
Signed:
	For and on behalf of DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT

20

IN WITNESS of which the parties to this Supplemental Agreement have executed this Supplemental Agreement as a deed the day and year first before written.

SIGNED and DELIVERED as	)	/s/ Eugenia Papapontikou
a DEED by	)
IONIAN TRADERS INC.	)
acting by	)
Eugenia Papapontikou	)
its duly authorised attorney-in-fact	)
in the presence of:	)
Constantinos Karachalios
/s/ Stephenson Harwood
STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160
SIGNED and DELIVERED as	)	/s/ Eugenia Papapontikou
a DEED by	)
NORWALK STAR OWNERS INC.	)
acting by	)
Eugenia Papapontikou	)
its duly authorised attorney-in-fact	)
in the presence of:	)
Constantinos Karachalios
/s/ Stephenson Harwood STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160
SIGNED and DELIVERED as	)	/s/ Eugenia Papapontikou
a DEED by	)
DRYSHIPS INC.	)
acting by	)
Eugenia Papapontikou	)
its duly authorised attorney-in-fact	)
in the presence of:	)
Constantinos Karachalios
/s/ Stephenson Harwood STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160

21

SIGNED and DELIVERED as	)	/s/ Christodoulos Vartzis
a DEED by	)
DEUTSCHE SCHIFFSBANK	)
AKTIENGESELLSCHAFT (as a Lender)	)
acting by	)
Christodoulos Vartzis	)
its duly authorised attorney-in-fact	)
in the presence of	)
Constantinos Karachalios
/s/ Stephenson Harwood STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160
SIGNED and DELIVERED as	)	/s/ Christodoulos Vartzis
a DEED by	)
UNICREDIT BANK AG	)
(formerly known as BAYERISCHE	)
HYPO- UND VEREINSBANK AG)	)
(as a Lender)	)
acting by	)
Christodoulos Vartzis	)
its duly authorised attorney- in-fact	)
in the presence of:	)
Constantinos Karachalios
/s/ Stephenson Harwood STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160
SIGNED and DELIVERED as	)	/s/ Christodoulos Vartzis
a DEED by	)
DEUTSCHE SCHIFFSBANK	)
AKTIENGESELLSCHAFT (as Agent)	)
acting by	)
Christodoulos Vartzis	)
its duly authorised attorney-in-fact	)
in the presence of:	)
Constantinos Karachalios
/s/ Stephenson Harwood STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160

22

SIGNED and DELIVERED as	)	/s/ Christodoulos Vartzis
a DEED by	)
DEUTSCHE SCHIFFSBANK	)
AKTIENGESELLSCHAFT	)
(as a Swap Provider)	)
acting by	)
Christodoulos Vartzis	)
its duly authorised attorney-in-fact	)
in the presence of:	)
Constantinos Karachalios
/s/ Stephenson Harwood STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160
SIGNED and DELIVERED as	)	/s/ Christodoulos Vartzis
a DEED by	)
UNICREDIT BANK AG	)
(formerly known as BAYERISCHE	)
HYPO- UND VEREINSBANK AG)	)
(as a Swap Provider)	)
acting by	)
Christodoulos Vartzis	)
its duly authorised attorney-in-fact	)
in the presence of:	)
Constantinos Karachalios
/s/ Stephenson Harwood STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160
SIGNED and DELIVERED as	)	/s/ Christodoulos Vartzis
a DEED by	)
DEUTSCHE SCHIFFSBANK	)
AKTIENGESELLSCHAFT	)
(as SecurityAgent)	)
acting by	)
Christodoulos Vartzis	)
its duly authorised attorney-in-fact	)
in the presence of:	)
Constantinos Karachalios
/s/ Stephenson Harwood STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 18536 VAT. NO. 998711156 TEL 2104295160

23

EX-4.46

Exhibit 4.46

Dated 8 October 2009

AEGEAN TRADERS INC. and

IGUANA SHIPPING COMPANY LIMITED

as Borrowers

- and -

DRYSHIPS INC.

as Corporate Guarantor

- and -

WESTLB AG, LONDON BRANCH

as Lender

FIRST SUPPLEMENTAL AGREEMENT

in relation to a Loan Agreement dated 20 June 2008

in respect of a loan facility of (originally) up to US$103,200,000

and a Guarantee also dated 20 June 2008

WATSON, FARLEY & WILLIAMS

Piraeus

INDEX

Clause		Page
1	DEFINITIONS	2
2	REPRESENTATIONS AND WARRANTIES	2
3	AGREEMENT OF THE LENDER	3
4	CONDITIONS	4
5	VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS	5
6	CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS	12
7	EXPENSES	13
8	COMMUNICATIONS	13
9	SUPPLEMENTAL	13
10	LAW AND JURISDICTION	13
SCHEDULE 1		14
FORM OF COMPLIANCE CERTIFICATE		14

THIS FIRST SUPPLEMENTAL AGREEMENT is dated 8 October 2009 and made

BETWEEN:

(1) AEGEAN TRADERS INC., a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 and IGUANA SHIPPING COMPANY LIMITED, a company incorporated in Malta whose registered office is at 5/1, Merchants Street, Valletta, Malta (together the “Borrowers” and each a “Borrower”);

(2) DRYSHIPS INC., a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 (the “Corporate Guarantor”); and

(3) WESTLB AG, LONDON BRANCH, a company incorporated in Germany having its registered office at Herzogstrasse 15 in 40217 Duesseldorf, Germany and acting through its London branch at Woolgate Exchange, 25 Basinghall Street, London EC2V 5HA, England (as “Lender”).

BACKGROUND

(A) By a Loan Agreement dated 20 June 2008 (the “Loan Agreement”) made between (i) the Borrowers as joint and several borrowers and (ii) the Lender as lender whereby the Lender has made available to the Borrowers a loan facility of (originally) up to One hundred and Three million two hundred thousand United States Dollars (US$103,200,000) (the “Loan”) upon the terms and for the purposes therein specified.

(B) By a Guarantee dated 20 June 2008 (the “Corporate Guarantee”);

(C) The Borrowers and the Corporate Guarantor have requested that the Lender agrees to (inter alia):

(a) waive the application of the security cover provisions in clause 14.1 of the Loan Agreement during the period commencing on the Effective Date and ending on the earlier of (i) the date on which the Lender is satisfied that the Corporate Guarantor and the Borrowers are in compliance with Clause 11.15 of the Corporate Guarantee and Clause 14.1 of the Loan Agreement and (ii) the date falling 18 months after the date of this First Supplemental Agreement (the “Waiver Period”);

(b) waive the application of the Corporate Guarantor’s financial covenants regarding the Market Adjusted Equity Ratio and Market Value Adjusted Net Worth set out in paragraphs (a) and (c) respectively of clause 11.15 of the Corporate Guarantee during the Waiver Period;

(c) relax, during the Waiver Period, the minimum Interest Coverage Ratio which needs to be maintained pursuant to paragraph (b) of clause 11.15 of the Corporate Guarantee from 3:1 to 2:1; and

(d) the amendment and/or variation of certain other provisions of the Loan Agreement and the other Finance Documents.

(D) This Agreement sets out the terms and conditions on which the Lender agrees to:

(i) waive the application of clause 14.1 of the Loan Agreement during the Waiver Period and waive the Corporate Guarantor’s financial covenants regarding the

Market Adjusted Equity Ratio and Market Value Adjusted Net Worth set out in paragraphs (a) and (c) respectively of clause 11.15 of the Corporate Guarantee during the Waiver Period;

(b) amend the minimum Interest Coverage Ratio which needs to be maintained pursuant to paragraph (b) of clause 11.15 of the Corporate Guarantee from 3:1 to 2:1 for the duration of the Waiver Period;

(c) the consequential amendments to the Loan Agreement and the other Finance Documents in connection with those matters; and

(d) certain other amendments and/or variations to the Loan Agreement and the other Finance Documents.

NOW THEREFORE IT IS HEREBY AGREED

1 DEFINITIONS

1.1 Words and expressions defined in the Loan Agreement (as hereby amended) and the recitals hereto and not otherwise defined herein shall have the same meanings when used in this First Supplemental Agreement.

1.2 In this First Supplemental Agreement the words and expressions specified below shall have the meanings attributed to them below:

“Effective Date” means the date on which the conditions precedent in Clause 4 are satisfied;

“Mortgage Addendum” means, in relation to each Ship, the first addendum to the Mortgage on that Ship, executed or to be executed by the Borrower owning that Ship in favour of the Lender in such form as the Lender may approve or require and, in the plural, means both of them; and

“Waiver Period” has the meaning ascribed to it in Recital (C)(a) above.

1.3 Where the context so admits words importing the singular number only shall include the plural and vice versa and words importing persons shall include firms and corporations. Clause headings are inserted for convenience of reference only and shall be ignored in construing this First Supplemental Agreement. References to Clauses are to clauses of this First Supplemental Agreement save as may be otherwise expressly provided in this First Supplemental Agreement.

2 REPRESENTATIONS AND WARRANTIES

2.1 Each Borrower and the Corporate Guarantor hereby jointly and severally represents and warrants to the Lender, as at the date of this First Supplemental Agreement, that the representations and warranties set forth in Clause 9 of the Loan Agreement and those set forth in clause 10 of the Corporate Guarantee (updated mutatis mutandis to the date of this First Supplemental Agreement) are true and correct as if all references therein to “this Agreement” or, as the case may be, “this Guarantee” were references to the Loan Agreement or, as the case may be, the Corporate Guarantee as further amended by this First Supplemental Agreement.

2.2 Each Borrower and the Corporate Guarantor hereby further jointly and severally represents and warrants to the Lender that as at the date of this First Supplemental Agreement:

(a) each of Aegean and the Corporate Guarantor is duly incorporated, validly existing and in goodstanding under the laws of the Marshall Islands and Iguana is duly incorporated and validly existing and in good standing under the laws of Malta and each Borrower and the Corporate Guarantor has full power to enter into and perform its obligations under this First Supplemental Agreement and has complied with all statutory and other requirements relative to its business, and does not have an established place of business in any part of the United Kingdom or the United States of America;

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(b) all necessary governmental or other official consents, authorisations, approvals, licences, consents or waivers for the execution, delivery, performance, validity and/or enforceability of this First Supplemental Agreement and all other documents to be executed in connection with the amendments to the Loan Agreement and the Corporate Guarantee as contemplated hereby have been obtained and will be maintained in full force and effect, from the date of this First Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and while all or any part of the Commitment remains outstanding;

(c) each Borrower and the Corporate Guarantor has taken all necessary corporate and other action to authorise the execution, delivery and performance of its obligations under this First Supplemental Agreement and such other documents to which it is a party and such documents do or will upon execution thereof constitute the valid and binding obligations of each Borrower and the Corporate Guarantor enforceable in accordance with their respective terms;

(d) the execution, delivery and performance of this First Supplemental Agreement and all such other documents as contemplated hereby does not and will not, from the date of this First Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and while all or any part of the Commitment remains outstanding, constitute a breach of any contractual restriction or any existing applicable law, regulation, consent or authorisation binding on each Borrower and the Corporate Guarantor or on any of its property or assets and will not result in the creation or imposition of any security interest, lien, charge or encumbrance (other than under the Finance Documents) on any of such property or assets; and

(e) each Borrower and the Corporate Guarantor has fully disclosed in writing to the Lender all facts which it knows or which it should reasonably know and which are material for disclosure to the Lender in the context of this First Supplemental Agreement and all information furnished by such Borrower or the Corporate Guarantor or on its behalf relating to its business and affairs in connection with this First Supplemental Agreement was and remains true, correct and complete in all material respects and there are no other material facts or considerations the omission of which would render any such information misleading.

3 AGREEMENT OF THE LENDER

3.1 The Lender, relying upon each of the representations and warranties set out in Clauses 2.1 and 2.2 of this First Supplemental Agreement, hereby agrees with the Borrowers and the Corporate Guarantor, subject to and upon the terms and conditions of this First Supplemental Agreement and in particular, but without limitation, subject to the fulfilment of the conditions precedent set out in Clause 4, to:

(a) waive the application of the security cover provisions in clause 14.1 of the Loan Agreement during the Waiver Period;

(b) waive the application of the Corporate Guarantor’s financial covenants regarding the Market Adjusted Equity Ratio and Market Value Adjusted Net Worth set out in paragraphs (a) and (c) respectively of clause 11.15 of the Corporate Guarantee during the Waiver Period; and

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(c) the amendment and/or variation of certain other provisions of the Loan Agreement and the other Finance Documents.

3.2 Each Borrower and the Corporate Guarantor agrees and confirms that the Loan Agreement, the Corporate Guarantee and the other Finance Documents to which it is a party shall remain in full force and effect and that Borrower and the Corporate Guarantor shall remain liable under the Loan Agreement, the Corporate Guarantee and the other Finance Documents to which it is a party for all obligations and liabilities assumed by it thereunder.

3.3 The agreement of the Lender contained in Clauses 3.1 and 3.2 shall have effect on and from the Effective Date.

4 CONDITIONS

4.1 The agreements of the Lender contained in Clause 3.1 of this First Supplemental Agreement shall all be expressly subject to the condition that the Lender shall have received in form and substance satisfactory to the Lender and its legal advisers on or before the Effective Date:

(a) a certificate from an officer of each Borrower confirming the names of all the directors and shareholders of that Borrower and having attached thereto true and complete copies of their incorporation and constitutional documents;

(b) a certificate from an officer of the Corporate Guarantor confirming the names of all the directors of the Corporate Guarantor and having attached thereto true and complete copies of its incorporation and constitutional documents;

(c) true and complete copies of the resolutions passed at separate meetings of all the directors and shareholders of each Borrower authorising and approving the execution of this First Supplemental Agreement and the Mortgage Addendum to which that Borrower is or will become a party and any other document or action to which it is or is to be a party and authorising its directors or other representatives to execute the same on its behalf;

(d) true and complete copies of the resolutions passed at a meeting of all the directors of the Corporate Guarantor authorising and approving the execution of this First Supplemental Agreement and any other document or action to which it is or is to be a party and authorising its directors or other representatives to execute the same on its behalf;

(e) the original of any power of attorney issued by each Borrower and the Corporate Guarantor pursuant to such resolutions aforesaid;

(f) each Mortgage Addendum duly executed by the relevant Borrower together with evidence that that Mortgage Addendum has been duly registered as a valid addendum to the relevant Mortgage in accordance with the laws of Malta;

(g) certified copies of all documents (with a certified translation if an original is not in English) evidencing any other necessary action, approvals or consents with respect to this First Supplemental Agreement and the Mortgage Addenda (including without limitation) all necessary governmental and other official approvals and consents in such pertinent jurisdictions as the Lender deems appropriate;

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(h) such legal opinions as the Lender may require in respect of the matters contained in this First Supplemental Agreement and the Mortgage Addenda; and

(i) evidence that the agent referred to in clause 30.4 of the Loan Agreement has accepted its appointment as agent for service of process under this First Supplemental Agreement and the Additional Finance Documents.

5 VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS

5.1 In consideration of the agreement of the Lender contained in Clause 3.1 of this First Supplemental Agreement the Borrowers and the Corporate Guarantor hereby agree with the Lender that upon satisfaction of the conditions referred to in Clause 4.1, the provisions of the Loan Agreement and the Corporate Guarantee shall be varied and/or amended and/or supplemented as follows:

(a) by inserting in clause 1.1 of the Loan Agreement and the Corporate Guarantee the definition of “Mortgage Addendum” set out in Clause 1.2 of this First Supplemental Agreement;

(b) the definition of, and references throughout each of the Finance Documents to, the Mortgage relevant to each Ship shall be construed as if the same referred to that Mortgage as amended and supplemented by the relevant Mortgage Addendum;

(c) by adding the following new definitions of “Additional Owner”, “Additional Ship”, “Approved Owner”, “Approved Ship”, “Effective Date”, “MYSTIC”, “OREGON”, “Permitted Investment” and “Waiver Period” in clause 1.1 of the Loan Agreement:

““Additional Owner” means each of:

(a) in the case of “MYSTIC”, Dalian Star Owners Inc. a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960; and

(b) in the case of “OREGON”, Iason Owning Company Limited a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960,

each a subsidiary of the Corporate Guarantor and, in the plural, means both of them;

“Additional Ship” means each of “MYSTIC” and “OREGON” and, in the plural, means both of them;

“Approved Owner” means, in respect of any Approved Ship, the registered owner thereof (subject to such owner being incorporated in a jurisdiction acceptable to the Lender and being a subsidiary of the Corporate Guarantor) and, in the plural, means all of them;

“Approved Ship” means any kind of vessel to be in all respects (including, but not limited to, type, age or deadweight) acceptable to the Lender owned by the relevant Approved Owner and, in the plural, means all of them;

“Effective Date” means the date on which the conditions precedent in clause 4 of the First Supplemental Agreement are satisfied;

“First Supplemental Agreement” means the first supplemental agreement to this Agreement dated 8 October 2009 and entered into between the Borrowers, the Corporate Guarantor and the Lender;

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“Hull 1837” means the drillship currently under construction by Samsung pursuant to the Hull 1837 Shipbuilding Contract which is scheduled to be delivered in December 2010;

“Hull 1838” means the drillship currently under construction by Samsung pursuant to the Hull 1838 Shipbuilding Contract which is scheduled to be delivered in March 2011;

“Hull 1837 Shipbuilding Contract” means the shipbuilding contract dated 17 September 2007 (as the same may be amended and supplemented from time to time) and executed between Drillship Hydra Owners Inc. and Samsung;

“Hull 1838 Shipbuilding Contract” means the shipbuilding contract dated 17 September 2007 (as the same may be amended and supplemented from time to time) and executed between Drillship Paros Owners Inc. and Samsung;

“Hull SS058” means the Kamsarmax bulk carrier of approximately 82,000 metric tons deadweight, currently under construction by Tsuneishi pursuant to the SS058 MOA;

“Hull SS059” means the Kamsarmax bulk carrier with Hull Number SS059 of approximately 82,000 metric tons deadweight, currently under construction by Tsuneishi pursuant to the SS059 MOA;

“MYSTIC” means the 2008-built bulk carrier vessel of 89,510 gross registered tons and 56,668 net registered tons, having IMO Number 9421831 and registered in the ownership of the relevant Additional Owner under the Maltese flag with the name “MYSTIC”;

“OREGON” means the 2002-built bulk carrier vessel of 38,727 gross registered tons and 26,124 net registered tons, having IMO Number 9214123 and registered in the ownership of the relevant Additional Owner under the Maltese flag with the name “OREGON”;

““Permitted Investment” means any investment or capital expenditure to be made by a Borrower or the Corporate Guarantor:

(a) in the ordinary course of its business for the purpose of maintaining the Ships (or either of them);

(b) the equity portion of which shall have been raised from proceeds of any equity offering by the Corporate Guarantor; or

(c) in connection with the acquisition and construction of Hull 1837, Hull 1838, Hull SS058 and Hull SS059;

“Samsung” means Samsung Heavy Industries Co. Ltd. a company organised under the laws of Korea with registered office at 34th floor, Samsung Life Insurance Seocho Tower 1321-15, Seocho-Dong, Seocho-Gu, Seoul, Korea;

“SS058 MOA” means the memorandum of agreement dated 31 July 2007 (as the same may be amended and supplemented from time to time) and executed between Iktinos Owning Company Limited and Chijin (as nominated by Tsuneishi Holdings Corporation Kambara Kisen Company);

“SS059 MOA” means the memorandum of agreement dated 31 July 2007 (as the same may be amended and supplemented from time to time) and executed between Kallikrates Owning Company Limited and Chijin (as nominated by Tsuneishi Holdings Corporation Kambara Kisen Company);

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“Tsuneishi” means Tsuneishi Group (Zhoushan) Shipbuilding Inc. a company organised under the laws of the People’s Republic of China with registered office at Retao Village, Xiushan Island, Daishan Country, Zhoushan City, Zhejiang Province, the Peoples’ Republic of China;

“Waiver Period” means the period commencing on the Effective Date and ending on the earlier of (i) the date on which the Lender is satisfied that the Corporate Guarantor and the Borrowers are in compliance with Clause 11.15 of the Corporate Guarantee and Clause 14.1 of the Loan Agreement and (ii) the date falling 18 months after the date of the First Supplemental Agreement;”;

(d) by deleting the definition of “Margin” in clause 1.1 of the Loan Agreement and replacing it with the following new definition:

““Margin” means:

(a) during the Waiver Period, 2 per cent, per annum; and

(b) at all times thereafter, 1.2 per cent per annum;”;

(e) by deleting clause 10.6 of the Loan Agreement in its entirety and substituting it with the following:

“10.6 Provision of financial statements. The Borrowers will send or procure there are sent to the Lender:

(a) as soon as possible, but in no event later than 180 days after the end of each financial year of the Borrowers and the Corporate Guarantor (in the case of the management accounts or, if available, the audited financial statements for the Borrowers commencing with the financial year ending on 31 December 2008 and in the case of the audited consolidated financial statements the Corporate Guarantor commencing with the financial year ending on 31 December 2007), the management accounts or, if available, the audited financial statements in respect of each of the Borrowers, and the audited consolidated financial statements in respect of the Corporate Guarantor, in each case for that financial year; and

(b) as soon as possible, but in no event later than 10 days after the end of each calendar month, cash flow statements in respect of each Borrower and the Corporate Guarantor showing income received and the expenditure of that Borrower or the Corporate Guarantor in the previous calendar month.”;

(f) by adding the following new sub-paragraph (g) in clause 11.3 of the Loan Agreement:

““(g) during the Waiver Period, make any form of investments or capital expenditure other than the Permitted Investments.”;

(g) by adding a new clause 11.5 in the Loan Agreement as follows:

““11.5 Additional Security. The Borrowers shall, promptly following the Lender’s request, at any time during the Waiver Period, procure that:

(a) an Additional Owner executes or, as the case may be, registers in favour of the Lender as additional security for the obligations of the Borrowers under the Loan Agreement and the other Finance Documents a second priority or as the case may preferred mortgage (and, if applicable, a collateral deed of covenants) over the Additional Ship owned by it together with a second priority assignment of the earnings and insurances of the applicable Additional Ship; or

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(b) if for any reason the registration of the second priority security specified in (a) above is not possible, an Approved Owner executes or, as the case may be, registers in favour of the Lender as additional security for the obligations of the Borrowers under the Loan Agreement and the other Finance Documents a second priority or as the case may preferred mortgage (and, if applicable, a collateral deed of covenants) over the relevant Approved Ships together with a second priority assignment of the earnings and insurances of the applicable Additional Ship.”;

(h) by adding a new clause 11.6 in the Loan Agreement as follows:

“11.6 Prepayments/provisions of cash security. The Borrowers shall ensure that if following the Effective Date the Corporate Guarantor and any other member of the Group make prepayments or provide cash (or cash equivalent) security to any other banks or financial institutions (in respect of any Financial Indebtedness owed to such banks or financial institutions) in an amount of more than $15,000,000 in aggregate, the Borrowers shall prepay an equal proportion of the Loan or provide equivalent cash (or cash equivalent) security in favour of the Lender.”;

(i) by adding the words “(at any time other than during the Waiver Period)”:

(i) after the word “Borrowers” in the second line of clause 14.1 of the Loan Agreement; and

(ii) after the words “at any date” in the first line of clause 14.3 of the Loan Agreement;

(j) by inserting the following new definitions in clause 1.1 of the Corporate Guarantee:

““Delivery Date” means, in relation to each Permitted Ship, the date on which title to and possession of that Permitted Ship is transferred to the relevant buyer pursuant to the relevant Permitted Shipbuilding Contract;

“Deutsche Bank Borrowers” means Drillships Skopelos Owners Inc and Drillships Kithira Owners Inc, and in the singular means either of them;

“Deutsche Bank Loan Agreements” means, together:

(a) the loan agreement dated 18 July 2008 made between (i) Drillships Skopelos Owners Inc as borrower, (ii) the banks and financial institutions listed as lenders therein, (iii) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch as swap banks, (iv) Deutsche Bank Luxembourg SA as facility agent, (v) Deutsche Bank AG Filiale Deutschlandgeschaft as security trustee, (vi) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch joint mandated lead arrangers and (vii) Deutsche Bank AG, London as bookrunner; and

(b) the loan agreement dated 18 July 2008 made between (i) Drillships Kithira Owners Inc as borrower, (ii) the banks and financial institutions listed as lenders therein, (iii) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch as swap banks, (iv) Deutsche Bank Luxembourg SA as facility agent, (v) Deutsche Bank AG Filiale Deutschlandgeschaft as security trustee, (vi) Deutsche Bank AG, London branch and Dexia Credit Local, New York branch joint mandated lead arrangers and (vii) Deutsche Bank AG, London as bookrunner,

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and, in the singular, means either of them;

“Hull 1865” means the drillship currently under construction by Samsung pursuant to the 1865 Shipbuilding Contract which is scheduled to be delivered in July 2011;

“Hull 1866” means the drillship currently under construction by Samsung pursuant to the 1866 Shipbuilding Contract which is scheduled to be delivered in September 2011;

“Hull 1865 Shipbuilding Contract” means the shipbuilding contract dated 24 January 2008 (as the same may be amended and supplemented from time to time) and executed between Drillship Kithira Owners Inc. and Samsung;

“Hull 1866 Shipbuilding Contract” means the shipbuilding contract dated 24 January 2008 (as the same may be amended and supplemented from time to time) and executed between Drillship Skopelos Owners Inc. and Samsung;

“Permitted Ships” means, together, Hull 1865 and Hull 1866 and, in the singular means, either of them;

“Permitted Shipbuilding Contracts” means, together, the Hull 1865 Shipbuilding Contract and the Hull 1866 Shipbuilding Contract and, in the singular, means either of them;

“Waiver Period” means the period commencing on the Effective Date and ending on the earlier of (i) the date on which the Lender is satisfied that the Guarantor and the Borrowers are in compliance with Clause 11.15 of this Guarantee and clause 14.1 of the Loan Agreement and (ii) the date falling 18 months after the date of the First Supplemental Agreement;”;”;

(k) by deleting clause 11.3 of the Corporate Guarantee in its entirety and substituting it with the following:

“11.3 Provision of financial statements. The Guarantor will send or procure there are sent to the Lender:

(a) as soon as possible, but in no event later than 180 days after the end of each financial year of the Borrowers and the Guarantor (in the case of the management accounts or, if available, the audited financial statements for the Borrowers commencing with the financial year ending on 31 December 2008 and in the case of the audited consolidated financial statements of the Guarantor commencing with the financial year ending on 31 December 2007), (i) the management accounts or, if available, the audited financial statements in respect of the Borrowers and (ii) the audited consolidated financial statements of the Guarantor for that financial year and such other financial information (including information as to its financial condition, commitments and operations) in connection with the Guarantor as the Lender may reasonably require; and

(b) as soon as possible, but in no event later than 10 days after the end of each calendar month, a cash flow statement in respect of the Guarantor showing the income received and the expenditure of the Guarantor in the previous calendar month.”;

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(1) by deleting clause 11.11(b) of the Corporate Guarantee and replacing it with the following:

“(b) pay any dividend or make any other form of distribution or effect any form of redemption or return of share capital Provided that the Guarantor may in any financial year pay a dividend or make any other form of distribution which does not exceed in aggregate 50 per cent, of the Net Income for such financial year subject to (i) no Event of Default having occurred which is continuing at the relevant time or resulting from the payment of a dividend or the making of any other form of distribution and (ii) any dividend during the Waiver Period being made by way of issue of shares only; or”;

(m) by adding the words “(other than any reconstruction or reorganisation which may occur in connection with a Spin Off” after the word “kind)” in the second line of clause 11.11 (d) of the Corporate Guarantee;

(n) by adding the following new sub-paragraph (e) in clause 11.11 of the Corporate Guarantee:

““(e) during the Waiver Period, make any form of investments or capital expenditure other than any Permitted Investment.”;

(o) by deleting clause 11.12(a) of the Corporate Guarantee and replacing it with the following:

“(a) not, and shall procure that neither Borrower will, create or permit to arise any Security Interest over any asset present or future except (i) Security Interests created or permitted by the Finance Documents, (ii) Permitted Security Interests and (iii) in the case of the Guarantor those arising:

(A) during the Waiver Period, in connection with any Permitted Investments; or

(B) at all times thereafter, in the normal course of its business of acquiring, financing and operating vessels and making investments within the shipping and oil and gas sector,”;

(o) by deleting clause 11.13 of the Corporate Guarantee in its entirety and replacing it with the following:

““11.13  No disposal of assets and change of business. The Guarantor:

(a) shall procure that neither Borrower will transfer, lease or otherwise dispose of all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not except in the usual course of its trading operations and on normal arms’ length terms; or

(b) will not, and shall procure that neither Borrower make any substantial change to the nature of its business from that existing at the date of this Guarantee; or

(c) will not Spin Off the offshore business of the Group unless:

(i) the Lender is satisfied that the Guarantor and all other members of the Group maintain and will continue to maintain bank or cash balances equal to at least $80,000,000 in aggregate; and

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(ii) it has delivered to the Lender evidence that each of Hull 1865 and Hull 1866 is subject to an Approved Contract of Employment commencing from the actual delivery date of the relevant Permitted Ship or, if the Cut Off Date for such Permitted Ship has not occurred prior to Spin Off, the Guarantor shall by no later than that Cut Off Date deliver to the Lender such evidence as aforesaid;

(iii) it provides satisfactory evidence to the Lender that it has been released from all its obligations relating to the offshore business of the Group (including, without limitation, the $800,000,000 acquisition financing of Ocean Rig ASA (other than any obligations it has pursuant to two guarantees each dated 18 July 2008 executed by the Guarantor as security for the obligations of the Deutsche Bank Borrowers under the Deutsche Bank Loan Agreements)); and

(iv) it satisfies the Lender that it is using its best endeavours to be released from the guarantees referred to in paragraph (iii) above.

In this Clause 11.13(c) the following terms will have the following meanings:

“Approved Contract of Employment” means, in respect of each of Hull 1865 and Hull 1866, a contract of employment in respect of that Permitted Ship for at least 24 months in duration (commencing from the delivery date of the relevant Permitted Ship) at a hire rate which, when aggregated for the first 24 months of the duration thereof will be in an amount of at least equal to the aggregate of the (a) operating expenses and (b) debt service costs of that Permitted Ship for the first 24 months of the duration of that contract of employment.

“Cut Off Date” means, in respect of each of Hull 1865 and Hull 1866, the date falling 6 months prior to the scheduled delivery date of that Permitted Ship; and

“Spin Off” means any means any reorganization, spin-off, re-domiciliation or transfer of ownership in respect of any corporate entity whose business primarily consists of activities in the oil, gas and off shore sector;”;

(d) by deleting clause 11.15 of the Corporate Guarantee in its entirety and replacing it with the following:

““11.15  Financial covenants. The Guarantor shall ensure that at all times:

(a) (other than during the Waiver Period) the Market Adjusted Equity Ratio shall not be less than 0.2:1;

(b) the Interest Coverage Ratio shall not be less than:

(ii) during the Waiver Period, 2:1; and

(iii) at all times thereafter, 3:1;

(c) (other than during the Waiver Period) the Market Value Adjusted Net Worth of the Group shall not be less than $250,000,000; and

(d) there is available to the Guarantor and all the other members of the Group an aggregate amount of not less than $20,000,000 in immediately freely available and unencumbered bank or cash balances.”;

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(q) by adding a new clause 11.18 in the Corporate Guarantee as follows:

“11.18 Prepayments/provisions of cash security. The Guarantor shall procure that the Borrowers shall, if following the Effective Date the Guarantor and any other member of the Group make prepayments or provide cash (or cash equivalent) security to any other banks or financial institutions (in respect of any Financial Indebtedness of such banks or financial institutions) in an amount of more than $15,000,000 in aggregate, prepay an equal proportion of the Loan or provide equivalent cash (or cash equivalent) security in favour of the Lender.”;

(r) by amending the existing heading in Schedule 1 to the Corporate Guarantee to read “Part A - Form of Compliance Certificate (to be used except during Waiver Period)” and adding at the end of Schedule 1 (as a new Part B to that Schedule) the form of Compliance Certificate set out in Schedule 1 to this First Supplemental Agreement;

(s) by construing all references therein to “this Agreement” where the context admits as being references to “this Agreement as the same is amended and supplemented by this First Supplemental Agreement and as the same may from time to time be further supplemented and/or amended”; and

(t) by construing references to each of the Finance Documents as being references to each such document as it is from time to time supplemented and/or amended.

5.2 Amendments to Finance Documents. With effect on and from the date of this First Supplemental Agreement each of the Finance Documents other than the Loan Agreement shall be, and shall be deemed by this Agreement to have been, amended as follows:

(a) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement and any of the other Finance Documents shall be construed as if the same referred to the Loan Agreement and those Finance Documents as amended and supplemented by this First Supplemental Agreement; and

(b) by construing references throughout each of the Finance Documents to “this Agreement”, “this Deed”, “hereunder and other like expressions as if the same referred to such Finance Documents as amended and supplemented by this First Supplemental Agreement.

5.3 Finance Documents to remain in full force and effect. The Finance Documents shall remain in full force and effect as amended and supplemented by:

(a) the amendments to the Finance Documents contained or referred to in Clauses 5.1 and 5.2; and

(b) such further or consequential modifications as may be necessary to make the same consistent with, and to give full effect to, the terms of this First Supplemental Agreement.

6 CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS

6.1 Continuance of Loan Agreement and other Finance Documents. Save for the alterations to the Loan Agreement, the Corporate Guarantee and the other Finance Documents made or to be made pursuant to this First Supplemental Agreement and such further modifications (if any) thereto as may be necessary to make the same consistent with the terms of this First Supplemental Agreement, the Loan Agreement and the Corporate Guarantee shall remain in full force and effect and the security constituted by the other Finance Documents shall continue and remain valid and enforceable.

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7 EXPENSES

7.1 Fees and expenses. The provisions of clause 19 (fees and expenses) of the Loan Agreement shall apply to this First Supplemental Agreement as if they were expressly incorporated in this First Supplemental Agreement with any necessary amendments.

7.2 Restructuring fees. The Borrowers shall pay to the Lender on the date of this First Supplemental Agreement a restructuring fee of $ 167.750 ( representing 0.25 per cent of the Loan).

8 COMMUNICATIONS

8.1 General. The provisions of clause 27 (notices) of the Agreement, as amended and supplemented by this Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.

9 SUPPLEMENTAL

9.1 Counterparts. This First Supplemental Agreement may be executed in any number of counterparts.

9.2 Third Party rights. A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this First Supplemental Agreement.

10 LAW AND JURISDICTION

10.1 Governing law. This First Supplemental Agreement shall be governed by and construed in accordance with English law.

10.2 Incorporation of the Agreement provisions. The provisions of clause 30 (law and jurisdiction) of the Agreement, as amended and supplemented by this First Supplemental Agreement, shall apply to this First Supplemental Agreement as if they were expressly incorporated in this First Supplemental Agreement with any necessary medications.

IN WITNESS WHEREOF the parties hereto have caused this First Supplemental Agreement to be duly executed the day and year first above written.

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SCHEDULE 1

FORM OF COMPLIANCE CERTIFICATE

(to be used during the Waiver Period)

To: WestLB AG, London Branch

Wool gate Exchange

25 Basinghall Street

London EC2V 5HA

England

[—] 200[—]

Dear Sirs,

We refer to:

(a) a loan agreement dated 20 June 2008 (as amended and supplemented by a first supplemental agreement dated [—], the “Loan Agreement”) made between (amongst others) yourselves and Aegean Traders Inc. and Iguana Snipping Company Limited (together, the “Borrowers”) in relation to a term loan facility of up to $103,200,000 in aggregate; and

(b) a guarantee dated [—] 2008 of the obligations of the Borrowers under (inter alia) the Loan Agreement.

Words and expressions defined in the Loan Agreement shall have the same meaning when used in this compliance certificate.

We enclose with this certificate a copy of the audited consolidated accounts for the Borrowers and ourselves for the financial year ended [—]. The accounts (i) have been prepared in accordance with all applicable laws and generally accepted accounting information all consistently applied, (ii) give a true and fair view of the state of affairs of the Group at the date of the accounts and of its profit for the period to which the accounts relate and (iii) fully disclose or provide for all significant liabilities of the Group.

We represent that no Event of Default or Potential Event of Default has occurred as at the date of this certificate [except for the following matter or event [set out all material details of matter or event]]. In addition as of [—], we confirm compliance with the financial covenants set out in Clause 11.15 of the Guarantee for the financial year ending as of the date to which the enclosed accounts are prepared.

We now certify that, as at [—]:

(a) the Interest Coverage Ratio is [—]:[—]; and

(b) the aggregate freely available and unencumbered bank or cash balances of the Group are $[—].

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This certificate shall be governed by, and construed in accordance with, English law.

[—]

Authorised Signatory of DryShips Inc.

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EXECUTION PAGE

BORROWERS
SIGNED by	)	/s/ Eugenia Papapontikou
	)
for and on behalf of	)
AEGEAN TRADERS INC.	)
in the presence of:	)
/s/ Christoforos Bismpikos CHRISTOFOROS BISMPIKOS SOLICITOR WATSON, FARLEY & WILLIAMS 89 AKTI MIAOULI PIRAEUS 18538 - GREECE
SIGNED by	)	/s/ Eugenia Papapontikou
	)
for and on behalf of	)
IGUANA SHIPPING COMPANY LIMITED	)
in the presence of:	)
/s/ Christoforos Bismpikos CHRISTOFOROS BISMPIKOS SOLICITOR WATSON, FARLEY & WILLIAMS 89 AKTI MIAOULI PIRAEUS 18538 - GREECE
CORPORATE GUARANTOR
SIGNED by	)	/s/ Eugenia Papapontikou
	)
for and on behalf of	)
DRYSHIPS INC.	)
in the presence of:	)
/s/ Christoforos Bismpikos CHRISTOFOROS BISMPIKOS SOLICITOR WATSON, FARLEY & WILLIAMS 89 AKTI MIAOULI PIRAEUS 18538 - GREECE
LENDER
SIGNED by	)	/s/ Vassiliki Georgopoulos
	)
for and on behalf of	)
WESTLB AG, LONDON BRANCH	)
in the presence of:	)
/s/ Christoforos Bismpikos CHRISTOFOROS BISMPIKOS SOLICITOR WATSON, FARLEY & WILLIAMS 89 AKTI MIAOULI PIRAEUS 18538 - GREECE

16

EX-4.48

Exhibit 4.48

Dated 12 October 2009

CRETAN TRADERS INC.

as Borrower

-and-

DRYSHIPS INC.

as Guarantor

-and-

THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1

as Lenders

-and-

NORDDEUTSCHE LANDESBANK GIROZENTRALE

as Swap Bank

-and-

NORDDEUTSCHE LANDESBANK GIROZENTRALE

as Underwriter, Mandated Lead Arranger,

Bookrunner, Agent and Security Trustee

SUPPLEMENTAL AGREEMENT

in relation to a Loan Agreement dated 23 July 2008

(as amended and supplemented by a supplemental letter

dated 24 July 2009) in respect of a loan facility

of (originally) US$126,400,000

WATSON, FARLEY & WILLIAMS

Piraeus

INDEX

Clause		Page
1	DEFINITIONS	2
2	REPRESENTATIONS AND WARRANTIES	5
3	AGREEMENT OF THE CREDITOR PARTIES	6
4	CONDITIONS	6
5	VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS	8
6	CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS	14
7	EXPENSES	14
8	COMMUNICATIONS	14
9	SUPPLEMENTAL	14
10	LAW AND JURISDICTION	15
APPENDIX I LENDERS		16
EXECUTION PAGE		17

THIS SUPPLEMENTAL AGREEMENT is dated 12 October 2009 and made

BETWEEN:

(1) CRETAN TRADERS INC., a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (including its successors) as Borrower;

(2) DRYSHIPS INC., a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 as Guarantor;

(3) THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as Lenders;

(4) NORDDEUTSCHE LANDESBANK GIROZENTRALE acting through its office at Friedrichswall 10, D-30159, Hannover, Germany, as Swap Bank; and

(5) NORDDEUTSCHE LANDESBANK GIROZENTRALE acting through its office at Friedrichswall 10, D-30159, Hannover, Germany as Underwriter, Mandated Lead Arranger, Bookrunner, Agent and Security Trustee.

BACKGROUND

(A) By a loan agreement dated 23 July 2008 (as amended and supplemented by a supplemental letter dated 24 July 2009, the “Loan Agreement”) made between (i) the Borrower, (ii) the Lenders, (iii) the Swap Bank, (iv) the Underwriter, (v) the Mandated Lead Arranger, (vi) the Bookrunner, (vii) the Agent and (viii) the Security Trustee, the Lenders made available to the Borrower a loan facility of (originally) US$126,400,000 (the “Loan”).

(B) The Borrower has requested that the Creditor Parties agree to (inter alia):

(i) waive the application of the security cover provisions in clause 15.1 of the Loan Agreement during the period commencing on 9 October 2009 and ending on 9 October 2011;

(ii) amend the application of clause 2.5 of the Loan Agreement so that Norddeutsche Landesbank Girozentrale is no longer required to complete a Successful Syndication until 31 December 2009 but may syndicate or transfer a part of its Contribution after such date;

(iii) waive the right of the Agent to determine the amounts of Tranche A and Tranche B pursuant to clause 2.6 of the Loan Agreement; and

(iv) the amendment and/or variation of certain other provisions of the Loan Agreement.

(C) This Agreement sets out the terms and conditions on which the Creditor Parties agree to:

(i) the Borrower’s requests as outline in Recital (B);

(ii) the consequential amendments to the Loan Agreement and the other Finance Documents in connection with those matters; and

(iii) certain other amendments and/or variations to the Loan Agreement and the other Finance Documents.

NOW THEREFORE IT IS HEREBY AGREED

1 DEFINITIONS

1.2 Words and expressions defined in the Loan Agreement (as hereby amended) and the recitals hereto and not otherwise defined herein shall have the same meanings when used in this Supplemental Agreement.

1.3 In this Supplemental Agreement the words and expressions specified below shall have the meanings attributed to them below:

“Additional Earnings Account” means an account in the name of the Borrower with the Agent in Hannover designated “Cretan Traders Inc.—Additional Earnings Account” and any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is designated by the Agent as the Additional Earnings Account in relation to the Ship for the purposes of the Loan Agreement;

“Additional Earnings Account Pledge” means a first priority pledge creating security in respect of the Additional Earnings Account to be executed by the Borrower in favour of the Lenders in such form as the Agent may approve or require;

“Amendment Mortgage” means the amendment to the Mortgage, executed or to be executed by the Borrower in favour of the Security Trustee in such form as the Agent may approve or require;

“Dollar Spot Rate of Exchange” means, in relation to Dollars at any relevant time, the Agent’s spot rate of exchange for the purchase in the London foreign exchange market of the European Interbank Market of Dollars with Euros at or about 11.00 am (London time) on the relevant date;

“Effective Date” means the date on which the conditions precedent in Clause 4 are satisfied;

“EMU Legislation” means legislative measures of the Council of the European Union for the introduction of, changeover to, or operation of, a single or unified European currency being part of the implementation of the Third Stage;

“Euro” means, for the time being, the single currency of Participating Member States as provided in the EMU Legislation;

“Monteagle” means Monteagle Shipping S.A., a corporation incorporated in the Republic of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH96960, The Marshall Islands;

“New Charterparty Assignment” means each of the Oliva Charterparty Assignment and the Rapallo Charterparty Assignment and, in the plural, means both of them;

“New Earnings Account” means each of the Oliva Earnings Account and the Rapallo Earnings Account and, in the plural, means both of them;

“New Deed of Covenant” means, in relation to each New Ship, a deed of covenant collateral to the New Mortgage relative thereto and creating a charge over the relevant New Ship in such form as the Agent may approve or require and, in the plural, means both of them;

“New Finance Documents” means, together, the Additional Earnings Account Pledge, the Retention Account Pledge, the Rapallo Earnings Account Pledge, the Rapallo Retention

2

Account Pledge, the Oliva Earnings Accounts Pledge, the Oliva Retention Account Pledge, the New Guarantees, the New Mortgages, the New Deeds of Covenant, the New General Assignments, the New Charterparty Assignments and the New Manager’s Undertakings and, in the singular, means any of them;

“New General Assignment” means, in relation to each New Ship, a first priority general assignment of the Earnings, Insurances and Requisition Compensation in respect thereof executed or to be executed by the relevant New Owner in favour of the Security Trustee in such form as the Agent may approve or require and, in the plural, means both of them;

“New Guarantee” means, in relation to each New Owner, the guarantee of the obligations of the Borrower under the Loan Agreement and the other Finance Documents executed or to be executed by that New Owner in favour of the Security Trustee in such form as the Agent may approve or require and, in the plural, means both of them;

“New Manager’s Undertaking” means, in relation to each New Ship, a letter of undertaking executed or to be executed by the Approved Manager in favour of the Security Trustee in such form as the Agent may approve or require agreeing certain matters in relation to the management of that New Ship and subordinating the rights of that Approved Manager against that New Ship and the New Owner thereof to the rights of the Creditor Parties under the Finance Documents and including (inter alia) an assignment of the Approved Manager’s interests in the Insurances of that New Ship and, in the plural, means both of them;

“New Mortgage” means, in relation to each New Ship, the first priority Maltese mortgage over that New Ship executed or to be executed by the relevant New Owner in favour of the Security Trustee in such form as the Agent may approve or require and, in the plural, means both of them;

“New Owner” means each of Roscoe and Monteagle and, in the plural, means both of them;

“New Retention Account” means each of the Oliva Retention Account and the Rapallo Retention Account and, in the plural, means both of them;

“New Ship” means each of “OLIVA” and “RAPALLO” and, in the plural, means both of them;

“OLIVA” means the 2009-built bulk carrier of 75200 metric deadweight tons registered in the ownership of Monteagle under the Maltese flag with the name “OLIVA”;

“Oliva Charterparty” means a time charter entered between Monteagle and STX Pan Ocean Co. Ltd. of Seoul, Korea for a duration of at least 26 months, at a gross daily charter hire rate of at least US$17,850 and/or on such other terms as shall be in all respects acceptable to the Agent;

“Oliva Charterparty Assignment” means a first priority assignment of the rights of Monteagle pursuant to the Oliva Charterparty executed or to be executed by Monteagle in favour of the Security Trustee in such form as the Agent may approve or require;

“Oliva Earnings Account” means an account opened or to be opened in the name of Monteagle with the Agent in Hannover designated “Monteagle—Earnings Account”, or any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is designated by the Agent as the Oliva Earnings Account for the purposes of the Loan Agreement;

3

“Oliva Earnings Account Pledge” means the first priority pledge creating security in respect of the Oliva Earnings Account to be executed by Monteagle in favour of the Lenders in such form as the Agent may approve or require;

“Oliva Retention Account” means an account opened or to be opened in the name of Monteagle with the Agent in Hannover designated “Monteagle - Retention Account”, or any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is designated by the Agent as the Oliva Retention Account for the purposes of the Loan Agreement;

“Oliva Retention Account Pledge” means the first priority pledge creating security in respect of the Oliva Retention Account to be executed by Monteagle in favour of the Lenders in such form as the Agent may approve or require;

“Participating Member State” means each state so described in any EMU Legislation;

“RAPALLO” means the 2009-built bulk carrier of 75123 metric deadweight tons registered in the ownership of Roscoe under the Maltese flag with the name “RAPALLO”;

“Rapallo Charterparty” means a time charter entered between Roscoe and STX Pan Ocean Co. Ltd. of Seoul, Korea for a duration of at least 26 months, at a gross daily charter hire rate of at least US$15,400 and/or on such other terms as shall be in all respects acceptable to the Agent;

“Rapallo Charterparty Assignment” means a first priority assignment of the rights of Roscoe pursuant to the Rapallo Charterparty executed or to be executed by Roscoe in favour of the Security Trustee in such form as the Agent may approve or require;

“Rapallo Earnings Account” means an account opened or to be opened in the name of Roscoe with the Agent in Hannover designated “Roscoe - Earnings Account”, or any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is designated by the Agent as the Rapallo Earnings Account for the purposes of the Loan Agreement;

“Rapallo Earnings Account Pledge” means the first priority pledge over the Rapallo Earnings Account to be executed Roscoe in favour of the Lenders in such form as the Agent may approve or require;

“Rapallo Retention Account” means an account opened or to be opened in the name of Roscoe with the Agent in Hannover designated “Roscoe - Retention Account”, or any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is designated by the Agent as the Rapallo Retention Account for the purposes of the Loan Agreement;

“Rapallo Retention Account Pledge” means the first priority pledge over the Rapallo Retention Account to be executed by Roscoe in favour of the Lenders in such form as the Agent may approve or require;

“Retention Account” means an account opened or to be opened in the name of the Borrower with the Agent in Hannover designated “Cretan Traders Inc. - Retention Account”, or any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is designated by the Agent as the Retention Account for the purposes of the Loan Agreement;

“Retention Account Pledge” means the first priority pledge creating security in respect of the Retention Account to be executed by the Borrower in favour of the Lenders in such form as the Agent may approve or require;

4

“Roscoe” means Roscoe Marine Ltd., a corporation incorporated in the Republic of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH96960, The Marshall Islands;

“Third Stage” means the third stage of European economic and monetary union pursuant to the Treaty on European Union;

“Treaty on European Union” means the Treaty of Rome of 25 March 1957, as amended by the Single European Act 1986 and the Maastricht Treaty of 7 February 1992; and

“Waiver Period” means the period commencing on 9 October 2009 and ending on 9 October 2011.

1.4 Where the context so admits words importing the singular number only shall include the plural and vice versa and words importing persons shall include firms and corporations. Clause headings are inserted for convenience of reference only and shall be ignored in construing this Supplemental Agreement. References to Clauses are to clauses of this Supplemental Agreement save as may be otherwise expressly provided in this Supplemental Agreement.

2 REPRESENTATIONS AND WARRANTIES

2.1 The Borrower hereby represents and warrants to the Agent, as at the date of this Supplemental Agreement, that the representations and warranties set forth in Clause 10 of the Loan Agreement (updated mutatis mutandis to the date of this Supplemental Agreement) are true and correct as if all references therein to “this Agreement” were references to the Loan Agreement as further amended by this Supplemental Agreement.

2.2 The Borrower hereby further represents and warrants to the Agent that as at the date of this Supplemental Agreement:

(a) it is duly incorporated and validly existing and in good standing under the laws of the Marshall Islands and has full power to enter into and perform its obligations under this Supplemental Agreement and has complied with all statutory and other requirements relative to its business, and does not have an established place of business in any part of the United Kingdom or the United States of America;

(b) all necessary governmental or other official consents, authorisations, approvals, licences, consents or waivers for the execution, delivery, performance, validity and/or enforceability of this Supplemental Agreement and all other documents to be executed in connection with the amendments to the Loan Agreement (including, but not limited to, the New Finance Documents and the Amendment Mortgage) and the other Finance Documents as contemplated hereby have been obtained and will be maintained in full force and effect, from the date of this Supplemental Agreement and so long as any moneys are owing under any of the Finance Documents and/or the New Finance Documents and while all or any part of the Loan remains outstanding;

(c) it has taken all necessary corporate and other action to authorise the execution, delivery and performance of its obligations under this Supplemental Agreement and such other documents to which it is a party and such documents do or will upon execution thereof constitute its valid and binding obligations enforceable in accordance with their respective terms;

(d) the execution, delivery and performance of this Supplemental Agreement and all such other documents as contemplated hereby (including, but not limited to, the New Finance Documents and the Amendment Mortgage) does not and will not, from the date of this Supplemental Agreement and so long as any moneys are owing under any of the Finance

5

Documents and/or the New Finance Documents and while all or any part of the Commitment remains outstanding, constitute a breach of any contractual restriction or any existing applicable law, regulation, consent or authorisation binding on the Borrower or on any of its property or assets and will not result in the creation or imposition of any security interest, lien, charge or encumbrance (other than under the Finance Documents and/or the New Finance Documents) on any of such property or assets; and

(e) it has fully disclosed in writing to the Agent all facts which it knows or which it should reasonably know and which are material for disclosure to the Agent in the context of this Supplemental Agreement and all information furnished by such Borrower or on its behalf relating to its business and affairs in connection with this Supplemental Agreement was and remains true, correct and complete in all material respects and there are no other material facts or considerations the omission of which would render any such information misleading.

3 AGREEMENT OF THE CREDITOR PARTIES

3.1 The Creditor Parties, relying upon each of the representations and warranties set out in Clauses 2.1 and 2.2 of this Supplemental Agreement, hereby agree with the Borrower, subject to and upon the terms and conditions of this Supplemental Agreement and in particular, but without limitation, subject to the fulfilment of the conditions precedent set out in Clause 4, to:

(a) waive the application of the security cover provisions set out in clause 15.1 of the Loan Agreement during the Waiver Period;

(b) amend the application of clause 2.5 of the Loan Agreement so that Norddeutsche Landesbank Girozentrale is no longer required to complete a Successful Syndication until 31 December 2009 but may syndicate or transfer a part of its Contribution after such date;

(c) waive the right of the Agent to determine the amounts of Tranche A and Tranche B pursuant to clause 2.6 of the Loan Agreement; and

(d) the amendments/variations of the Loan Agreement and the other Finance Documents referred to in Clause 5.

3.2 The Borrower and the Security Parties agree and confirm that the Loan Agreement and the Finance Documents to which each is a party shall remain in full force and effect and the Borrower and each Security Party shall remain liable under the Loan Agreement and the Finance Documents to which each is a party for all obligations and liabilities assumed by it thereunder.

3.3 The agreement of the Creditor Parties contained in Clause 3.1 shall have effect on and from the Effective Date.

4 CONDITIONS

4.1 The agreements of the Creditor Parties contained in Clause 3.1 of this Supplemental Agreement shall all be expressly subject to the condition that the Agent shall have received in form and substance satisfactory to it and its legal advisers on or before on or before the Effective Date:

(a) evidence that the persons executing this Supplemental Agreement, each New Finance Document and the Amendment Mortgage on behalf of the Borrower, the Guarantor or, as the case may be, a New Owner are duly authorised to execute the same;

6

(b) an original of this Agreement duly executed by the parties to it and counter-signed by the Security Parties;

(c) a certificate from an officer of the Borrower, the Guarantor and each New Owner confirming the names of all the directors and shareholders of the Borrower, the Guarantor or, as the case may be, that New Owner and having attached thereto true and complete copies of its incorporation and constitutional documents;

(d) true and complete copy of the resolutions passed at separate meetings of the sole director or directors, as the case may be, and shareholders of the Borrower and the Guarantor authorising and approving the execution of this Supplemental Agreement, the Amendment Mortgage and each New Finance Document to which each is a party and any other document or action to which each is or is to be a party and authorising its directors or other representatives to execute the same on its behalf;

(e) true and complete copies of the resolutions passed at separate meetings of the sole director and shareholders of each New Owner authorising and approving the execution of the New Finance Documents to which each is a party and any other document or action to which each is or is to be a party and authorising its directors or other representatives to execute the same on its behalf;

(f) the original of any power of attorney issued by the Borrower, the Guarantor and each New Owner pursuant to such resolutions aforesaid;

(g) evidence that each New Ship:

(i) is registered in the name of the New Owner owning that Ship under the laws and flag of Malta;

(ii) is in the absolute and unencumbered ownership of the Borrower save as contemplated by the New Finance Documents;

(iii) maintains the highest class applicable to vessels of the same type, age and specifications as that New Ship with American Bureau of Shipping (or such other first class classification society which is a member of IACS acceptable to the Agent) free of all recommendations and conditions; and

(iv) is insured in accordance with the relevant provisions of the New Deed of Covenant applicable to that New Ship and all requirements thereof in respect of such Insurances have been fulfilled;

(h) each New Finance Document (other than the Additional Earnings Account Pledge, the Retention Account Pledge, the Rapallo Earnings Account Pledge, the Oliva Earnings Account Pledge, the Rapallo Retention Account Pledge and the Oliva Retention Account Pledge, originals of which shall be provided within one calendar month from the date of this Supplemental Agreement) and the Amendment Mortgage has been duly executed by the relevant New Owner or, as the case may be, the Borrower together with evidence that:

(i) each New Mortgage has been registered against the relevant New Ship with first priority in accordance with the laws of Malta;

(ii) the Amendment Mortgage has been duly registered as a valid amendment to the Mortgage in accordance with the laws of Malta;

(iii) all notices required to be served under each New General Assignment and any New Charterparty Assignment have been served and (where applicable) acknowledged in the manner therein provided; and

7

(iv) save for the Security Interests created by or pursuant to the New Mortgages, the New General Assignments and the New Charterparty Assignments, there are no Security Interests of any kind whatsoever on either New Ship or her Earnings, Insurances or Requisition Compensation;

(i) a certified true copy of the Oliva Charterparty and the Rapallo Charterparty duly signed by the parties thereto;

(j) evidence that the New Earnings Accounts, the New Retention Accounts, the Retention Account and the Additional Earnings Account have been opened and all mandate forms, documentation required by the Agent in relation to the Borrower, each New Owner and any other Security Party pursuant to the Agent’s “know your customer” requirements have been received;

(k) documents establishing that each New Ship is managed by the Approved Manager on terms acceptable to the Lenders, together with:

(i) the New Manager’s Undertaking relative to that New Ship; and

(ii) copies of the Approved Manager’s Document of Compliance and of the New Ship’s Safety Management Certificate (together with any other details of the applicable safety management system which the Agent requires);

(l) one valuation (at the cost of the Borrower) of each New Ship dated 2 October 2009 each prepared in accordance with Clause 15.3 by an Approved Broker and addressed to the Agent confirming that the Market Value of each New Ship is at least US$38,000,000;

(m) favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of the Marshall Islands, Malta and such other relevant jurisdictions as the Agent may require;

(n) a favourable opinion from an independent insurance consultant acceptable to the Agent on such matters relating to the Insurances for each New Ship as the Agent may require;

(o) certified copies of all documents (with a certified translation if an original is not in English) evidencing any other necessary action, approvals or consents with respect to this Supplemental Agreement and the New Finance Documents (including without limitation) all necessary governmental and other official approvals and consents in such pertinent jurisdictions as the Agent deems appropriate; and

(p) evidence that the process agent referred to in clause 30.4 of the Loan Agreement has accepted its appointment as agent for service of process under this Supplemental Agreement and the New Finance Documents.

5 VARIATIONS TO LOAN AGREEMENT AND FINANCE DOCUMENTS

5.1 In consideration of the agreement of the Creditor Parties contained in Clause 3.1 of this Supplemental Agreement, the Borrower hereby agrees with the Creditor Parties that upon satisfaction of the conditions referred to in Clause 4.1, the provisions of the Loan Agreement shall be varied and/or amended and/or supplemented with effect on and from the Effective Date as follows:

(a) by inserting in clause 1.1 thereof the definitions of “Additional Earnings Account”, “Additional Earnings Account Pledge”, “Amendment Mortgage”, “Dollar Spot Rate of Exchange”, “EMU Legislation”, “Euro”, “Monteagle”, “New Charterparty Assignments”, “New Earnings Accounts”, “New Finance Documents”, “New General Assignment”, “New Guarantees”, “New Manager’s Undertakings”, “New Mortgage”, “New Owner”,

8

“New Ship”, “New Retention Accounts”, “OLIVA”, “Oliva Earnings Account”, “Oliva Earnings Account Pledge”, “Oliva Retention Account”, “Oliva Retention Account Pledge”, “Participating Member State”, “RAPALLO”, “Rapallo Earnings Account”, “Rapallo Earnings Account Pledge”, “Rapallo Retention Account”, “Rapallo Retention Account Pledge”, “Retention Account”, “Retention Account Pledge”, “Roscoe”, “Third Stage”, “Treaty on European Union” and “Waiver Period” set out in Clause 1.2;

(b) the definition of, and references throughout each of the Finance Documents to, the Mortgage shall be construed as if the same referred to the Mortgage as amended and supplemented by the Amendment Mortgage;

(c) by adding the words “or a New Ship” after the word “Ship” in the definitions of “Approved Manager”, “Earnings”, “Environmental Incident”, “General Assignment”, “Insurances”, “Major Casualty”, “Market Value”, “Permitted Security Interest”, “Total Loss” and “Total Loss Date” each in clause 1.1 thereof;

(d) by adding after the words “the Borrower” the words “, the relevant New Owner” in the definition of “Earnings”, “Environmental Incident”, “Finance Documents”, “Permitted Security Interests”, “Total Loss” and “Total Loss Date” in clause 1.1 thereof;

(e) by adding to the definition of “Finance Documents” in clause 1.1 thereof a new sub-paragraph (1) as follows:

“(1) the new Finance Documents;”;

(f) by re-designating the existing sub-paragraph (1) in the definition of “Finance Documents” in clause 1.1 thereof as a new sub-paragraph (m);

(g) by deleting the definition of “Margin” in clause 1.1 thereof in its entirety and replacing it with the following new definition:

““Margin” means 1.85 per cent. per annum in respect of both Tranches;”;

(h) by adding the words “the New Owners” after the word “Guarantor” in the definition of “Security Party” in clause 1.1 thereof;

(i) by adding the words “or a New Ship” after the words “the Ship” in:

(i) the third and fourth line of “excess risk” in clause 1.2 thereof;

(ii) the first and second lines of the definition of “obligatory insurances” in clause 1.2 thereof;

(iii) the third line of clause 11.11 thereof;

(iv) the first line of clause 15.3 thereof;

(v) the first line of clause 19.l(j) thereof;

(vi) the first line of clause 19.l(m) thereof; and

(vii) the first line of clause 19.1(o)(ii) thereof;

(j) by adding the words “or the relevant New Ship” after the words “the Ship” in clause 15.3 (c) thereof;

(k) by adding the words “or a New Owner” after the words “the Borrower” in:

(i) the second line of sub-paragraph (1) in the definition of “Finance Documents” thereof;

9

(ii) the seventh line of clause 19.1(g)(iv) thereof;

(iii) the first and second line of sub-paragraph 19.1(j); and

(iv) the first line of sub-paragraph (i) in clause 19.1(o) thereof and in the second line of the last paragraph of clause 19.1(o) thereof;

(1) by adding the words “or the relevant New Owner” after the words “the Borrower” in:

(i) the second line of the definition of “obligatory insurances” in clause 1.2 thereof; and

(ii) the second line of clause 19.1(m) thereof;

(m) by deleting clause 2.4 thereof in its entirety and replacing it with the following:

“2.4 Market Flex. The Borrower agrees that the Agent shall be entitled, after consultation with the Borrower and the Guarantor, to change the pricing, with the exception of the arrangement fee to be capped at up to 0.50% of the aggregate Contributions terms and structure of the Loan outlined in this Agreement if the Mandated Lead Arranger considers that such changes would be necessary in order to enhance the prospects of a syndicate or transfer and the Borrower shall enter into such documentation as may be required by the Agent in order to document the resultant amendments to this Agreement and any of the other Finance Documents. To determine whether the changes suggested by the Mandated Lead Arranger will in fact enhance the prospects of a Successful Syndication the Agent shall contact 3 banks or financial institutions experienced in ship finance which shall be selected with the prior approval of the Borrower (which shall not be unreasonably withheld or delayed) to seek their opinion.”

(n) by deleting clause 2.5 thereof in its entirety and replacing it with the following:

“2.5 Transfer of the Loan. Norddeutsche Landesbank Girozentrale is entitled to syndicate or transfer a part of its Contribution in accordance with the applicable provisions of Clause 26 at any time during the Security Period Provided that following such syndication or transfer its remaining Contribution is greater than that of any other Lender.”;

(o) by deleting clause 2.6 thereof in its entirety and replacing it with the following:

“2.6 Determination of Tranches. If any changes are made to the Loan pursuant to Clause 2.4, the Agent is entitled at the same time to determine the amounts of Tranche A and Tranche B and shall advise the Borrower in writing of the amount of each Tranche and the Borrower agrees and acknowledges that such determination shall be final and binding on the Borrower save in the case of manifest error.

(p) by deleting clause 5.16 thereof in its entirety;

(q) by deleting clause 8.5(a) thereof in its entirety and replacing it with the following:

“(a) a partial prepayment shall be $250,000 or a multiple of $250,000 (other than in the case of the partial prepayments made pursuant to Clause 18.2 where all partial prepayments shall be $100,000 or a multiple of $100,000);”

10

(r) by deleting clause 8.8 thereof in its entirety and replacing it with the following new clause:

“8.8 Mandatory prepayment. Without prejudice to the provisions of Clause 15, the Borrower shall be obliged to apply the whole of the sale or Total Loss Proceeds of the Ship or a New Ship in prepayment of the Loan in the following circumstances:

(a) if the Ship or a New Ship is sold, on or before the date on which the sale is completed by delivery of the Ship or the relevant New Ship to its buyer; or

(b) if a Ship or a New Ship becomes a Total Loss, on the earlier of the date falling 180 days after the Total Loss Date relative thereto relating thereto and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss.”;

(s) by deleting clause 8.10(a) thereof in its entirety and replacing it with the following new clause:

“(c) Clauses 8.4 and 18.2(b), shall be applied first against the balloon instalment of Tranche A and thereafter against the balloon instalment of Tranche B. Thereafter any balance shall be applied first against the then outstanding repayment instalments in respect of Tranche A in inverse order of maturity and thereafter against the then outstanding repayment instalments in respect of Tranche B in inverse order of maturity.”

(t) by deleting clause 18 thereof in its entirety and replacing it with the following new clause:

“18. APPLICATION OF EARNINGS

18.1 Payment of Earnings. The Borrower undertakes with each Creditor Party to ensure that, throughout the Security Period (and subject only to the provisions of the General Assignment and the applicable New General Assignment), all the Earnings of the Ship are paid to the Earnings Account or, as the case may be, the Additional Earnings Account if the currency of the payments is Euro, and all the Earnings of each New Ship are paid to the New Earnings Accounts relative thereto.

18.2 Minimum retentions and application.

(a) The Borrower undertakes with each Creditor Party to ensure that on 31 December and 30 June in each calendar year (commencing from 31 December 2009) or, at the option of the Borrower or the New Owners, at the end of each calendar month, there is transferred to the Retention Account the Surplus or, as the case may be, the Monthly Surplus out of the aggregate Earnings received in the Earnings Accounts, the Additional Earnings Account (converted, in the case of the Euro balances on Additional Earnings Account, into Dollars at the applicable Dollar Spot Rate of Exchange) and, until and including 29 January 2012, the New Earnings Accounts during the preceding 6-month period (or, in the case of the first period ending on 31 December 2009, all Earnings standing to the credit of the afore said accounts on that date) or, if the Borrower opts to effect the transfer at the end of a calendar month, the preceding month.

(b) The Agent shall apply on 29 July and/or (in the Agent’s sole discretion) 29 January in each calendar year (commencing as from 29 January 2010) the Surplus held in the Retention Account towards prepayment of the Loan (and such prepayment shall be applied in accordance with Clause 8.10(a)).

11

In this Clause 18.2, “Monthly Surplus” means, on the last day in any calendar month (commencing with the month ending on 30 November 2009), the aggregate of the Earnings of the Ship and the New Ships standing to the credit of the Earnings Account, the Additional Earnings Account and the New Earnings Accounts, after deducting the aggregate of the operating expenses of the Ship (including, without limitation, the general administrative expenses, the maintenance costs and the debt service amounts) and the New Ships which the Agent is satisfied (in its sole discretion) have accrued during that calendar month; and

“Surplus” means, in any 6-month period ending on 30 June and 31 December in each calendar year, the aggregate of the Monthly Surpluses during that 6-month period.

18.3 Interest accrued on accounts. Any current interest requires separate documentation.

18.4 Location of accounts. The Borrower shall promptly:

(a) comply, or procure the compliance by the New Owners of, with any requirement of the Agent as to the location or re-location of the Earnings Account, the Additional Earnings Account, the Retention Account, the New Retention Accounts and the New Earnings Accounts (or any of them);

(b) execute, or procure that the New Owners execute, any documents which the Agent specifies to create or maintain in favour of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation to) the Earnings Account, the Additional Earnings Account, the Retention Account, the New Retention Accounts and the New Earnings Accounts (or any of them).

18.5 Debits for expenses etc. The Agent shall be entitled (but not obliged) from time to time to debit the Earnings Account, the Additional Earnings Account or the New Earnings Accounts (or any of them) without prior notice in order to discharge any amount due and payable under Clause 20 or 21 to a Creditor Party or payment of which any Creditor Party has become entitled to demand under Clause 20 or 21.”

(u) by deleting 15.1(a) thereof in its entirety and replacing it with the following new sub-paragraph:

“15.1 Minimum required security cover. Clause 15.2 applies if the Agent notifies the Borrower (at any time other than during the Waiver Period) that:

(a) the Market Value of the Ship plus the aggregate Market Value of the New Ships; plus”

(v) by deleting clause 30 in its entirety and replacing it with the following:

“30 LAW AND JURISDICTION

30.1 English law. This Deed and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.

30.2 Exclusive English jurisdiction. Subject to Clause 30.3, the courts of England shall have exclusive jurisdiction to settle any Dispute.

12

30.3 Choice of forum for the exclusive benefit of the Creditor Parties. Clause 30.2 is for the exclusive benefit of the Creditor Parties, each of which reserves the right:

(a) to commence proceedings in relation to any Dispute in the courts of any country other than England and which have or claim jurisdiction to that Dispute; and

(w) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

The Borrower shall not commence any proceedings in any country other than England in relation to a Dispute.

30.4 Process agent. The Borrower irrevocably appoints Ince Process Agents Ltd, whose present address is International House, 1 St. Katherine’s Way, E1N 1UN London, England, to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute.

30.5 Creditor Party rights unaffected. Nothing in this Clause 30 shall exclude or limit any right which any Creditor Party may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

30.6 Meaning of “proceedings”. In this Clause 30, “proceedings” means proceedings of any kind, including an application for a provisional or protective measure and a “Dispute” means any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement) or any non-contractual obligation arising out of or in connection with this Agreement.”;

(w) by construing all references therein to “this Agreement” where the context admits as being references to “this Agreement as the same is amended and supplemented by this Supplemental Agreement and as the same may from time to time be further supplemented and/or amended”; and

(x) by construing references to each of the Finance Documents as being references to each such document as it is from time to time supplemented and/or amended.

5.2 Amendments to the Guarantee. With effect on and from the Effective Date the Guarantee shall be deemed by this Supplemental Agreement to have been, amended as follows:

(a) by deleting clause 11.13 thereof in its entirety and replacing it with the following clause:

“11.13 No merger etc. The Guarantor shall not, without the Agent’s prior written consent:

(i) enter into any amalgamation, demerger, merger or corporate reconstruction other than the corporate reconstruction allowing only Ocean Rig UDW Inc., a corporation incorporated under the laws of The Marshall Islands whose registered office is at The Trust Company Complex, Ajeltake Island, Majuro, Marshall Islands, to cease being a subsidiary of the Guarantor; or

13

(ii) make any substantial change to the general nature of its business from that carried on at the date of this Guarantee; or

(iii) engage in any business other than that advised to the Security Trustee at the date of this Guarantee.”

1.3 Amendments to Finance Documents. With effect on and from the Effective Date each of the Finance Documents other than the Loan Agreement shall be, and shall be deemed by this Agreement to have been, amended as follows:

(a) the definition of, and references throughout each of the Finance Documents to, the Loan Agreement and any of the other Finance Documents shall be construed as if the same referred to the Loan Agreement and those Finance Documents as amended and supplemented by this Supplemental Agreement (and, in the case of the Mortgage, by the Amendment Mortgage); and

(b) by construing references throughout each of the Finance Documents to “this Agreement”, “this Deed”, “hereunder and other like expressions as if the same referred to such Finance Documents as amended and supplemented by this Supplemental Agreement.

5.2 Finance Documents to remain in full force and effect. The Finance Documents shall remain in full force and effect as amended and supplemented by:

(a) the amendments to the Finance Documents contained or referred to in Clauses 5.1 and 5.2; and

(b) such further or consequential modifications as may be necessary to make the same consistent with, and to give full effect to, the terms of this Supplemental Agreement.

6 CONTINUANCE OF LOAN AGREEMENT AND FINANCE DOCUMENTS

6.1 Save for the alterations to the Loan Agreement and the other Finance Documents made or to be made pursuant to this Supplemental Agreement and the Amendment Mortgage and such further modifications (if any) thereto as may be necessary to make the same consistent with the terms of this Supplemental Agreement, the Loan Agreement shall remain in full force and effect and the security constituted by the other Finance Documents shall continue and remain valid and enforceable.

7 EXPENSES

7.1 Fees and expenses. The provisions of clause 20 (fees and expenses) of the Loan Agreement shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary amendments.

8 COMMUNICATIONS

8.1 General. The provisions of clause 28 (notices) of the Loan Agreement, as amended and supplemented by this Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary modifications.

9 SUPPLEMENTAL

9.1 Counterparts. This Agreement may be executed in any number of counterparts.

9.2 Third Party rights. A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

14

10 LAW AND JURISDICTION

10.1 Governing law. This Agreement shall be governed by and construed in accordance with English law.

10.2 Incorporation of the Loan Agreement provisions. The provisions of clause 30 (law and jurisdiction) of the Loan Agreement, as amended and supplemented by this Agreement, shall apply to this Agreement as if they were expressly incorporated in this Agreement with any necessary medications.

IN WITNESS WHEREOF the parties hereto have caused this Supplemental Agreement to be duly executed the day and year first above written.

15

SCHEDULE I

LENDERS

Lender	Lending Office	Contribution
		(US Dollars)
Norddeutsche Landesbank Girozentrale	Friedrichswall 10 D-30159 Hannover Germany	126,400,000

16

EXECUTION PAGE

BORROWER
SIGNED by EUGENIA PAPAPONTIKOU for and on behalf of CRETAN TRADERS INC.	) ) )	/s/ Eugenia Papapontikou
GUARANTOR
SIGNED by EUGENIA PAPAPONTIKOU for and on behalf of DRYSHIPS INC.	) ) )	/s/ Eugenia Papapontikou
LENDERS
SIGNED by ERICA LACOMBE for and on behalf of NORDDEUTSCHE LANDESBANK GIROZENTRALE	) ) ) )	/s/ Erica Lacombe
SWAP BANK
SIGNED by ERICA LACOMBE for and on behalf of NORDDEUTSCHE LANDESBANK GIROZENTRALE	) ) ) )	/s/ Erica Lacombe
UNDERWRITER
SIGNED by ERICA LACOMBE for and on behalf of NORDDEUTSCHE LANDESBANK GIROZENTRALE	) ) ) )	/s/ Erica Lacombe
MANDATED LEAD ARRANGER
SIGNED by ERICA LACOMBE for and on behalf of NORDDEUTSCHE LANDESBANK GIROZENTRALE	) ) ) )	/s/ Erica Lacombe

17

BOOKRUNNER
SIGNED by ERICA LACOMBE	)	/s/ Erica Lacombe
for and on behalf of	)
NORDDEUTSCHE LANDESBANK	)
GIROZENTRALE	)
AGENT
SIGNED by ERICA LACOMBE	)	/s/ Erica Lacombe
for and on behalf of	)
NORDDEUTSCHE LANDESBANK	)
GIROZENTRALE	)
SECURITY TRUSTEE
SIGNED by ERICA LACOMBE	)	/s/ Erica Lacombe
for and on behalf of	)
NORDDEUTSCHE LANDESBANK	)
GIROZENTRALE	)

Witness to all the		)	/s/ Vassilike Georgopoulos
above signatures		)
Name:
Address:

18

COUNTERSIGNED this day 12 of October 2009 for and on behalf of Cardiff Marine Inc. which, by its execution hereof, confirms and acknowledges that it has read and understood the terms and conditions of this Supplemental Agreement, that it agrees in all respects to the same and that the Finance Documents to which it is a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrower under the Loan Agreement and the Master Agreement.

/s/ Maria Phylactov

MARIA PHYLACTOV

for and on behalf of

CARDIFF MARINE INC.

19

EX-4.51

Exhibit 4.51

Execution Version

SUPPLEMENTAL AGREEMENT

17 SEPTEMBER 2008

DRILLSHIP SKOPELOS OWNERS INC.

as Owner

DEUTSCHE BANK AG, LONDON BRANCH

as Bookrunner and Joint Mandated Lead Arranger

DEXIA CREDIT LOCAL, NEW YORK BRANCH

as Joint Mandated Lead Arranger

DEUTSCHE BANK AG, LONDON BRANCH

and

DEXIA CREDIT LOCAL, NEW YORK BRANCH

as Swap Banks

DEUTSCHE BANK LUXEMBOURG S.A.

as Facility Agent

and

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHAFT

as Security Trustee

Relating to

US$562,500,000 CREDIT FACILITY AGREEMENT

Dated 18 July 2008

ALLEN & OVERY

Allen & Overy LLP

London

CONTENTS

Clause		Page
1.	Definitions and Interpretation	3
2.	Amendments to the Credit Agreement	3
3.	Representations and Warranties	4
4.	Miscellaneous	4
5.	Further Assurance	4
6.	Governing Law and Jurisdiction	5
Signatories		6

THIS AGREEMENT is dated 17 September 2008

BETWEEN:

(1) DRILLSHIP SKOPELOS OWNERS INC., a corporation incorporated in the Marshall Islands with registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 as borrower (the Owner);

(2) DEUTSCHE BANK AG, LONDON BRANCH as bookrunner and joint mandated lead arranger and bookrunner (in this capacity the Bookrunner and Joint Mandated Lead Arranger);

(3) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as joint mandated lead arranger (in this capacity the Joint Mandated Lead Arranger);

(4) DEUTSCHE BANK AG, LONDON BRANCH as swap bank (in this capacity a Swap Bank);

(5) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as swap bank (in this capacity a Swap Bank);

(6) DEUTSCHE BANK LUXEMBOURG S.A., as facility agent and acting on behalf of the Finance Parties (as defined in the Credit Agreement) (the Facility Agent); and

(7) DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHAFT as security trustee (in this capacity the Security Trustee).

WHEREAS:

(A) By the credit facility agreement dated 18 July 2008 between, inter alia, the Owner as the Borrower, the financial institutions referred to therein as Lenders, Deutsche Bank AG, London Branch as Bookrunner and Joint Mandated Lead Arranger, Dexia Credit Local, New York Branch as Joint Mandated Lead Arranger, Deutsche Bank AG, London Branch and Dexia Credit Local, New York Branch as Swap Banks, Deutsche Bank Luxembourg S.A. as the Facility Agent and Deutsche Bank AG Filiale Deutschlandgeschaft as the Security Trustee, (the Credit Agreement), the Lenders have made available to the Owner secured credit facilities up to US$562,500,000.

(B) The Parties wish to amend the Credit Agreement in accordance with the provisions of this Agreement.

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

Unless a contrary indication appears, a term used in the Credit Agreement has the same meaning in this Agreement. The principles of construction set out in Clause 1.2 of the Credit Agreement shall have effect as if set out in this Agreement.

2. AMENDMENTS TO THE CREDIT AGREEMENT

(a) As of and with effect from the date of this Agreement, the definition of Manager under the Credit Agreement will be amended to read as follows:

“Manager means Ocean Rig AS (whether acting alone or through Cardiff Marine Inc. as provider of certain administrative services) or such other person in each case approved by the Charterer from time to time and the Facility Agent (acting on the instructions of the Majority Lenders).”

3

(b) As of and with effect from the date of this Agreement, Clause 3.1 (a) of the Credit Agreement will be amended to read as follows:

“(a) A Request in respect of any Loan may not be given until the Facility Agent has notified the Owner and the Lenders that it has received all of the documents and evidence set out in Schedule 2 (Conditions Precedent) in respect of the Loan the subject of that Request in form and substance satisfactory to the Facility Agent or that it expects to receive outstanding documents or evidence on or before the Utilisation Date of such Loan or, in the case of evidence on the payment of the Equity Contribution, Balancing Equity Contribution or Equity Collateral, on or before the date which falls one (1) Business Day after the date of service of the relevant Request to the Facility Agent (provided that it will be a condition precedent to the obligations of each Lender to advance such Loan that, as at the relevant Utilisation Date (or, in the case of evidence of the payment of the Equity Contribution, Balancing Equity Contribution or Equity Collateral, as at the date which falls one (1) Business Day after the date the Request is served), such outstanding documents or evidence have been received by the Facility Agent in form and substance satisfactory to the Facility Agent. The Facility Agent must give this notification to the Owner and the Lenders promptly upon being so satisfied.”

(c) As of and with effect from the date of this Agreement, Clause 4.2 (a) (iii) (B) of the Credit Agreement will be amended to read as follows:

“(B) for the second Incidental Vessel Costs Loan, is a date not earlier than 31 October 2008 and for any other Incidental Vessel Costs Loan, is a date falling at least three (3) months after the previous Incidental Vessel Costs Loan Utilisation Date;”

3. REPRESENTATIONS AND WARRANTIES

The representations and warranties set out in Clause 14 (Representations and Warranties) of the Credit Agreement are true as if made on the date of this Agreement, in each case as if references to the Credit Agreement are references to the Credit Agreement, as amended by this Agreement, with reference to the facts and circumstances then existing.

4. MISCELLANEOUS

(a) This Agreement and the Credit Agreement as amended by this Agreement is a Finance Document.

(b) Subject to the terms of this Agreement, the Credit Agreement will remain in full force and effect and, from the date of this Agreement, the Credit Agreement and this Agreement will be read and construed as one document.

5. FURTHER ASSURANCE

Each of the Parties hereto shall do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Agreement.

4

6. GOVERNING LAW AND JURISDICTION

The provisions of Clause 35 (Governing Law) and Clause 36 (Enforcement) of the Credit Agreement shall be incorporated in this Agreement as if they were set out in full in this Agreement and as if references in that Clause to “this Agreement” are references to this Agreement.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

5

SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner
/s/ Alexandros Mylonas
Signed by ALEXANDROS MYLONAS
as attorney for
DRILLSHIP SKOPELOS OWNERS INC.
in the presence of:
Witness:	/s/ Stelios N. Deverakis
	STELIOS N. DEVERAKIS
The Bookrunner and Joint Mandated Lead Arranger
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

6

SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner

Signed by

as attorney for

DRILLSHIP SKOPELOS OWNERS INC.

in the presence of:

Witness:
The Bookrunner and Joint Mandated Lead Arranger
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

6

SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner

Signed by

as attorney for

DRILLSHIP SKOPELOS OWNERS INC.

in the presence of:

Witness:

The Bookrunner and Joint Mandated Lead Arranger

By:

as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:	/s/ Daniel Ivanier
as authorised signatory for	DANIEL IVANIER General Manager
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Daniel Ivanier
	DANIEL IVANIER
as authorised signatory for	General Manager
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

6

The Facility Agent
acting on its own behalf and on behalf of the Finance Parties
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK LUXEMBOURG S.A.
The Security Trustee
By:
as authorised signatory for
DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

7

The Facility Agent
acting on its own behalf and on behalf of the Finance Parties
By:
as authorised signatory for
DEUTSCHE BANK LUXEMBOURG S.A.
The Security Trustee
By:	/s/ Illegible            /s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

7

EX-4.52

Exhibit 4.52

Execution Version

SUPPLEMENTAL AGREEMENT

17 SEPTEMBER 2008

DRILLSHIP KITHIRA OWNERS INC.

as Owner

DEUTSCHE BANK AG, LONDON BRANCH

as Bookrunner and Joint Mandated Lead Arranger

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Joint Mandated Lead Arranger

DEUTSCHE BANK AG, LONDON BRANCH

and

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Swap Banks

DEUTSCHE BANK LUXEMBOURG S.A.

as Facility Agent

and

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

as Security Trustee

Relating to

US$562,500,000 CREDIT FACILITY AGREEMENT

Dated 18 July 2008

Allen & Overy LLP

London

CONTENTS

Clause		Page
1.	Definitions and Interpretation	3
2.	Amendments to the Credit Agreement	3
3.	Representations and Warranties	4
4.	Miscellaneous	4
5.	Further Assurance	4
6.	Governing Law and Jurisdiction	5
Signatories		6

THIS AGREEMENT is dated 17 September 2008

BETWEEN:

(1) DRILLSHIP KITHIRA OWNERS INC., a corporation incorporated in the Marshall Islands with registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 as borrower (the Owner);

(2) DEUTSCHE BANK AG, LONDON BRANCH as bookrunner and joint mandated lead arranger and bookrunner (in this capacity the Bookrunner and Joint Mandated Lead Arranger);

(3) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as joint mandated lead arranger (in this capacity the Joint Mandated Lead Arranger);

(4) DEUTSCHE BANK AG, LONDON BRANCH as swap bank (in this capacity a Swap Bank);

(5) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as swap bank (in this capacity a Swap Bank);

(6) DEUTSCHE BANK LUXEMBOURG S.A., as facility agent and acting on behalf of the Finance Parties (as defined in the Credit Agreement) (the Facility Agent); and

(7) DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT as security trustee (in this capacity the Security Trustee).

WHEREAS:

(A) By the credit facility agreement dated 18 July 2008 between, inter alia, the Owner as the Borrower, the financial institutions referred to therein as Lenders, Deutsche Bank AG, London Branch as Bookrunner and Joint Mandated Lead Arranger, Dexia Crédit Local, New York Branch as Joint Mandated Lead Arranger, Deutsche Bank AG, London Branch and Dexia Crédit Local, New York Branch as Swap Banks, Deutsche Bank Luxembourg S.A. as the Facility Agent and Deutsche Bank AG Filiale Deutschlandgeschäft as the Security Trustee, (the Credit Agreement), the Lenders have made available to the Owner secured credit facilities up to US$562,500,000.

(B) The Parties wish to amend the Credit Agreement in accordance with the provisions of this Agreement.

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

Unless a contrary indication appears, a term used in the Credit Agreement has the same meaning in this Agreement. The principles of construction set out in Clause 1.2 of the Credit Agreement shall have effect as if set out in this Agreement.

2. AMENDMENTS TO THE CREDIT AGREEMENT

(a) As of and with effect from the date of this Agreement, the definition of Manager under the Credit Agreement will be amended to read as follows:

“Manager means Ocean Rig AS (whether acting alone or through Cardiff Marine Inc. as provider of certain administrative services) or such other person in each case approved by the Charterer from time to time and the Facility Agent (acting on the instructions of the Majority Lenders).”

3

(b) As of and with effect from the date of this Agreement, Clause 3.1 (a) of the Credit Agreement will be amended to read as follows:

“(a) A Request in respect of any Loan may not be given until the Facility Agent has notified the Owner and the Lenders that it has received all of the documents and evidence set out in Schedule 2 (Conditions Precedent) in respect of the Loan the subject of that Request in form and substance satisfactory to the Facility Agent or that it expects to receive outstanding documents or evidence on or before the Utilisation Date of such Loan or, in the case of evidence on the payment of the Equity Contribution, Balancing Equity Contribution or Equity Collateral, on or before the date which falls one (1) Business Day after the date of service of the relevant Request to the Facility Agent (provided that it will be a condition precedent to the obligations of each Lender to advance such Loan that, as at the relevant Utilisation Date (or, in the case of evidence of the payment of the Equity Contribution, Balancing Equity Contribution or Equity Collateral, as at the date which falls one (1) Business Day after the date the Request is served), such outstanding documents or evidence have been received by the Facility Agent in form and substance satisfactory to the Facility Agent. The Facility Agent must give this notification to the Owner and the Lenders promptly upon being so satisfied.”

(c) As of and with effect from the date of this Agreement, Clause 4.2 (a) (iii) (B) of the Credit Agreement will be amended to read as follows:

“(B) for the second Incidental Vessel Costs Loan, is a date not earlier than 31 October 2008 and for any other Incidental Vessel Costs Loan, is a date falling at least three (3) months after the previous Incidental Vessel Costs Loan Utilisation Date;”

3. REPRESENTATIONS AND WARRANTIES

The representations and warranties set out in Clause 14 (Representations and Warranties) of the Credit Agreement are true as if made on the date of this Agreement, in each case as if references to the Credit Agreement are references to the Credit Agreement, as amended by this Agreement, with reference to the facts and circumstances then existing.

4. MISCELLANEOUS

(a) This Agreement and the Credit Agreement as amended by this Agreement is a Finance Document.

(b) Subject to the terms of this Agreement, the Credit Agreement will remain in full force and effect and, from the date of this Agreement, the Credit Agreement and this Agreement will be read and construed as one document.

5. FURTHER ASSURANCE

Each of the Parties hereto shall do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Agreement.

4

6. GOVERNING LAW AND JURISDICTION

The provisions of Clause 35 (Governing Law) and Clause 36 (Enforcement) of the Credit Agreement shall be incorporated in this Agreement as if they were set out in full in this Agreement and as if references in that Clause to “this Agreement” are references to this Agreement.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

5

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner

/s/ Alexandros Mylonas

Signed by ALEXANDROS MYLONAS

as attorney for
DRILLSHIP KITHIRA OWNERS INC.
in the presence of:	/s/ Stelios N. Deverakis
	STELIOS N. DEVERAKIS
Witness:

The Bookrunner and Joint Mandated Lead Arranger

By:

as authorised signatory for

DEUTSCHE BANK AG, LONDON BRANCH

The Joint Mandated Lead Arranger

By:

as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

The Swap Banks

By:

as authorised signatory for

DEUTSCHE BANK AG, LONDON BRANCH

By:

as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

6

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner

Signed by

as attorney for

DRILLSHIP KITHIRA OWNERS INC.

in the presence of:

Witness:

The Bookrunner and Joint Mandated Lead Arranger
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH

The Joint Mandated Lead Arranger

By:

as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

The Swap Banks

By: /s/ Illegible                /s/ Illegible

as authorised signatory for

DEUTSCHE BANK AG, LONDON BRANCH

By:

as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

6

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner

Signed by

as attorney for

DRILLSHIP KITHIRA OWNERS INC.

in the presence of:

Witness:

The Bookrunner and Joint Mandated Lead Arranger

By:

as authorised signatory for

DEUTSCHE BANK AG, LONDON BRANCH

The Joint Mandated Lead Arranger

By:	/s/ Daniel Ivanier
	DANIEL IVANIER
	General Manager

as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

The Swap Banks

By:

as authorised signatory for

DEUTSCHE BANK AG, LONDON BRANCH

By:	/s/ Daniel Ivanier
	DANIEL IVANIER
	General Manager

as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

6

The Facility Agent

acting on its own behalf and on behalf of the Finance Parties

By: /s/ Illegible                /s/ Illegible

as authorised signatory for

DEUTSCHE BANK LUXEMBOURG S.A.

The Security Trustee

By:

as authorised signatory for

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

7

The Facility Agent

acting on its own behalf and on behalf of the Finance Parties

By:

as authorised signatory for

DEUTSCHE BANK LUXEMBOURG S.A.

The Security Trustee

By: /s/ Illegible                /s/ Illegible

as authorised signatory for

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

7

EX-4.53

Exhibit 4.53

Execution Version

SUPPLEMENTAL AGREEMENT NO. 2

18 DECEMBER 2008

DRILLSHIP SKOPELOS OWNERS INC.

as Owner

DEUTSCHE BANK AG, LONDON BRANCH

as Bookrunner and Joint Mandated Lead Arranger

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Joint Mandated Lead Arranger

DEUTSCHE BANK AG, LONDON BRANCH

and

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Swap Banks

DEUTSCHE BANK LUXEMBOURG S.A.

as Facility Agent

and

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

as Security Trustee

Relating to

US$562,500,000 CREDIT FACILITY AGREEMENT

Dated 18 July 2008

as amended and supplemented by Supplemental Agreement dated 17 September 2008

Allen & Overy LLP

London

CONTENTS

Clause		Page
1.	Definitions and Interpretation	3
2.	Amendments to the Credit Agreement	3
3.	Representations and Warranties	4
4.	Miscellaneous	4
5.	Further Assurance	4
6.	Governing Law and Jurisdiction	4
Signatories		5

THIS AGREEMENT is dated 18 December 2008

BETWEEN:

(1) DRILLSHIP SKOPELOS OWNERS INC., a corporation incorporated in the Marshall Islands with registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 as borrower (the Owner);

(2) DEUTSCHE BANK AG, LONDON BRANCH as bookrunner and joint mandated lead arranger and bookrunner (in this capacity the Bookrunner and Joint Mandated Lead Arranger);

(3) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as joint mandated lead arranger (in this capacity the Joint Mandated Lead Arranger);

(4) DEUTSCHE BANK AG, LONDON BRANCH as swap bank (in this capacity a Swap Bank);

(5) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as swap bank (in this capacity a Swap Bank);

(6) DEUTSCHE BANK LUXEMBOURG S.A., as facility agent and acting on behalf of the Finance Parties (as defined in the Credit Agreement) (the Facility Agent); and

(7) DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT as security trustee (in this capacity the Security Trustee).

WHEREAS:

(A) By the credit facility agreement dated 18 July 2008 as amended and supplemented by a supplemental agreement dated 17 September 2008 between, inter alia, the Owner as the Borrower, the financial institutions referred to therein as Lenders, Deutsche Bank AG, London Branch as Bookrunner and Joint Mandated Lead Arranger, Dexia Crédit Local, New York Branch as Joint Mandated Lead Arranger, Deutsche Bank AG, London Branch and Dexia Crédit Local, New York Branch as Swap Banks, Deutsche Bank Luxembourg S.A. as the Facility Agent and Deutsche Bank AG Filiale Deutschlandgeschäft as the Security Trustee, (the Credit Agreement), the Lenders have made available to the Owner secured credit facilities up to US$562,500,000.

(B) The Parties wish amend the Credit Agreement in accordance with the provisions of this Agreement.

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

Unless a contrary indication appears, a term used in the Credit Agreement has the same meaning in this Agreement. The principles of construction set out in Clause 1.2 of the Credit Agreement shall have effect as if set out in this Agreement.

2. AMENDMENTS TO THE CREDIT AGREEMENT

As of and with effect from the date of this Agreement, Clause 4.4 of the Credit Agreement will be amended to read as follows:

“4.4 Capitalisation of interest payable to Commercial Lenders and KEXIM Lenders

(a) During the Pre-Completion Period the Commitment fee payable in accordance with Clause 22.1 (Commitment fee), and interest calculated and payable in accordance with Clause 7.1

3

(a) and 7.1 (c) (other than any such Commitment fees or interest included in the Incidental Costs Loan or interest payable to the Eksportfinans Lenders under this Agreement) shall accrue and shall, on the last day of each Term during the Pre-Completion Period, be capitalised and added to the principal amount of the Loans outstanding.

(b) The amount of any Incidental Loan Costs to be capitalised may not in any circumstances exceed, when aggregated with the Loans already made and amounts of Incidental Loan Costs already capitalised under the relevant Loan, the Maximum Facility Amount or cause the applicable LTC Ratio set out in Clause 4.2 (c) (i) or 4.2 (c) (ii) to be breached. Any Incidental Loan Costs due and payable which cannot be capitalised in accordance with this Clause 4.4 must be paid by the Owner on the due date.”

3. REPRESENTATIONS AND WARRANTIES

The representations and warranties set out in Clause 14 (Representations and Warranties) of the Credit Agreement are true as if made on the date of this Agreement, in each case as if references to the Credit Agreement are references to the Credit Agreement, as amended by this Agreement, with reference to the facts and circumstances then existing.

4. MISCELLANEOUS

(a) This Agreement and the Credit Agreement as amended by this Agreement is a Finance Document.

(b) Subject to the terms of this Agreement, the Credit Agreement will remain in full force and effect and, from the date of this Agreement, the Credit Agreement and this Agreement will be read and construed as one document.

5. FURTHER ASSURANCE

Each of the Parties hereto shall do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Agreement.

6. GOVERNING LAW AND JURISDICTION

The provisions of Clause 35 (Governing Law) and Clause 36 (Enforcement) of the Credit Agreement shall be incorporated in this Agreement as if they were set out in full in this Agreement and as if references in that Clause to “this Agreement” are references to this Agreement.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

4

SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner
Signed by	/s/ Alexandros Mylonas
as attorney for	ALEXANDROS MYLONAS
DRILLSHIP SKOPELOS OWNERS INC. in the presence of:
Witness:	/s/ Dimitris Papavasileiou
	DIMITRIS PAPAVASILEIOU
The Bookrunner and Joint Mandated Lead Arranger
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

5

SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner
Signed by as attorney for
DRILLSHIP SKOPELOS OWNERS INC. in the presence of:
Witness:
The Bookrunner and Joint Mandated Lead Arranger
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

5

SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner
Signed by as attorney for DRILLSHIP SKOPELOS OWNERS INC. in the presence of:
Witness:
The Bookrunner and Joint Mandated Lead Arranger
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:	/s/ Daniel Ivanier
	DANIEL IVANIER
	General Manager
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Daniel Ivanier
	DANIEL IVANIER
	General Manager
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

5

The Facility Agent
acting on its own behalf and on behalf of the Finance Parties
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK LUXEMBOURG S.A.
The Security Trustee
By:
as authorised signatory for
DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

6

The Facility Agent
acting on its own behalf and on behalf of the Finance Parties
By:
as authorised signatory for
DEUTSCHE BANK LUXEMBOURG S.A.
The Security Trustee
By:	/s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

6

EX-4.54

Exhibit 4.54

Execution Version

SUPPLEMENTAL AGREEMENT NO. 2

18 DECEMBER 2008

DRILLSHIP KITHIRA OWNERS INC.

as Owner

DEUTSCHE BANK AG, LONDON BRANCH

as Bookrunner and Joint Mandated Lead Arranger

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Joint Mandated Lead Arranger

DEUTSCHE BANK AG, LONDON BRANCH

and

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Swap Banks

DEUTSCHE BANK LUXEMBOURG S.A.

as Facility Agent

and

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

as Security Trustee

Relating to

US$562,500,000 CREDIT FACILITY AGREEMENT

Dated 18 July 2008

as amended and supplemented by Supplemental Agreement dated 17 September 2008

Allen & Overy LLP

London

CONTENTS

Clause		Page
1.	Definitions and Interpretation	3
2.	Amendments to the Credit Agreement	3
3.	Representations and Warranties	4
4.	Miscellaneous	4
5.	Further Assurance	4
6.	Governing Law and Jurisdiction	4
Signatories		5

THIS AGREEMENT is dated 18 December 2008

BETWEEN:

(1) DRILLSHIP KITHIRA OWNERS INC., a corporation incorporated in the Marshall Islands with registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 as borrower (the Owner);

(2) DEUTSCHE BANK AG, LONDON BRANCH as bookrunner and joint mandated lead arranger and bookrunner (in this capacity the Bookrunner and Joint Mandated Lead Arranger);

(3) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as joint mandated lead arranger (in this capacity the Joint Mandated Lead Arranger);

(4) DEUTSCHE BANK AG, LONDON BRANCH as swap bank (in this capacity a Swap Bank);

(5) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as swap bank (in this capacity a Swap Bank);

(6) DEUTSCHE BANK LUXEMBOURG S.A., as facility agent and acting on behalf of the Finance Parties (as defined in the Credit Agreement) (the Facility Agent); and

(7) DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT as security trustee (in this capacity the Security Trustee).

WHEREAS:

(A) By the credit facility agreement dated 18 July 2008 as amended and supplemented by a supplemental agreement dated 17 September 2008 between, inter alia, the Owner as the Borrower, the financial institutions referred to therein as Lenders, Deutsche Bank AG, London Branch as Bookrunner and Joint Mandated Lead Arranger, Dexia Crédit Local, New York Branch as Joint Mandated Lead Arranger, Deutsche Bank AG, London Branch and Dexia Crédit Local, New York Branch as Swap Banks, Deutsche Bank Luxembourg S.A. as the Facility Agent and Deutsche Bank AG Filiale Deutschlandgeschäft as the Security Trustee, (the Credit Agreement), the Lenders have made available to the Owner secured credit facilities up to US$562,500,000.

(B) The Parties wish amend the Credit Agreement in accordance with the provisions of this Agreement.

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

Unless a contrary indication appears, a term used in the Credit Agreement has the same meaning in this Agreement. The principles of construction set out in Clause 1.2 of the Credit Agreement shall have effect as if set out in this Agreement.

2. AMENDMENTS TO THE CREDIT AGREEMENT

As of and with effect from the date of this Agreement, Clause 4.4 of the Credit Agreement will be amended to read as follows:

“4.4 Capitalisation of interest payable to Commercial Lenders and KEXIM Lenders

(a) During the Pre-Completion Period the Commitment fee payable in accordance with Clause 22.1 (Commitment fee), and interest calculated and payable in accordance with Clause 7.1 (a)

3

and 7.1 (c) (other than any such Commitment fees or interest included in the Incidental Costs Loan or interest payable to the Eksportfinans Lenders under this Agreement) shall accrue and shall, on the last day of each Term during the Pre-Completion Period, be capitalised and added to the principal amount of the Loans outstanding.

(b) The amount of any Incidental Loan Costs to be capitalised may not in any circumstances exceed, when aggregated with the Loans already made and amounts of Incidental Loan Costs already capitalised under the relevant Loan, the Maximum Facility Amount or cause the applicable LTC Ratio set out in Clause 4.2 (c) (i) or 4.2 (c) (ii) to be breached. Any Incidental Loan Costs due and payable which cannot be capitalised in accordance with this Clause 4.4 must be paid by the Owner on the due date.”

3. REPRESENTATIONS AND WARRANTIES

The representations and warranties set out in Clause 14 (Representations and Warranties) of the Credit Agreement are true as if made on the date of this Agreement, in each case as if references to the Credit Agreement are references to the Credit Agreement, as amended by this Agreement, with reference to the facts and circumstances then existing.

4. MISCELLANEOUS

(a) This Agreement and the Credit Agreement as amended by this Agreement is a Finance Document.

(b) Subject to the terms of this Agreement, the Credit Agreement will remain in full force and effect and, from the date of this Agreement, the Credit Agreement and this Agreement will be read and construed as one document.

5. FURTHER ASSURANCE

Each of the Parties hereto shall do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Agreement.

6. GOVERNING LAW AND JURISDICTION

The provisions of Clause 35 (Governing Law) and Clause 36 (Enforcement) of the Credit Agreement shall be incorporated in this Agreement as if they were set out in full in this Agreement and as if references in that Clause to “this Agreement” are references to this Agreement.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

4

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner
Signed by	/s/ Alexandros Mylonas
as attorney for	ALEXANDROS MYLONAS

DRILLSHIP KITHIRA OWNERS INC.

in the presence of:

Witness:	/s/ Dinitris Papavasileiou
	DINITRIS PAPAVASILEIOU

The Bookrunner and Joint Mandated Lead Arranger

By:

as authorised signatory for

DEUTSCHE BANK AG, LONDON BRANCH

The Joint Mandated Lead Arranger

By:

as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

The Swap Banks

By:

as authorised signatory for

DEUTSCHE BANK AG, LONDON BRANCH

By:

as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

5

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner

Signed by

as attorney for

DRILLSHIP KITHIRA OWNERS INC.

in the presence of:

Witness:

The Bookruner and Joint Mandated Lead Arranger

By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

5

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT

Owner

Signed by

as attorney for

DRILLSHIP KITHIRA OWNERS INC.

in the presence of:

Witness:

The Bookrunner and Joint Mandated Lead Arranger

By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:	/s/ Daniel Ivanier
	DANIEL IVANIER
	General Manager
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Daniel Ivanier
	DANIEL IVANIER
	General Manager
as authorised signatory for

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

5

The Facility Agent
acting on its own behalf and or behalf of the Finance Parties
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for
DEUTSCHE BANK LUXEMBOURG S.A.
The Security Trustee
By:
as authorised signatory for

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

6

The Facility Agent
acting on its own behalf and on behalf of the Finance Parties
By:
as authorised signatory for
DEUTSCHE BANK LUXEMBOURG S.A.
The Security Trustee
By:	/s/ Illegible                /s/ Illegible
as authorised signatory for

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

6

EX-4.55

Exhibit 4.55

EXECUTION VERSION

SUPPLEMENTAL AGREEMENT NO. 3

29 JANUARY 2010

DRILLSHIP SKOPELOS OWNERS INC.

as Owner

DEUTSCHE BANK AG, LONDON BRANCH

as Bookrunner and Joint Mandated Lead Arranger

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Joint Mandated Lead Arranger

DEUTSCHE BANK AG, LONDON BRANCH

and

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Swap Banks

DEUTSCHE BANK LUXEMBOURG S.A,

as Facility Agent

and

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

as Security Trustee

Relating to

US$562,500,000 CREDIT FACILITY AGREEMENT

Dated 18 July 2008

as amended and supplemented by Supplemental Agreement dated 17 September 2008 and

the Supplemental Agreement No. 2 dated 18 December 2008

Allen & Overy LLP

London

CONTENTS

		Page
Clause
1.	Definitions and Interpretation	1
2.	Amendments to the Credit Agreement	2
3.	Termination of the Swap Consent Letter	5
4.	Termination of the Financial Covenant Consent Letter	5
5.	Representations and Warranties	5
6.	Miscellaneous
7.	Reservation of rights	5
8.	Further Assurance	6
9.	Governing Law and Jurisdiction	6
10.	Counterparts	6
Schedule
1.	Condition Precedent Documents	7
2.	Form of Effective Date Notice	9
Signatories		10

THIS AGREEMENT is dated 29 January 2010 and is made

BETWEEN:

(1) DRILLSHIP SKOPELOS OWNERS INC., a corporation incorporated in the Marshall Islands with registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH. 96960 as borrower (the Owner);

(2) DEUTSCHE BANK AG, LONDON BRANCH as bookrunner and joint mandated lead arranger and bookrunner (in this capacity the Bookrunner and Joint Mandated Lead Arranger);

(3) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as joint mandated lead arranger (in this capacity the Joint Mandated Lead Arranger);

(4) DEUTSCHE BANK AG, LONDON BRANCH as swap bank (in this capacity a Swap Bank);

(5) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as swap bank (in this capacity a Swap Bank);

(6) DEUTSCHE BANK LUXEMBOURG S.A., as facility agent and acting on behalf of the Finance Parties (as defined in the Credit Agreement) (the Facility Agent); and

(7) DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT as security trustee (in this capacity the Security Trustee).

WHEREAS:

(A) By the credit facility agreement dated 18 July 2008 as amended and supplemented by a supplemental agreement dated 17 September 2008 and the supplemental agreement No. 2 dated 18 December 2008 between, inter alia, the Owner as the Borrower, the financîal institutions referred to therein as Lenders, Deutsche Bank AG, London Branch as Bookrunner and Joint Mandated Lead Arranger, Dexia Crédit Local, New York Branch as Joint Mandated Lead Arranger, Deutsche Bank AG, London Branch and Dexia Credit Local, New York Branch as Swap Banks, Deutsche Bank Luxembourg S.A. as the Facility Agent and Deutsche Bank AG Filiale Deutschlandgeschäft as the Security Trustee, (the Credit Agreement), the Lenders have made available to the Owner secured credit facilities up to US$562,500,000.

(B) The Parties wish to amend the Credit Agreement in accordance with the provisions of this Agreement.

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

(a) In this Agreement:

Conditions Precedent Documents means the documents set out in Schedule 1 (Condition Precedent Documents) to this Agreement.

Effective Date means the date when the Facility Agent notifies the Owner and the Lenders in the form of notice set out in Schedule 2 (Form of Effective Date Notice) that it has received all of the Conditions Precedent Documents in form and substance satisfactory to the Facility Agent.

1

Financial Covenant Consent Letter means the consent letter dated 5 June 2009 from the Facility Agent and the Security Trustee to the Owner and the Sponsor whereby the Facility Agent and the Security Trustee waived the financial covenants set out clauses in 7.14 (a) and 7.14 (c) of the Sponsor Construction and Post-Delivery Guarantee and the Event of Default under the Credit Agreement resulting from the breach of those financial covenants, all on the terms and subject to the conditions of the consent letter.

Swap Consent Letter means the consent letter dated 11 February 2009 from the Facility Agent to the Owner and the Sponsor whereby the Facility Agent consented to the Owner entering into New Swap Agreements (as defined therein) and incurring Financial Indebtedness on the terms and subject to the conditions of the consent letter.

(b) Unless a contrary indication appears, a term used in the Credit Agreement has the same meaning in this Agreement.

1.2 Construction

The principles of construction set out in Clause 1.2 of the Credit Agreement shall have effect as if set out in this Agreement

2. AMENDMENTS TO THE CREDIT AGREEMENT

As of and with effect from the Effective Date, the Credit Agreement shall, without prejudice to the other provisions of this Agreement, be amended as follows:

(a) by amending the definition of Drilling Charter Cut-off Date in Clause 1.1 of the Credit Agreement so that it reads as follows:

“Drilling Charter Cut-off Date means the earlier of (a) 30 April 2011 and (b) the Delivery Date of the Sister Vessel.”;

(b) by inserting a new definition “Vessel Drilling Charter Date” in Clause 1.1 of the Credit Agreement to read as follows:

“Vessel Drilling Charter Date means the date upon which the Owner (i) enters into a Five Year Drilling Charter in respect of the Vessel which satisfies the other requirements set out for a Drilling. Charter under Clause 16.22 of this Agreement and (ii) satisfies the provisions of Clause 16.22 (b) of this Agreement.”;

(c) by inserting a new definition “Vessel and Sister Vessel Drilling Charter Date” in Clause 1.1 of the Credit Agreement to read as follows:

“Vessel and Sister Vessel Drilling Charter Date” means the date upon which a Drilling Charter and a Sister Drilling Charter have been entered into and:

(a) the Drilling Charter is a Five Year Drilling Charter and the Sister Drilling Charter is a Sister Five Year Drilling Charter; or

(b) the Drilling Charter is a Five Year Drilling Charter and the Sister Drilling Charter is a Sister Three Year Drilling Charter; or

(c) the Drilling Charter is a Three Year Drilling Charter and the Sister Drilling Charter is a Sister Five Year Drilling Charter,

2

and provided further that the Drilling Charter and the Sister Drilling Charter (i) satisfy the other requirements set out for a Drilling Charter and a Sister Drilling Charter under Clause 16.22 of this Agreement and clause 16.22 of the Sister Loan Agreement, respectively and (ii) satisfy the provisions of Clause 16.22 (b) of this Agreement and clause 16.22 (b) of the Sister Loan Agreement, respectively.”;

(d) by amending Clause 2.2(a) of the Credit Agreement so that it reads as follows:

“(a) financing or refinancing the cost of construction of the Vessel pursuant to the Shipbuilding Contract;”;

(e) by amending Clause 4.2(a)(i) of the Credit Agreement so that it reads as follows:

“(i) for an Installment Loan (other than the Delivery Loan), is the date on which the corresponding Installment is payable under the terms of the Shipbuilding Contract or, in the case of an Installment Loan which is to be used to refinance an Installment, is a date after the date on which the Owner has paid the corresponding Installment to the Builder under the Shipbuilding Contract;”;

(f) by amending Clause 42(c)(l) of the Credit Agreement so that it reads as follows:

“(i) if either:

(A) the Vessel Drilling Charter Date has occurred at least ten (10) Business Days prior to the relevant Utilisation Date; or

(B) if a Drilling Charter and a Sister Drilling Charter has been entered into ten (10) Business Days prior to the relevant Utilisation Date; and

(I) the Drilling Charter is a Five Year Drilling Charter and the Sister Drilling Charter is a Sister Five Year Drilling Charter; or

(II) the Drilling: Charter is a Five Year Drilling Charter and the Sister Drilling Charter is a Sister Three Year Drilling Charter; or

(III) the Drilling Charter is a Three Year Drilling Charter and the Sister Drilling Charter is a Sister Five Year Drilling Charter,

a percentage of the Scheduled Installment Amount or, as applicable the Approved Incidental Vessel Costs (in each case determined by the Facility Agent) to be derived from an iterative process in a manner that the expected LTC Ratio at the Utilisation Date following the advance of the Loan equals zero point seven (0.7); or”;

(g) by amending Clause 12.2(a)(iii)(C) of the Credit Agreement so that it reads as follows:

“(C) on or prior to the earlier to occur of the Vessel and Sister Vessel Drilling Charter Date and the Drilling Charter Cut-off Date, an aggregate amount equal to all anticipated Equity Contributions to be made until the Final Completion Date in accordance with the relevant Approved Budget;”;

3

(h) by amending Clause 12.2(d) of the Credit Agreement so that it reads as follows:

“(d) The balance of the Equity Account shall at all times prior to the earlier to occur of the Vessel and Sister Vessel Drilling Charter Date and the Drilling Charter Cut-off Date be at least equal to the Loans drawn under this Agreement as at the relevant time. If the balance of the Equity Account falls at any time below the amount of the Loans drawn, the Owner shall immediately pay, or procure that there is paid into the Equity Account such amount as shall restore the credit balance of the Equity Account to an amount equal to the aggregate amount of the Loans drawn under this Agreement as at that time, provided that if the Vessel and Sister Vessel Drilling Charter Date has occurred and no Event of Default or Mandatory Prepayment Event has occurred and is continuing, the funds standing to the credit of the Equity Account (other than the anticipated Equity Contributions paid into the Equity Account in accordance with Clause 12.2 (a) (iii) (C)) shall be released to the. Owner or to its order.”;

(i) by amending Clause 12.2(e)(ii) of the Credit Agreement so that it reads as follows:

“(ii) on each Utilisation Date, after the proceeds of the relevant Loan have been credited, sufficient amounts from the Proceeds Account to (A) any account specified by the Builder to be applied to make Installment payments or, in the case that the relevant Loan is to be used to refinance the Installment payment already paid to the Builder by the Owner, any account specified by the Owner, and (B) the account nominated by the Facility Agent, to be applied to part of the Incidental Costs Loan as does not relate to Incidental Vessel Costs, and (C) any account specified by the Owner to be applied towards such other items or costs as are included in the Vessel Cost;”;

(j) by amending Clause 12.8(a) of the Credit Agreement so that it reads as follows:

“(a) The Owner shall pay, or procure that there is paid to the Debt Service Reserve Account on or prior to the earlier to occur of the Vessel and Sister Vessel Drilling Charter Date and the Drilling Charter Cut-off Date an amount equal to US$25,000,000.”;

(k) by amending paragraph 5 of Part 3, Schedule 2 to the Credit Agreement so that it reads as follows:

“5. Evidence that (i) the Vessel Drilling Charter Date has occurred or (ii) the Vessel and Sister Vessel Drilling Charter Date has occurred”;

(l) by amending paragraph 6 of Part 3, Schedule 2 to the Credit Agreement so that it reads as follows:

“6. A certified copy of the invoice issued by the Builder in relation to the Installment payable by the Owner on the Installment Loan 2 Utilisation Date or, if the Installment Loan is to be used to refinance the Installment, the invoice issued by the Builder in relation to the Installment referred to in Article II paragraph 4(c) of the Shipbuilding Contract together with evidence in writing that the Owner has paid the relevant Installment to the Builder.”;

(m) by amending paragraph 7 of Part 3, Schedule 2 to the Credit Agreement so that it reads as follows;

“7. If the Vessel and Sister Vessel Drilling Charter Date has occurred, evidence from the Equity Account Bank that the required Equity Collateral has been placed in the Equity Account in accordance with Clause 12.2(a)(iii)(C).”

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(n) by amending paragraph a of Part 3, Schedule 2 to the Credit Agreement so that it reads as follows:

“8. If the Vessel and Sister Vessel Drilling Charter Date has occurred, evidence from the Account Bank that the amount of US$25,000,000 has been paid into the Debt Service Reserve Account in accordance with Clause 12.8(a).”; and

(o) by amending paragraph 5 of Part 4, Schedule 2 to the Credit Agreement so that it reads as follows:

“5. A certified copy of the invoice issued by the Builder in relation to the Installment payable by the Owner on the Installment Loan 3 Utilisation Date or, if the Installment Loan is to be used to refinance the Installment, the invoice issued by the Builder in relation to the Installment referred to in Article II paragraph 4(d) of the Shipbuilding Contract together with evidence in writing that the Owner has paid the relevant Installment to the Builder.”.

3. TERMINATION OF THE SWAP CONSENT LETTER

The Parties agree and confirm that as of and with effect from the date of this Agreement, the Swap Consent Letter shall be terminated and all consents given thereunder shall be revoked. The Owner confirms that it has not entered into any New Swap Agreement (as defined in the Swap Consent Letter).

4. TERMINATION OF THE FINANCIAL COVENANT CONSENT LETTER

The Parties agree and confirm that as of and with effect from the date of this Agreement, the Financial Covenant Consent Letter shall be terminated and all waivers and consents given thereunder shall be revoked.

5. REPRESENTATIONS AND WARRANTIES

The representations and warranties set out in Clause 14 (Representations and Warranties) of the Credit Agreement are true as if made on the date of this Agreement and on the Effective Date, in each case as if references to the Credit Agreement are references to the Credit Agreement as amended by this Agreement, with reference to the facts and circumstances then existing.

6. MISCELLANEOUS

(a) This Agreement and the Credit Agreement as amended by this Agreement are each a Finance Document.

(b) Subject to the terms of this Agreement, the Credit Agreement will remain in full force and effect and, from the date of this Agreement, the Credit Agreement and this Agreement will be read and construed as one document.

7. RESERVATION OF RIGHTS

Each Finance Party reserves any other right or remedy (whether under the Finance Documents, at law or otherwise) it may have now or subsequently. This Agreement does not constitute a waiver of any right or remedy other than those which are expressly waived or amended in accordance with this Agreement and then only on the terms and subject to the conditions contained in this Agreement.

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8. FURTHER ASSURANCE

Each of the Parties hereto shall do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Agreement.

9. GOVERNING LAW AND JURISDICTION

The provisions of Clause 35 (Governing Law) and Clause 36 (Enforcement) of the Credit Agreement shall be incorporated in this Agreement as if they were set out in full in this Agreement and as if references in that Clause to “this Agreement” are references to this Agreement.

10. COUNTERPARTS

This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1

CONDITION PRECEDENT DOCUMENTS

1. Refresh certificates or, as the case may be confirmation and satisfactory evidence of continued compliance with the conditions precedent referred to in Part 1 of Schedule 2 to the Credit Agreement at paragraphs 1, 3, 18, 19 and 21.

2. An up to date certificate of goodstanding of Ocean Rig UDW Inc. and a confirmation that its constitutional documents remain in full force and effect and have not been amended, repealed or superseded since they were previously provided to the Facility Agent or the Security Trustee.

3. A certified copy of a resolution of the board of directors and shareholder of the Owner:

(a) approving the terms of, and the transactions contemplated by this Agreement and resolving that it executes this Agreement;

(b) authorising a specified person or persons to execute this Agreement on its behalf; and

(c) authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices to be signed and/or despatched by it under or in connection with this Agreement.

4. A certified copy of a resolution of the board of directors and shareholders of the Sister Owner, the Parent, the Sister Parent, the Parent Shareholder and Ocean Rig UDW Inc. (together, the Related Parties) approving the terms of, and the transactions contemplated by this Agreement and confirming that the Finance Documents and the Sister Finance Documents to which they are a party remain in full force and effect and approving the execution of the certificate referred to in paragraph 5 below.

5. A pdf-copy of the certificate (with original to follow within five (5) Business Days from the date of this Agreement) from the Owner and the Related Parties addressed to the Facility Agent and the Security Trustee confirming that the Finance Documents and the Sister Finance Documents to which they are a party remain in full force and effect.

6. A certified copy of a resolution of the board of directors of the Sponsor approving the terms of, and the transactions contemplated by this Agreement and confirming that the Sponsor Construction and Post-Delivery Guarantee remains in full force and effect and approving the execution of the certificate referred to in paragraph 4 below.

7. A pdf-copy of the certificate (with original to follow within five (5) Business Days from the date of this Agreement) from the Sponsor addressed to the Facility Agent and the Security Trustee acknowledging and confirming (i) that the Sponsor Construction and Post-Delivery Guarantee remains in full force and effect, (ii) the termination of the Swap Consent Letter and (iii) the termination of the Financial Covenant Consent Letter.

8. A pdf-copy of this Agreement, notarised, legalised and/or apostilled as necessary, duly executed by all parties (with original to follow within five (5) Business Days from the date of this Agreement).

9. A pdf-copy of an amendment agreement to the GIEK Guarantee (with original to follow within five (5) Business Days from the date of this Agreement), addressed in favour of the Eksportfinans Lenders, notarised, legalised and/or apostilled as necessary, duly executed by all parties.

7

10. A legal opinion of Seward & Kissel LLP, Marshall Islands legal advisers to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders.

11. A legal opinion of Allen & Overy LLP, London, English legal advisers to the Lenders, addressed to the Facility Agent as agent for and on behalf of the Lenders.

12. A legal opinion of Allen & Overy LLP, London, English legal advisers to GIEK., addressed to Eksportfinans and concerning certain provisions of the amended GIEK Guarantee.

13. Receipt by the Facility Agent of such other documents which, based on legal advice from the relevant legal advisers, are necessary to evidence the legality, validity and enforceability of the obligations of the Owner to this Agreement or the continuing legality, validity and enforceability of any obligor to any other Finance Document.

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SCHEDULE 2

FORM OF EFFECTIVE DATE NOTICE

To:

Drillship Skopelos Owners, Inc. (as Owner)

and

the Lenders referred to in Schedule 1 to the Credit Agreement (as defined below)

Date: [—] January 2010

Dear Sirs,

We refer to a supplemental agreement No. 3 dated [—] January 2010 (the Supplemental Agreement) relating to US$562,500,000 credit agreement dated 18 July 2008 (as amended and supplemented pursuant to the supplemental agreement dated 17 September 2008 and the supplemental agreement No. 2 dated 18 December 2008, the Credit Agreement) between, among others, Drillship Skopelos Owners Inc. as the Owner, the Lenders referred to in Schedule 1 to the Credit Agreement and ourselves as the Facility Agent.

Capitalised terms in the Credit Agreement shall have the same meaning herein, save where expressly defined otherwise.

This is to notify you that the Effective Date as defined in the Supplemental Agreement has occurred on the date of this notice.

Yours sincerely,

DEUTSCHE BANK LUXEMBOURG S.A. as the Facility Agent
By:	By:

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SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT No. 3

Owner
SIGNED by as attorney for
DRILLSHIP SKOPELOS OWNERS INC. in the presence of: /s/ Illegible	/s/ Stelios N. Deverakis STELIOS N. DEVERAKIS
Witness:
The Bookrunner and Joint Mandated Lead Arranger
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
	/s/ Illegible

10

SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT No. 3

Owner
SIGNED by as attorney for
DRILLSHIP SKOPELOS OWNERS INC. in the presence of:
Witness:
The Bookrunner and Joint Mandated Lead Arranger
By:	/s/ Illegible	/s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:	/s/ Illegible	/s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

10

SIGNATORIES

DRILLSHIP SKOPELOS OWNERS INC. – SUPPLEMENTAL AGREEMENT No. 3

Owner
SIGNED by as attorney for
DRILLSHIP SKOPELOS OWNERS INC. in the presence of:
Witness:
The Bookrunner and Joint Mandated Lead Arranger
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:	/s/ Brian T. Caldwell	/s/ Francisco Dasas
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Brian T. Caldwell	/s/ Francisco Dasas
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

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The Facility Agent
acting on its own behalf and on behalf of the Finance Parties
By:	/s/ Illegible
as authorised signatory for
DEUTSCHE BANK LUXEMBOURG S.A.
The Security Trustee
By:
as authorised signatory for
DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

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The Facility Agent
acting on its own behalf and on behalf of the Finance Parties
By:
as authorised signatory for
DEUTSCHE BANK LUXEMBOURG S.A.
The Security Trustee
By:	/s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

11

EX-4.56

Exhibit 4.56

EXECUTION VERSION

SUPPLEMENTAL AGREEMENT NO. 3

29 JANUARY 2010

DRILLSHIP KITHIRA OWNERS INC.

as Owner

DEUTSCHE BANK AG, LONDON BRANCH

as Bookrunner and Joint Mandated Lead Arranger

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Joint Mandated Lead Arranger

DEUTSCHE BANK AG, LONDON BRANCH

and

DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

as Swap Banks

DEUTSCHE BANK LUXEMBOURG S.A.

as Facility Agent

and

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

as Security Trustee

Relating to

US$562,500,000 CREDIT FACILITY AGREEMENT

Dated 18 July 2008

as amended and supplemented by Supplemental Agreement dated 17 September 2008 and

the Supplemental Agreement No. 2 dated 18 December 2008

Allen & Overy LLP

London

CONTENTS

	Page
Clause
1.      Definitions and Interpretation	1
2.      Amendments to the Credit Agreement	2
3.      Termination of the Swap Consent Letter	5
4.      Termination of the Financial Covenant Consent Letter	5
5.      Representations and Warranties	5
6.      Miscellaneous	5
7.      Reservation of rights	5
8.      Further Assurance	6
9.      Governing Law and Jurisdiction	6
10.    Counterparts	6
Schedule
1.      Condition Precedent Documents	7
2.      Form of Effective Date Notice	9
Signatories	10

THIS AGREEMENT is dated 29 January 2010 and is made

BETWEEN:

(1) DRILLSHIP KITHIRA OWNERS INC., a corporation incorporated in the Marshall Islands with registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 as borrower (the Owner);

(2) DEUTSCHE BANK AG, LONDON BRANCH as bookrunner and joint mandated lead arranger and bookrunner (in this capacity the Bookrunner and Joint Mandated Lead Arranger);

(3) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as joint mandated lead arranger (in this capacity the Joint Mandated Lead Arranger);

(4) DEUTSCHE BANK AG, LONDON BRANCH as swap bank (in this capacity a Swap Bank);

(5) DEXIA CRÉDIT LOCAL, NEW YORK BRANCH as swap bank (in this capacity a Swap Bank);

(6) DEUTSCHE BANK LUXEMBOURG S.A., as facility agent and acting on behalf of the Finance Parties (as defined in the Credit Agreement) (the Facility Agent); and

(7) DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT as security trustee (in this capacity the Security Trustee).

WHEREAS:

(A) By the credit facility agreement dated 18 July 2008 as amended and supplemented by a supplemental agreement dated 17 September 2008 and the supplemental agreement No. 2 dated 18 December 2008 between, inter alia, the Owner as the Borrower, the financial institutions referred to therein as Lenders, Deutsche Bank AG, London Branch as Bookrunner and Joint Mandated Lead Arranger, Dexia Crédit Local, New York Branch as Joint Mandated Lead Arranger, Deutsche Bank AG, London Branch and Dexia Crédit Local, New York Branch as Swap Banks, Deutsche Bank Luxembourg S.A. as the Facility Agent and Deutsche Bank AG Filiale Deutschlandgeschäft as the Security Trustee, (the Credit Agreement), the Lenders have made available to the Owner secured credit facilities up to US$562,500,000.

(B) The Parties wish to amend the Credit Agreement in accordance with the provisions of this Agreement.

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

(a) In this Agreement:

Conditions Precedent Documents means the documents set out in Schedule 1 (Condition Precedent Documents) to this Agreement.

Effective Date means the date when the Facility Agent notifies me Owner and the Lenders in the form of notice set out in Schedule 2 (Form of Effective Date Notice) that it has received all of the Conditions Precedent Documents in form and substance satisfactory to the Facility Agent.

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Financial Covenant Consent Letter means the consent letter dated 5 June 2009 from the Facility Agent and the Security Trustee to the Owner and the Sponsor whereby the Facility Agent and the Security Trustee waived the financial covenants set out clauses in 7.14 (a) and 7.14 (c) of the Sponsor Construction and Post-Delivery Guarantee and the Event of Default under the Credit Agreement resulting from the breach of those financial covenants, all on the terms and subject to the conditions of the consent letter.

Swap Consent Letter means the consent letter dated 11 February 2009 from the Facility Agent to the Owner and the Sponsor whereby the Facility Agent consented to the Owner entering into New Swap Agreements (as defined therein) and incurring Financial Indebtedness on the terms and subject to the conditions of the consent letter.

(b) Unless a contrary indication appears, a term used in the Credit Agreement has the same meaning in this Agreement

1.2 Construction

The principles of construction set out in Clause 1.2 of the Credit Agreement shall have effect as if set out in this Agreement.

2. AMENDMENTS TO THE CREDIT AGREEMENT

As of and with effect from the Effective Date, the Credit Agreement shall, without prejudice to the other provisions of this Agreement, be amended as follows:

(a) by amending the definition of Drilling Charter Cut-off Date in Clause 1.1 of the Credit Agreement so that it reads as follows:

“Drilling Charter Cut-off Date means the earlier of (a) 30 April 2011 and (b) the Delivery Date of the Vessel.”;

(b) by inserting a new definition “Vessel Drilling Charter Date” in Clause 1.1 of the Credit Agreement to read as follows:

“Vessel Drilling Charter Date means the date upon which the Owner (i) enters into a Five Year Drilling Charter in respect of the Vessel which satisfies the other requirements set out for a Drilling Charter under Clause 16.22 of this Agreement and (ii) satisfies the provisions of Clause 16.22 (b) of this Agreement.”;

(c) by inserting a new definition “Vessel and Sister Vessel Drilling Charter Date” in Clause 1.1 of the Credit Agreement to read as follows:

“Vessel and Sister Vessel Drilling Charter Date” means the date upon which a Drilling Charter and a Sister Drilling Charter have been entered into and:

(a) the Drilling Charter is a Five Year Drilling Charter and the Sister Drilling Charter is a Sister Five Year Drilling Charter; or

(b) the Drilling Charter is a Five Year Drilling Charter and the Sister Drilling Charter is a Sister Three Year Drilling Charter; or

(c) the Drilling Charter is a Three Year Drilling Charter and the Sister Drilling Charter is a Sister Five Year Drilling Charter,

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and provided further that the Drilling Charter and the Sister Drilling Charter (i) satisfy the other requirements set out for a Drilling Charter and a Sister Drilling Charter under Clause 16.22 of this Agreement and clause 16.22 of the Sister Loan Agreement, respectively and (ii) satisfy the provisions of Clause 16.22 (b) of this Agreement and clause 16.22 (b) of the Sister Loan Agreement, respectively.”;

(d) by amending Clause 22(a) of the Credit Agreement so that it reads as follows:

“(a) financing or refinancing the cost of construction of the Vessel pursuant to the Shipbuilding Contract;”;

(e) by amending Clause 4.2(a)(i) of the Credit Agreement so that it reads as follows:

“(i) for an Instalment Loan (other than the Delivery Loan), is the date on which the corresponding Instalment is payable under the terms of the Shipbuilding Contract or, in the case of an Instalment Loan which is to be used to refinance an Instalment, is a date after the date on which the Owner has paid the corresponding Instalment to the Builder under the Shipbuilding Contract;”;

(f) by amending Clause 4.2(c)(i) of the Credit Agreement so that it reads as follows:

“(i) if either

(A) the Vessel Drilling Charter Date has occurred at least ten (10) Business Days prior to the relevant Utilisation Date; or

(B) if a Drilling Charter and a Sister Drilling Charter has been entered into ten (10) Business Days prior to the relevant Utilisation Date; and

(I) the Drilling Charter is a Five Year Drilling Charter and the Sister Drilling Charter is a Sister Five Year Drilling Charter, or

(II) the Drilling Charter is a Five Year Drilling Chatter and the Sister Drilling Charter is a Sister Three Year Drilling Charter; or

(III) the Drilling Charter is a Three Year Drilling Charter and the Sister Drilling Charter is a Sister Five Year Drilling Charter,

a percentage of the Scheduled Instalment Amount or, as applicable the Approved Incidental Vessel Costs (in each case determined by the Facility Agent) to be derived from an iterative process in a manner that the expected LTC Ratio at the Utilisation Date following the advance of the Loan equals zero point seven (0.7); or”;

(g) by amending Clause 12.2(a)(iii)(C) of the Credit Agreement so that it reads as follows:

“(C) on or prior to the earlier to occur of the Vessel and Sister Vessel Drilling Charter Date and the Drilling Charter Cut-off Date, an aggregate amount equal to all anticipated Equity Contributions to be made until the Final Completion Date in accordance with the relevant Approved Budget;”;

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(h) by amending Clause 12.2(d) of the Credit Agreement so that it reads as follows:

“(d) The balance of the Equity Account shall at all times prior to the earlier to occur of the Vessel and Sister Vessel Drilling Charter Date and the Drilling Charter Cut-off Date be at least equal to the Loans drawn under this Agreement as at the relevant time. If the balance of the Equity Account falls at any time below the amount of the Loans drawn, the Owner shall immediately pay, or procure that there is paid into the Equity Account such amount as shall restore the credit balance of the Equity Account to an amount equal to the aggregate amount of the Loans drawn under this Agreement as at that time, provided that if the Vessel and Sister Vessel Drilling Charter Date has occurred and no Event of Default or Mandatory Prepayment Event has occurred and is continuing, the funds standing to the credit of the Equity Account (other than the anticipated Equity Contributions paid into the Equity Account in accordance with Clause 12.2 (a) (iii) (C)) shall be released to the Owner or to its order.”;

(i) by amending Clause 12.2(e)(ii) of the Credit Agreement so that it reads as follows:

“(ii) on each Utilisation Date, after the proceeds of the relevant Loan have been credited, sufficient amounts from the Proceeds Account to (A) any account specified by the Builder to be applied to make Instalment payments or, in the case that the relevant Loan is to be used to refinance the Instalment payment already paid to the Builder by the Owner, any account specified by the Owner, and (B) the account nominated by the Facility Agent, to be applied to part of the Incidental Costs Loan as does not relate to Incidental Vessel Costs, and (C) any account specified by the Owner to be applied towards such other items or costs as are Included in the Vessel Cost,”;

(j) by amending Clause 12.8(a) of the Credit Agreement so that it reads as follows:

“(a) The Owner shall pay, or procure that there is paid to the Debt Service Reserve Account on or prior to the earlier to occur of the Vessel and Sister Vessel Drilling Charter Date and the Drilling Charter Cut-off Date an amount equal to US$25,000,000.”;

(k) by amending paragraph 5 of Part 3, Schedule 2 to the Credit Agreement so that it reads as follows:

“5. Evidence that (i) the Vessel Drilling Charter Date has occurred or (ii) the Vessel and Sister Vessel Drilling Charter Date has occurred”;

(l) by amending paragraph 6 of Part 3, Schedule 2 to the Credit Agreement so that it reads as follows:

“6. A certified copy of the invoice issued by the Builder in relation to the Instalment payable by the Owner on the Instalment Loan 2 Utilisation Date or, if the Instalment Loan is to be used to refinance the Instalment, the invoice issued by the Builder in relation to the Instalment referred to in Article II paragraph 4(c) of the Shipbuilding Contract together with evidence in writing that the Owner has paid the relevant Instalment to the Builder.”;

(m) by amending paragraph 7 of Part 3, Schedule 2 to the Credit Agreement so that it reads as follows:

“7. If the Vessel and Sister Vessel Drilling Charter Date has occurred, evidence from the Equity Account Bank that the required Equity Collateral has been placed in the Equity Account in accordance with Clause 12.2(a)(iii)(C).”

4

(n) by amending paragraph 8 of Part 3, Schedule 2 to the Credit Agreement so that it reads as follows:

“8. If the Vessel and Sister Vessel Drilling Charter Date has occurred, evidence from the Account Bank that the amount of US$25,000,000 has been paid into the Debt Service Reserve Account in accordance with Clause 12.8(a).”; and

(o) by amending paragraph 5 of Part 4, Schedule 2 to the Credit Agreement so that it reads as follows:

“5. A certified copy of the invoice issued by the Builder in relation to the Instalment payable by the Owner on the Instalment Loan 3 Utilisation Date or, if the Instalment Loan is to be used to refinance the Instalment, the invoice issued by the Builder in relation to the Instalment referred to in Article II paragraph 4(d) of the Shipbuilding Contract together with evidence in writing that the Owner has paid the relevant Instalment to the Builder.”.

3. TERMINATION OF THE SWAP CONSENT LETTER

The Parties agree and confirm that as of and with effect from the date of this Agreement, the Swap Consent Letter shall be terminated and all consents given thereunder shall be revoked. The Owner confirms that it has not entered into any New Swap Agreement (as defined in the Swap Consent Letter).

4. TERMINATION OF THE FINANCIAL COVENANT CONSENT LETTER

The Parties agree and confirm that as of and with effect from the date of this Agreement, the Financial Covenant Consent Letter shall be terminated and all waivers and consents given thereunder shall be revoked.

5. REPRESENTATIONS AND WARRANTIES

The representations and warranties set out in Clause 14 (Representations and Warranties) of the Credit Agreement are true as if made on the date of this Agreement and on the Effective Date, in each case as if references to the Credit Agreement are references to the Credit Agreement as amended by this Agreement, with reference to the facts and circumstances then existing.

6. MISCELLANEOUS

(a) This Agreement and the Credit Agreement as amended by this Agreement are each a Finance Document.

(b) Subject to the terms of this Agreement, the Credit Agreement will remain in full force and effect and, from the date of this Agreement, the Credit Agreement and this Agreement will be read and construed as one document.

7. RESERVATION OF RIGHTS

Each Finance Party reserves any other right or remedy (whether under the Finance Documents, at law or otherwise) it may have now or subsequently. This Agreement does not constitute a waiver of any right or remedy other than those which are expressly waived or amended in accordance with this Agreement and then only on the terms and subject to the conditions contained in this Agreement.

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8. FURTHER ASSURANCE

Each of the Parties hereto shall do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Agreement.

9. GOVERNING LAW AND JURISDICTION

The provisions of Clause 35 (Governing Law) and Clause 36 (Enforcement) of the Credit Agreement shall be incorporated in this Agreement as if they were set out in full in this Agreement and as if references in that Clause to “this Agreement” are references to this Agreement.

10. COUNTERPARTS

This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1

CONDITION PRECEDENT DOCUMENTS

1. Refresh certificates or, as the case may be confirmation and satisfactory evidence of continued compliance with the conditions precedent referred to in Part 1 of Schedule 2 to the Credit Agreement at paragraphs 1, 3, 18, 19 and 21.

2. An up to date certificate of goodstanding of Ocean Rig UDW Inc. and a confirmation that its constitutional documents remain in full force and effect and have not been amended, repealed or superseded since they were previously provided to the Facility Agent or the Security Trustee.

3. A certified copy of a resolution of the board of directors and shareholder of the Owner:

(a) approving the terms of, and the transactions contemplated by this Agreement and resolving that it executes this Agreement;

(b) authorising a specified person or persons to execute this Agreement on its behalf; and

(c) authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices to be signed and/or despatched by it under or in connection with this Agreement.

4. A certified copy of a resolution of the board of directors and shareholders of the Sister Owner, the Parent, the Sister Parent, the Parent Shareholder and Ocean Rig UDW Inc. (together, the Related Parties) approving the terms of, and the transactions contemplated by this Agreement and confirming that the Finance Documents and the Sister Finance Documents to which they are a party remain in full force and effect and approving the execution of the certificate referred to in paragraph 5 below.

5. A pdf-copy of the certificate (with original to follow within five (5) Business Days from the date of this Agreement) from the Owner and the Related Patties addressed to the Facility Agent and the Security Trustee confirming that the Finance Documents and the Sister Finance Documents to which they are a party remain in full force and effect.

6. A certified copy of a resolution of the board of directors of the Sponsor approving the terms of, and the transactions contemplated by this Agreement and confirming that the Sponsor Construction and Post-Delivery Guarantee remains in full force and effect and approving the execution of the certificate referred to in paragraph 4 below.

7. A pdf-copy of the certificate (with original to follow within five (5) Business Days from the date of this Agreement) from the Sponsor addressed to the Facility Agent and the Security Trustee acknowledging and confirming (i) that the Sponsor Construction and Post-Delivery Guarantee remains in full force and effect, (ii) the termination of the Swap Consent Letter and (iii) the termination of the Financial Covenant Consent Letter.

8. A pdf-copy of this Agreement, notarised, legalised and/or apostilled as necessary, duly executed by all parties (with original to follow within five (5) Business Days from the date of this Agreement).

9. A pdf-copy of an amendment agreement to the GIEK Guarantee (with original to follow within five (5) Business Days from the date of this Agreement), addressed in favour of the Eksportfinans Lenders, notarised, legalised and/or apostilled as necessary, duly executed by all parties.

7

10. A legal opinion of Seward & Kissel LLP, Marshall Islands legal advisers to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders.

11. A legal opinion of Allen & Overy LLP, London, English legal advisers to the Lenders, addressed to the Facility Agent as agent for and on behalf of the Lenders.

12. A legal opinion of Allen & Overy LLP, London, English legal advisers to GIEK, addressed to Eksportfinans and concerning certain provisions of the amended GIEK Guarantee.

13. Receipt by the Facility Agent of such other documents which, based on legal advice from the relevant legal advisers, are necessary to evidence the legality, validity and enforceability of the obligations of the Owner to this Agreement or the continuing legality, validity and enforceability of any obligor to any other Finance Document.

8

SCHEDULE 2

FORM OF EFFECTIVE DATE NOTICE

To:

Drillship Kithira Owners, Inc. (as Owner)

and

the Lenders referred to in Schedule 1 to the Credit Agreement (as defined below)

Date:[—] January 2010

Dear Sirs,

We refer to a supplemental agreement No. 3 dated [—] January 2010 (the Supplemental Agreement) relating to US$562,500,000 credit agreement dated 18 July 2008 (as amended and supplemented pursuant to the supplemental agreement dated 17 September 2008 and the supplemental agreement No. 2 dated 18 December 2008, the Credit Agreement) between, among others, Drillship Kithira Owners Inc. as the Owner, the Lenders referred to in Schedule 1 to the Credit Agreement and ourselves as the Facility Agent.

Capitalised terms in the Credit Agreement shall have the same meaning herein, save where expressly defined otherwise.

This is to notify you that the Effective Date as defined in the Supplemental Agreement has occurred on the date of this notice.

Yours sincerely,

DEUTSCHE BANK LUXEMBOURG S.A. as the Facility Agent
By:	By:

9

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT No. 3

Owner
SIGNED by as attorney for
DRILLSHIP KITHIRA OWNERS INC. in the presence of: /s/ Illegible Witness:	/s/ Stelios N. Deverakis STELIOS N. DEVERAKIS
The Bookrunner and Joint Mandated Lead Arranger
By:
as authorised signatory for DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

10

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT No. 3

Owner
SIGNED by as attorney for
DRILLSHIP KITHIRA OWNERS INC. in the presence of:
Witness:
The Bookrunner and Joint Mandated Lead Arranger
By: /s/ Illegible	/s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By: /s/ Illegible	/s/ Illegible
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

10

SIGNATORIES

DRILLSHIP KITHIRA OWNERS INC. – SUPPLEMENTAL AGREEMENT No. 3

Owner
SIGNED by as attorney for
DRILLSHIP KITHIRA OWNERS INC. in the presence of:
Witness:
The Bookrunner and Joint Mandated Lead Arranger
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
The Joint Mandated Lead Arranger
By	/s/ Brian T. Caldwell	/s/ Fransisco Dasas
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH
The Swap Banks
By:
as authorised signatory for
DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Brian T. Caldwell	/s/ Fransisco Dasas
as authorised signatory for
DEXIA CRÉDIT LOCAL, NEW YORK BRANCH

10

The Facility Agent

acting on its own behalf and on behalf of the Finance Parties

By: /s/ Illegible

as authorised signatory for

DEUTSCHE BANK LUXEMBOURG S.A.

The Security Trustee

By:

as authorised signatory for

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

11

The Facility Agent

acting on its own behalf and on behalf of the Finance Parties

By:

as authorised signatory for

DEUTSCHE BANK LUXEMBOURG S.A.

The Security Trustee

By: /s/ Illegible

as authorised signatory for

DEUTSCHE BANK AG FILIALE DEUTSCHLANDGESCHÄFT

11

EX-4.58

Exhibit 4.58

December 2008

ADDENDUM NO. 1

to

GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT

dated 17 September 2008

between

OCEAN RIG ASA

and

OCEAN RIG NORWAY AS

as borrowers

OCEAN RIG ASA

OCEAN RIG NORWAY AS

OCEAN RIG 1 AS

OCEAN RIG 2 AS

OCEAN RIG NORTH SEA AS

and

OCEAN RIG USA LLC

as original guarantors

THE FINANCIAL INSTITUTIONS

listed in Schedule I

as banks

DNB NOR BANK ASA

as guarantee bank

DNB NOR BANK ASA

as mandated lead arranger and bookrunner

and

HSH NORDBANK AG

NORDEA BANK NORGE ASA

and

SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)

as mandated lead arrangers

DNB NOR BANK ASA

as agent

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THIS ADDENDUM NO. 1 to the USD 1,040,000,000 Guarantee, Revolving Credit and Term Loan Facility Agreement dated 17 September 2008 (the “Facility Agreement”) is made on December 2008 between:

(1) OCEAN RIG ASA, org. no. NO 976 769 643, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway and OCEAN RIG NORWAY AS, org. no. NO 879 750 172, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway (“OR Norway”) as borrowers (the “Borrowers”);

(2) OCEAN RIG ASA, org. no. NO 976 769 643, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, OCEAN RIG NORWAY AS, org. no. NO 879 750 172, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, OCEAN RIG 1 AS, org. no. NO 979 750 188, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, OCEAN RIG 2 AS, org. no. NO 979 750 196, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway and OCEAN RIG NORTH SEA AS, org. no. NO 992 250 941, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway as original guarantors (the “Original Guarantors”);

(3) THE FINANCIAL INSTITUTIONS parties hereto as banks (the “Banks”);

(4) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as guarantee bank (the “Guarantee Bank”);

(5) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as mandated lead arranger and bookrunner and HSH NORBANK AG, Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Germany, NORDEA BANK NORGE ASA, Middelthunsgate 17, N-0368 Oslo, Norway and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), SE-106 40 Stockholm, Sweden as mandated lead arrangers (the “Arrangers”); and

(6) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as agent and security trustee (the “Agent”).

WHEREAS

(A) Each Finance Party, by its signature to this Addendum No. 1, hereby releases Ocean Rig USA LLC from its obligations as guarantor under the Facility Agreement;

(B) the Parties have agreed to make certain amendments to the Facility Agreement in relation to the reconstruction of the Group permitted pursuant to paragraph (b) of Clause 22.19 (Merger and reconstruction restrictions) of the Facility Agreement, such reconstruction more closely described in more detail in the letter dated 19 November 2008 from the Parent to the Agent;

IT IS HEREBY AGREED AS FOLLOWS:

1. The wording of the following definitions in Clause 1.1 (Definitions) of the Facility Agreement shall be deleted in their entirety and replaced with the following wording:

““First Equipment Charge”

means a first priority all asset security, or such other security over moveable assets required by the Agent (acting on the instructions of the Majority Banks) granted or to be granted by each Owner in favour of the Agent as security for the obligations of the relevant Owner under the Finance Documents in relation to the Senior Facilities.

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“Letter of Credit”

means the irrevocable standby letter of credit in the amount of USD 20,000,000 issued by the Guarantee Bank in favour of the Beneficiary on 14 March 2008 under the Existing Guarantee Facility Agreement to support payments by the Owner of the relevant Unit under the New Eirik Raude Qualifying Contract, and deemed to be issued under the Guarantee Facility on and from the date the Agent has given notice to the Borrowers and the Banks pursuant to Clause 3.1 (Documentary conditions precedent), as amended, substituted or re-executed.

“New Eirik Raude Qualifying Contract”

means the form of contract for the provision of semi-submersible drilling unit “Eirik Raude” and associated drilling services dated 15 February 2008 entered into by the Owner thereof with Tullow Oil Plc, 3^rd Floor – Building 11, Chiswick Park, 566 Chiswick High Road, London W4 5YS, England at an initial daily rate of USD 580,000 and an average daily rate of USD 605,760 (net of any withholding tax, mobilisation costs and other deductions), and as assigned, transferred and/or novated to Ocean Rig Ghana Limited.

“Owner”

means each of the registered owners of the Units from time to time.

“Second Equipment Charge”

means a second priority all asset security, or such other security over moveable assets required by the Agent (acting on the instructions of the Majority Banks) granted or to be granted by each Owner in favour of the Agent as security for the obligations of the relevant Owner under the Finance Documents in relation to the Junior Facilities.”

2. The wording of paragraph (d) of Clause 2.4 (Purpose and application) of the Facility Agreement shall be deleted in its entirety and replaced with the following wording:

“The purpose of the Guarantee Facility is to maintain the Letter of Credit issued in favour of the Beneficiary on behalf of and for the account of the Borrowers to support payments by Ocean Rig 2 AS and/or Ocean Rig Ghana Limited under the New Eirik Raude Qualifying Contract.”

3. The following Clause 37.2 (Service of process) shall be inserted in the Facility Agreement:

“Service of process

Without prejudice to any other mode of service, each Obligor:-

(i) irrevocably appoints Ocean Rig AS of Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, as its agent for service of process relating to any proceedings before the Norwegian courts in connection with any Finance Document;

(ii) agrees that failure by its process agent to notify it of the process will not invalidate the proceedings concerned; and

(iii) consents to the service of process to any such proceedings before the Norwegian courts by prepaid posting of a copy of the process to its address set out in this Agreement or any Accession Agreement to which it is a party, or its address at any later time notified to the Agent in writing,”

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4. Each Obligor represents and warrants to each Finance Party that the representations and warranties in Clause 21 (Representations and warranties) of the Facility Agreement remain true and correct and that no Event of Default has occurred or will occur as a consequence of the entering into of this Addendum No. 1 or the compliance herewith.

5. The Borrowers shall upon demand pay to the Agent the amount of all reasonable costs and expenses (including external legal fees) properly incurred by the Agent in connection with the negotiation, preparation, printing, execution and registration of this Addendum No. 1, any other documents referred to in this Addendum No. 1.

6. This Addendum No. 1 and the amendments of the Facility Agreement agreed herein (other than Clause 5 hereof, which shall become effective on the date hereof) shall become effective on the date the Agent has notified the Borrower and the Lenders that it has received all of the documents set out in Schedule 1 in a form and substance satisfactory to the Agent, or on such earlier date as may be determined by the Agent (acting on the instructions of the Majority Banks) and notified to the Borrowers and the Banks in writing (the “Effective Date”).

7. Words and expressions used herein shall have the same meaning when used herein as set out in the Facility Agreement unless expressly set out herein or the context otherwise requires.

8. Except as expressly modified by this Addendum No. 1, all terms and provisions of the Facility Agreement shall remain in full force and effect and are hereby ratified and confirmed in all respects by the parties as if herein set forth in their entirety. All references in the Facility Agreement to “this Agreement”, “hereof”, “hereby”, “hereto”, and the like shall, upon execution and delivery of this Addendum No. 1, mean the Facility Agreement as hereby amended.

9. The courts of Norway have exclusive jurisdiction to settle any dispute arising out of or in connection with this Addendum No. I (including a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute”), and any Dispute shall be referred to Oslo district court as the court of first instance.

This Clause 9 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.

This Addendum No. 1 shall be governed by Norwegian law.

[The remainder of this page has been left intentionally blank]

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SCHEDULE 1

CONDITIONS PRECEDENT DOCUMENTS

1. In respect of each of the Obligors, certified copies or originals of:

(a) its articles of association;

(b) a certificate of registration;

(c) a resolution of its board of directors authorising it to execute this Addendum No. 1;

(d) if not included in the resolutions referred to in paragraph (c) above, a power of attorney to its representatives for the execution and registration of this Addendum No. 1; and

(e) such other documents and evidence as the Agent (or any Bank through the Agent) shall from time to time require, based on law and regulations applicable from time to time and the Banks’ own internal guidelines applicable from time to time to identify the Borrowers and the other Obligors, including the ultimate legal and beneficial owner or owners of such entities, and any other persons involved or affected by the transaction(s) contemplated by this Agreement.

2. Certified copies of all approvals, authorisations and consents required by any government or other authority in order for each of the Obligors to enter into and perform its obligations under this Addendum No. 1.

3. Favourable legal opinions in form and substance satisfactory to the Agent from lawyers appointed by the Agent on matters concerning all relevant jurisdictions.

6/6

SIGNATORIES

The Borrowers:
Ocean Rig ASA
By:	/s/ Jan Rune Steinsland
Name:	JAN RUNE STEINSLAND
Title:	CFO
Ocean Rig Norway AS
By:	/s/ Jan Rune Steinsland
Name:	JAN RUNE STEINSLAND
Title:	CHAIRMAN
The Original Guarantors:
Ocean Rig ASA
By:	/s/ Jan Rune Steinsland
Name:	JAN RUNE STEINSLAND
Title:	CFO
Ocean Rig Norway AS
By:	/s/ Jan Rune Steinsland
Name:	JAN RUNE STEINSLAND
Title:	CHAIRMAN
Ocean Rig 1 AS
By:	/s/ Jan Rune Steinsland
Name:	JAN RUNE STEINSLAND
Title:	CHAIRMAN
Ocean Rig 2 AS
By:	/s/ Jan Rune Steinsland
Name:	JAN RUNE STEINSLAND
Title:	CHAIRMAN
Ocean Rig North Sea AS
By:	/s/ Jan Rune Steinsland
Name:	JAN RUNE STEINSLAND
Title:	CHAIRMAN

7/8

The Banks:
DnB NOR Bank ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
HSH Nordbank AG
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
Nordea Bank Norge ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
Skandinaviska Enskilda Banken AB (publ)
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
DVB Bank N.V. Nordic Branch
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
Deutsche Schiffsbank Aktiengesellschaft
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
Natixis
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
National Bank of Greece S.A.
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

8/8

The Guarantee Bank:
DnB NOR Bank ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
The Arrangers:
DnB NOR Bank ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
HSH NordbankAG
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
Nordea Bank Norge ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
Skandinaviska Enskilda Banken AB (publ)
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact
The Agent:
DnB NOR Bank ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

EX-4.59

Exhibit 4.59

19 November 2009

AMENDMENT AND RESTATEMENT AGREEMENT

relating to a

GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT

dated 17 September 2008

between

OCEAN RIG ASA

and

OCEAN RIG NORWAY AS

as borrowers

OCEAN RIG ASA

OCEAN RIG NORWAY AS

OCEAN RIG 1 AS

OCEAN RIG 2 AS

OCEAN RIG NORTH SEA AS

and

OCEAN RIG USA LLC

as original guarantors

THE FINANCIAL INSTITUTIONS

listed in Part 2 of Schedule 1

as banks

DNB NOR BANK ASA

as guarantee bank

DNB NOR BANK ASA

as mandated lead arranger and bookrunner

and

HSH NORDBANK AG

NORDEA BANK NORGE ASA

and

SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)

as mandated lead arrangers

DNB NOR BANK ASA

as agent

USD 1,040,000,000

THIS AMENDMENT AND RESTATEMENT AGREEMENT (the “Restatement Agreement”) is dated 19 November 2009 and made between:

(1) OCEAN RIG ASA, org. no. NO 976 769 643, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, OCEAN RIG NORWAY AS, org. no. NO 879 750 172, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway (“OR Norway”) and DRILL RIGS HOLDINGS INC., Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 as borrowers (the “Borrowers”);

(2) THE COMPANIES listed in Part 1 of Schedule 1 to the Amended and Restated Facility Agreement as original guarantors (the “Original Guarantors”);

(3) THE FINANCIAL INSTITUTIONS listed in Part 2 of Schedule 1 to the Amended and Restated Facility Agreement as original banks (the “Original Banks”);

(4) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as guarantee bank (the “Guarantee Bank”);

(5) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as mandated lead arranger and bookrunner and HSH NORDBANK AG, Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Germany, NORDEA BANK NORGE ASA, Middelthunsgate 17, N-0368 Oslo, Norway and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), SE-106 40 Stockholm, Sweden as mandated lead arrangers (the “Arrangers”); and

(6) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as agent and security trustee (the “Agent”).

WHEREAS:

(A) Pursuant to a guarantee, revolving credit and term loan facility agreement dated 17 September 2008 (the “Original Facility Agreement”) between Ocean Rig ASA and OR Norway as borrowers, the Original Guarantors (as defined therein) as original guarantors, the Original Banks (as defined therein) as original banks, the Guarantee Bank, the Arrangers and the Agent, the Original Banks (as defined therein) made available certain guarantee, revolving credit and term loan facilities;

(B) The parties hereto wish to make certain amendments to the Original Facility Agreement by amending and restating the terms thereof as set out in the amended and restated guarantee, revolving credit and term loan facility agreement (the “Amended and Restated Facility Agreement”) attached in Schedule 2 hereto.

IT IS AGREED AS FOLLOWS:

1. INTERPRETATION

1.1 Definitions

(a) Capitalised terms defined in the Amended and Restated Facility Agreement have, unless expressly defined in this Restatement Agreement, the same meaning in this Restatement Agreement.

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(b) “Restatement Date” means:

(i) the date on which the Agent notifies the Parent and the Banks that it has received all of the documents and other evidence set out in Schedule 1 (Conditions precedent documents) of this Restatement Agreement in a form and substance satisfactory to the Agent; or

(ii) such other date as the Parent and the Banks agree.

2. CONDITIONS PRECEDENT

(a) Subject as set out below, the Original Facility Agreement will be amended and restated on and from the Restatement Date as set out in Schedule 2 (Form of Amended and Restated Facility Agreement) of this Restatement Agreement.

(b) The Restatement Date may not occur in the event that an Event of Default is continuing or would result from the occurrence of the Restatement Date.

(c) If the Restatement Date has not occurred on or before the date occurring 60 days after the date hereof or such later date as may be agreed in writing between the Parent and the Banks, the Original Facility Agreement will not be amended by this Restatement Agreement.

3. REPRESENTATIONS

Each Obligor represents and warrants to each Finance Party that on the date of this Restatement Agreement and on the Restatement Date:

(a) Powers and authority: it has the power to enter into and perform, and has taken all necessary action to authorise the entry into, performance and delivery of this Restatement Agreement and the transactions contemplated hereby;

(b) Consents: all authorisations, approvals, consents, licences exemptions, filings, registrations and other matters required by law for or in consequence of the entry into and performance by it of and/or the validity of this Restatement Agreement or the transactions to be implemented pursuant hereto have been obtained or effected or will be obtained or effected prior to the date required by law;

(c) Legal validity: this Restatement Agreement constitutes its legal, valid and binding and enforceable obligations in accordance with its terms;

(d) Non-conflict: the entry into and performance of this Restatement Agreement and the transactions contemplated hereby do not and will not conflict with:

(i) any applicable law or regulation or any applicable official or judicial order in any respect; or

(ii) its constitutional documents or any of its resolutions (having current effect) or the constitutional document or any other resolution of any of its subsidiaries; or

(iii) any agreement or instrument to which the Obligor or any of its Subsidiaries is a party or which is binding upon any of them or on any of their assets.

4. SECURITY DOCUMENTS

Each Obligor confirms that each Security Document to which it is a party and which has been executed prior to the date of this Restatement Agreement shall continue to secure the obligations secured thereby, including its obligations under the Original Facility Agreement as hereby amended and restated.

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5. EXPENSES

The Borrowers shall promptly following demand pay to the Agent the amount of all out-of-pocket costs and expenses (including, without limitation, external legal fees) properly and reasonably incurred and documented by the Agent in connection with:

(i) the negotiation, execution and registration of this Restatement Agreement and any other documents referred to herein;

(ii) any amendment, waiver, consent or suspension of rights (or any proposal for any of the foregoing) requested (or, in the case of a proposal, made) by or on behalf of an Obligor and relating to any of this Restatement Agreement or a document referred to herein; and

(iii) any other matter, not of an ordinary administrative nature, directly arising out of or in connection with this Restatement Agreement.

6. GOVERNING LAW AND JURISDICTION

(a) This Restatement Agreement shall be governed by and construed in accordance with Norwegian law.

(b) The courts of Norway have exclusive jurisdiction to settle any dispute arising out of or in connection with this Restatement Agreement (including a dispute regarding the existence, validity or termination of this Restatement Agreement) (a “Dispute”), and any Dispute shall be referred to Oslo district court as the court of first instance.

(c) This Clause 6 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.

(d) Without prejudice to any other mode of service, each Obligor:-

(i) irrevocably appoints Ocean Rig AS of Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, as its agent for service of process relating to any proceedings before the Norwegian courts in connection with this Restatement Agreement;

(ii) agrees that failure by its process agent to notify it of the process will not invalidate the proceedings concerned; and

(iii) consents to the service of process to any such proceedings before the Norwegian courts by prepaid posting of a copy of the process to its address set out in this Restatement Agreement, or its address at any later time notified to the Agent in writing.

*  *  *  *  *

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SCHEDULE 1

CONDITIONS PRECEDENT DOCUMENTS

1. In respect of each of the Obligors, certified copies or originals of:

(a) its articles of association;

(b) a certificate of registration;

(c) a resolution of its board of directors authorising it to execute each of the Finance Documents to which it is a party;

(d) if not included in the resolutions referred to in paragraph (c) above, a power of attorney to its representatives for the execution and registration of each of the Finance Documents to which it is a party; and

(e) such other documents and evidence as the Agent (or any bank through the Agent) shall from time to time require, based on law and regulations applicable from time to time and the Banks’ own internal guidelines applicable from time to time to identify the Borrowers and the other Obligors, including the ultimate legal and beneficial owner or owners of such entities, and any other persons involved or affected by the transaction(s) contemplated by this Agreement.

2. Certified copies of all approvals, authorisations and consents required by any government or other authority in order for each of the Obligors to enter into and perform its obligations under each of the Transaction Documents to which it is a party.

3. In respect of the Security Documents:

(a) the First Share Pledge Agreement in respect of all shares in each of Ocean Rig 1 Shareholders Inc. and Ocean Rig 2 Shareholders Inc. duly executed;

(b) the notices of pledge and acknowledgements required to be executed under the First Share Pledge Agreement in respect of all shares in each of Ocean Rig 1 Shareholders Inc. and Ocean Rig 2 Shareholders Inc., duly executed, and all other documentation required for the perfection of the security thereunder;

(c) the First Share Pledge Agreement and the Second Share Pledge Agreement (documented through one share pledge agreement securing both the obligations in relation to the Senior Facilities and the Junior Facilities) in respect of all shares in Primelead Ltd. duly executed;

(d) the notices of pledge and acknowledgements required to be executed under the First Share Pledge Agreement and the Second Share Pledge Agreement (documented through one share pledge agreement) in respect of all shares in Primelead Ltd., duly executed, and all other documentation required for the perfection of the security thereunder;

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(e) the First Share Pledge Agreements in respect of all shares in Ocean Rig 1 Inc. and Ocean Rig 2 Inc. following the transfer of such shares to Ocean Rig Shareholders 1 Inc. and Ocean Rig Shareholders 2 Inc. duly executed;

(f) the notices of pledge and acknowledgements required to be executed under the First Share Pledge Agreements in respect of all shares in Ocean Rig 1 Inc. and Ocean Rig 2 Inc., duly executed, and all other documentation required for the perfection of the security thereunder;

(g) the First Share Pledge Agreement in respect of all shares in Ocean Rig 2 AS and Ocean Rig North Sea AS following the transfer of such shares to Primelead Ltd. duly executed;

(h) the notices of pledge and acknowledgements required to be executed under the First Share Pledge Agreement in respect of all shares in Ocean Rig 2 AS and Ocean Rig North Sea AS, duly executed, and all other documentation required for the perfection of the security thereunder;

(i) the amendment to the deed of covenants collateral to the First Mortgage over “Leiv Eiriksson” duly executed;

(j) the amendment to the deed of covenants collateral to the First Mortgage over “Eirik Raude” duly executed;

(k) the First Leiv Eiriksson Qualifying Contract Cash Deposit Account Pledge Agreement duly executed (provided that the Restatement Date occurs prior to the Leif Eiriksson Qualifying Contract Expiry Date);

(1) the following documents relating to matters of Scots law, all duly executed by the relevant Obligor or otherwise held in escrow with appropriate powers of attorney to sign on completion:-

(i) a conditional deed of release between the Agent and Ocean Rig ASA;

(ii) a stock transfer form evidencing the transfer of the entire issued share capital in Ocean Rig Limited from the Agent to Ocean Rig ASA;

(iii) a share certificate signed by two officers of Ocean Rig Limited in respect of the above share transfer from the Agent to Ocean Rig ASA;

(iv) a stock transfer form evidencing the transfer of the entire issued share capital in Ocean Rig Limited from Ocean Rig ASA to Primelead Ltd. together with proof of stamp duty paid (if applicable);

(v) a share certificate signed by two officers of Ocean Rig Limited in respect of the above share transfer from Ocean Rig ASA to Primelead Ltd.;

(vi) the First Share Pledge Agreement and the Second Share Pledge Agreement (documented through one share pledge agreement securing both the obligations in relation to the Senior Facilities and the Junior Facilities) in respect of the entire issued share capital in Ocean Rig Limited duly executed by Primelead Ltd.;

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(vii) a stock transfer form evidencing the transfer of the entire issued share capital in Ocean Rig Limited from Primelead Ltd. to the Agent;

(viii) a share certificate signed by two officers of Ocean Rig Limited in respect of the above share transfer from Primelead Ltd. to the Agent; and

(ix) in each case, certified copies of the appropriate updated register of members of Ocean Rig Limited detailing the above share transfers (1) from the Agent to Ocean Rig ASA, then from (2) Ocean Rig ASA to Primelead Ltd. and then from (3) Primelead Ltd. to the Agent.

(m) the Second Share Pledge Agreement in respect of all shares in each of Ocean Rig 1 Shareholders Inc. and Ocean Rig 2 Shareholders Inc. duly executed;

(n) the notices of pledge and acknowledgements required to be executed under the Second Share Pledge Agreement in respect of all shares in each of Ocean Rig 1 Shareholders Inc. and Ocean Rig 2 Shareholders Inc., duly executed, and all other documentation required for the perfection of the security thereunder;

(o) the Second Share Pledge Agreements in respect of all shares in Ocean Rig I Inc. and Ocean Rig 2 Inc. following the transfer of such shares to Ocean Rig Shareholders 1 Inc. and Ocean Rig Shareholders 2 Inc. duly executed;

(p) the notices of pledge and acknowledgements required to be executed under the Second Share Pledge Agreements in respect of all shares in Ocean Rig 1 Inc. and Ocean Rig 2 Inc., duly executed, and all other documentation required for the perfection of the security thereunder;

(q) the Second Share Pledge Agreement in respect of all shares in Ocean Rig 2 AS and Ocean Rig North Sea AS following the transfer of such shares to Primelead Ltd. duly executed;

(r) the notices of pledge and acknowledgements required to be executed under the Second Share Pledge Agreement in respect of all shares in Ocean Rig 2 AS and Ocean Rig North Sea AS, duly executed, and all other documentation required for the perfection of the security thereunder;

(s) the amendment to the deed of covenants collateral to the Second Mortgage over “Leiv Eiriksson” duly executed;

(t) the amendment to the deed of covenants collateral to the Second Mortgage over “Eirik Raude” duly executed; and

(u) the Second Leiv Eiriksson Qualifying Contract Cash Deposit Account Pledge Agreement duly executed (provided that the Restatement Date occurs prior to the Leif Eiriksson Qualifying Contract Expiry Date).

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4. Evidence that the Leiv EMksson Qualifying Contract Cash Deposit Account has been opened by Ocean Rig 1 Inc. with the Agent and that an amount of at least USD 15,872,000 (or in the event that the term of the Leiv Eiriksson Qualifying Contract has expired and the amount claimed by the relevant member of the Group to be outstanding thereunder is less than USD 15,872,000, such amount claimed by the relevant member of the Group to be outstanding thereunder) has been deposited thereon (provided that the Restatement Date occurs prior to the Leif Eiriksson Qualifying Contract Expiry Date).

5. The step plan in respect of the Restructuring dated 12 October 2009.

6. A pro forma opening balance sheet for Drill Rigs Holdings Inc. as of the Restructuring Implementation Date evidencing that the financial condition of Drill Rigs Holdings Inc. (on a consolidated basis (for the avoidance of doubt also including Subsidiaries in respect of which all assets have not been distributed following liquidation of such Subsidiaries)) is not weaker than that of Ocean Rig ASA immediately prior to the distribution of the shares in Ocean Rig 1 Inc. and Ocean Rig 2 Inc. to Primeiead Ltd.

7. A funds flow chart showing the flow of funds in relation to the distribution of liquidation proceeds following the liquidation of Ocean Rig ASA.

8. A copy of an irrevocable instruction from Ocean Rig 2 AS to Ocean Rig Limited to pay approximately 95 per cent, of the bareboat charter hire under the Employment Contract in respect of “Eirik Raude” entered into between Ocean Rig 2 AS and Ocean Rig Limited directly to Ocean Rig 2 Inc.

9. A subordination statement issued by Ocean Rig 2 AS in favour of the Agent whereby Ocean Rig 2 AS subordinates any claim that it has or may have against Ocean Rig Limited under or in relation to the Employment Contract in respect of “Erik Raude” entered into between Ocean Rig 2 AS and Ocean Rig Limited to all claims that the Finance Parties have or may have against Ocean Rig Limited under the Finance Documents (which subordination statement shall be a Finance Document).

10. Evidence of the acceptance of appointment by each service of process agent appointed or required to be appointed under the Finance Documents.

11. Favourable legal opinions in form and substance satisfactory to the Agent from lawyers appointed by the Agent on matters concerning all relevant jurisdictions.

12. Such other documents, authorisations, information, opinions or assurances reasonably required by the Agent.

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SCHEDULE 2

AMENDED AND RESTATED

GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT

19 November 2009

GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT

between

OCEAN RIG ASA,

OCEAN RIG NORWAY AS and DRILL RIGS HOLDINGS INC.

as borrowers

THE COMPANIES

listed in Part 1 of Schedule 1

as original guarantors

THE FINANCIAL INSTITUTIONS

listed in Part 2 of Schedule 1

as banks

DNB NOR BANK ASA

as guarantee bank

DNB NOR BANK ASA

as mandated lead arranger and bookrunner

and

HSH NORDBANK AG

NORDEA BANK NORGE ASA

and

SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)

as mandated lead arrangers

DNB NOR BANK ASA

as agent

USD 1,040,000,000

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INDEX

1	INTERPRETATION	12
2	THE FACILITIES	31
3	CONDITIONS PRECEDENT	32
4	UTILISATION OF THE TERM LOAN FACILITY	33
5	UTILISATION OF THE REVOLVING CREDIT FACILITIES	34
6	UTILISATION OF THE GUARANTEE FACILITY	36
7	DEMAND UNDER THE LETTER OF CREDIT	36
8	REPAYMENT AND REDUCTION	38
9	PREPAYMENT AND CANCELLATION	40
10	INTEREST PERIODS	44
11	INTEREST AND GUARANTEE COMMISSION	45
12	PAYMENTS	46
13	SECURITY	48
14	COORDINATION OF SENIOR SECURITY DOCUMENTS AND JUNIOR SECURITY DOCUMENTS	49
15	TAXES	51
16	MARKET DISRUPTION	51
17	INCREASED COSTS	.52
18	ILLEGALITY	53
19	MITIGATION	53
20	GUARANTEE AND INDEMNITY	54
21	REPRESENTATIONS AND WARRANTIES	58
22	UNDERTAKINGS	62
23	FINANCIAL COVENANTS	70
24	EVENT OF DEFAULT	75
25	THE AGENT AND THE ARRANGERS	80
26	FEES	84
27	EXPENSES	85
28	INDEMNITIES	85
29	CALCULATIONS	86
30	AMENDMENTS AND WAIVERS	86
31	CHANGES TO THE PARTIES	88
32	DISCLOSURE OF INFORMATION	91
33	DISTRIBUTION AND PRO RATA SHARING	91

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34	SEVERABILITY	93
35	NOTICES	93
36	GOVERNING LAW	94
37	ENFORCEMENT	94
Schedules
		Page
1.	Banks and Commitments	97
2.	Form of Compliance Certificate	99
3.	Form of Drawdown Notice	103
4.	Form of Renewal Notice	105
5.	Form of Transfer Certificate	106
6.	Conditions precedent documents	110
Appendix
1.	Form of First Security Agreement	114
2.	Form of Accession Agreement	127

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THIS AGREEMENT (the “Agreement”) is dated 19 November 2009 and made between and amongst:

(1) OCEAN RIG ASA, org. no. NO 976 769 643, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, OCEAN RIG NORWAY AS, org. no. NO 879 750 172, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway (“OR Norway”) and DRILL RIGS HOLDINGS INC., Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 as borrowers (the “Borrowers”);

(2) THE COMPANIES listed in Part 1 of Schedule 1 as original guarantors (the “Original Guarantors”);

(3) THE FINANCIAL INSTITUTIONS listed in Part 2 of Schedule I as original banks (the “Original Banks”);

(4) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as guarantee bank (the “Guarantee Bank”);

(5) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as mandated lead arranger and bookrunner and HSH NORBANK AG, Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Germany, NORDEA BANK NORGE ASA, Middelthunsgate 17, N-0368 Oslo, Norway and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), SE-106 40 Stockholm, Sweden as mandated lead arrangers (the “Arrangers”); and

(6) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway as agent and security trustee (the “Agent”).

IT IS AGREED as follows:

1 INTERPRETATION

1.1 Definitions

In this Agreement:

“Accession Agreement”

means a document substantially in the form of Appendix 2 (Form of Accession Agreement), under which a member of the Group becomes a Guarantor under this Agreement.

“Additional Guarantor”

means a member of the Group which becomes a Guarantor after the Signing Date in accordance with Clause 31.8 (Additional Guarantors).

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“Applicable Margin”

means:

(i) in respect of the Term Loan Facility and Revolving Credit Facility A, 1.50 (one point fifty) per cent per annum; and

(ii) in respect of Revolving Credit Facility B and Revolving Credit Facility C, the rates per annum in respect thereof set out in the Margin and Fee Letter.

“Approved Accounting Principles”

means generally accepted accounting principles and practices in Norway, including the regulations and guidelines of the IFRS, or generally accepted accounting principles and practices in the United States of America, in each case consistently applied.

“Approved Brokers”

means Fearnley Offshore AS, R.S. Platou Offshore AS, ODS Petrodata and such other brokers as may be approved by the Agent.

“Availability Period”

means:

(i) in respect of the Term Loan Facility, the period commencing on the date of the Original Facility Agreement and ending on 30 September 2008; and

(ii) in respect of the Revolving Credit Facilities, the period commencing on the date of the Original Facility Agreement and ending on the date occurring one month prior to its Final Maturity Date.

“Bank”

means each Original Bank, where the context so requires, the Guarantee Bank, and any other bank or other financial institution which becomes a party hereto pursuant to a transfer in accordance with Clause 31.2 (Transfers by Banks) and any reference to the “Banks” shall, unless the context otherwise requires, be construed as a reference to the Original Banks, where the context so requires, the Guarantee Bank, and each other bank or other financial institution which shall have so become a party hereto.

“Basel Rules”

means the policy guidelines on credit risk measurement methods issued by the Basel Committee and/or corresponding EU/EEA legislation from time to time in force and applicable to a Bank through national implementation.

“Beneficiary”

means Tullow Oil Pic, 3^rd Floor – Building 11, Chiswick Park, 566 Chiswick High Road, London W4 5YS, England, company reg. no. 3919249.

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“Borrowing Base Amount”

means 80 per cent of the amount representing the present value of the Qualifying Contracts (provided, however, that the New Eirik Raude Qualifying Contract for the purpose of the calculation of the Borrowing Base Amount shall be regarded as a Qualifying Contract from the entering into thereof even if no Earnings have started to accrue thereunder) calculated on a quarterly basis applying (i) the rate payable by the Qualifying Contract Party thereunder in excess of the Borrowing Base Rate and (ii) a discount rate equal to the relevant swap rate for the tenor of the New Eirik Raude Qualifying Contract determined by the Agent plus the Applicable Margin in respect of Revolving Credit Facility B.

“Borrowing Base Rate”

means USD 325,000 per day per Unit (net of any withholding tax, mobilisation fees received for upgrade of a Unit and other deductions) based on operating expenses (including a pro rata share of general administration costs) of not more than USD 162,000 per day per Unit, and as adjusted each time the Borrowers are required to calculate or recalculate the Borrowing Base Amount pursuant to Clause 9.6 (Mandatory prepayment – Borrowing Base Amount), in an amount equivalent to the amount by which the actual daily operating expenses at the relevant time exceeds USD 162,000 per Unit.

“Break Costs”

means the amount (if any) by which:

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

exceeds:

(b) the amount which that Bank would be able to obtain by placing an amount equal to the principal amount received by it on deposit with a leading bank in the relevant interbank market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

“Business Day”

means a day on which banks are open for business of the nature required by this Agreement in Oslo, London and New York.

“Commitment”

means, for a Bank, the aggregate of its Term Loan Facility Commitments, Revolving Credit Facility Commitments and Guarantee Facility Commitments.

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“Compliance Certificate”

means certificates substantially in the form set out in Schedule 2 (Form of Compliance Certificate), which shall be completed by the Parent, and submitted to the Agent in accordance with Clause 22.3 (Compliance Certificates).

“Default”

means an Event of Default or an event which, with the giving of notice, lapse of time, or fulfilment or non-fulfilment (as the case may be) of any other applicable condition (or any combination of the foregoing), would constitute an Event of Default.

“Dollars” and “USD”

means the lawful currency for the time being of the United States of America.

“Drawdown Date”

means the date requested by a Borrower for a Loan to be advanced or (as the context requires) the date on which such advance is actually made to that Borrower.

“Drawdown Notice”

means the request for disbursement of a Loan substantially in the form of Schedule 3 (Form of Drawdown Notice).

“Earnings”

means:

(i) all freight, hire and passage moneys payable to any of the Obligors as a consequence of the operation of the Units, including without limitation payments of any nature under any Employment Contract entered into by any of the Obligors in respect thereof;

(ii) any claim under any guarantee in respect of any charterparty, pool agreement or other contract of employment entered into by any of the Obligors in respect of any of the Units or otherwise related to freight, hire or passage moneys payable to any of the Obligors as a consequence of the operation of any of the Units;

(iii) compensation payable to any of the Obligors in the event of any requisition of any of the Units;

(iv) remuneration for salvage, towage and other services performed by any of the Units and payable to any of the Obligors;

(v) demurrage and retention money receivable by any of the Obligors in relation to any of the Units;

(vi) all moneys which are at any time payable under the insurances in respect of loss of Earnings;

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(vii) if and whenever any Unit is employed on terms whereby any moneys falling within (i) to (vi) 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 the relevant Unit; and

(viii) other money whatsoever due or to become due to any of the Obligors from third parties in relation to any of the Units.

“Earnings Accounts”

means the Dollar account opened by a Group Contract Party with the Agent, designated as the Earnings Account of the relevant Group Contract Party, to which all the Earnings of the relevant Group Contract Party shall be paid.

“Employment Contract”

means any charterparty, pool agreement or other contract of employment entered into by a member of the Group for the employment of a Unit, whether entered into with another member of the Group or with any other third party.

“Employment Contract Party”

means a party to an Employment Contract other than a Group Contract Party.

“Environmental Claim”

means:

(i) any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or

(ii) any claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,

and “claim” means a claim for damages, compensation, fines, penalties or any other payment of any kind, whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.

“Environmental Incident”

means:

(i) any release of Environmentally Sensitive Material from any Unit; or

(ii) any incident in which Environmentally Sensitive Material is released from a vessel and which involves a collision between any Unit and such vessel or some other incident of navigation or operation in connection with which any Unit is actually or potentially liable to be arrested, attached, detained or injuncted and/or where the relevant Unit and/or any Obligor and/or any operator or manager of the relevant Unit is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

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(iii) any other incident in which Environmentally Sensitive Material is released otherwise than from any Unit and in connection with which the relevant Unit is actually or potentially liable to be arrested, attached, detained or injuncted and/or where any Unit and/or any Obligor and/or any operator or manager of the relevant Unit is at fault or allegedly at fault or otherwise liable to any legal or administrative action.

“Environmental Law”

means any law relating to pollution or protection of the environment, to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.

“Environmentally Sensitive Material”

means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.

“Event of Default”

means an event specified as such in Clause 24 (Event of Default).

“Existing Credit Facilities”

means the facilities under the USD 776,000,000 amended and restated credit facilities agreement dated 8 February 2007, as amended by an Addendum No. 1 thereto dated 15 April 2008 and an Addendum No. 2 thereto dated 9 July 2008, between, inter alia, OR Norway as borrower and DnB NOR Bank ASA as arranger and facility agent.

“Existing Guarantee Facility Agreement”

means the guarantee agreement dated 14 March 2008 entered into between OR Norway as debtor, the Parent, Ocean Rig 1 AS and Ocean Rig 2 AS as guarantors and the Guarantee Bank as bank.

“Expiry Date”

means in relation to the Letter of Credit, the date on which the Guarantee Bank has no further liability (actual or contingent) under the Letter of Credit.

“Facilities”

means the Term Loan Facility, the Revolving Credit Facilities and the Guarantee Facility.

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“Final Maturity Date”

means:

(i) in respect of Revolving Credit Facility B, the earlier of the date when the New Eirik Raude Qualifying Contract has expired (for whatever reason) and the date occurring 36 calendar months after the date of the Original Facility Agreement; and

(ii) in respect of the Term Loan Facility, Revolving Credit Facility A, Revolving Credit Facility C and the Guarantee Facility, the date occurring 60 calendar months after the date of the Original Facility Agreement.

“Finance Documents”

means this Agreement, the Margin and Fee Letter, any Accession Agreements, the Security Documents and any other document designated as such by the Agent and any member of the Group.

“Finance Parties”

means the Agent, the Arrangers, the Guarantee Bank and the Banks.

“Financial Indebtedness”

means any indebtedness for or in respect of:

(i) moneys borrowed;

(ii) any amount raised by acceptance under any acceptance credit facility;

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

(iv) the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with the Approved Accounting Principles, be treated as a finance or capital lease;

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

(vi) any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

(vii) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account)

(viii) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(ix) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (i) to (viii) above.

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“First Equipment Charge”

means a first priority all asset security, or such other security over moveable assets required by the Agent (acting on the instructions of the Majority Banks) granted or to be granted by each Owner in favour of the Agent as security for the obligations of the relevant Owner under the Finance Documents in relation to the Senior Facilities.

“First Leiv Eiriksson Qualifying Contract Cash Deposit Account Pledge Agreement”

means a first priority pledge agreement in respect of the Leiv Eiriksson Qualifying Contract Cash Deposit Account, entered into or to be entered into between Ocean Rig 1 Inc. and the Agent as security for the obligations of Ocean Rig 1 Inc. under the Finance Documents in relation to the Senior Facilities, in such form and substance the Agent may require.

“First Mortgages”

means the first priority mortgage and the deed of covenants collateral thereto executed or to be executed and recorded by the relevant Owner against each of the Units in the Bahamas Ship Register (or such other ship register acceptable to the Agent) in favour of the Agent as security for the obligations of the relevant Owner under the Finance Documents in relation to the Senior Facilities, in such form and substance the Agent may require.

“First Security Agreements”

means the first priority security agreements and/or deeds of assignment for each Unit in respect of (i) the assignment of Earnings (including any guarantee received by a Group Contract Party as security for the payment of Earnings), (ii) all insurances to be taken out in respect of the relevant Unit and (iii) the pledge of the relevant Earnings Account, entered into or to be entered into between each Group Contract Party (other than with effect from the Restructuring Implementation Date, Ocean Rig 2 AS and Ocean Rig Norway AS) and the Agent as security for the obligations of the relevant Group Contract Party under the Finance Documents in relation to the Senior Facilities, if entered into as a Norwegian law security agreement, substantially in the form set out in Appendix 1 (Form of First Security Agreement) and if entered into as an English law deed of assignment, in such form as the Agent may require.

“First Share Pledge Agreements”

means the first priority share pledge agreements in respect of all of the shares in each of the Guarantors (other than the Parent) and Ocean Rig 2 AS and Ocean Rig North Sea AS, entered into or to be entered into as security for the obligations of the Obligors under the Finance Documents in relation to the Senior Facilities, in such form and substance as the Agent may require.

“Group”

means the Parent and its Subsidiaries, but from the Restructuring Implementation Date excluding Subsidiaries incorporated in Norway in relation to which a resolution for liquidation has been passed without notice of final liquidation having been made to the Norwegian Register of Business Enterprises pursuant to Section 16-10 of the Norwegian Companies Acts.

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“Group Contract Party”

means a member of the Group which from time to time is party to an Employment Contract.

“Guarantee Facility”

means a guarantee facility made available under this Agreement in the amount of up to USD 20,000,000.

“Guarantee Facility Commitments”

means:

(i) in relation to an Original Bank, the amount in USD set opposite its name under the heading “Guarantee Facility Commitments” in Part 2 of Schedule 1 (Banks and Commitments); and

(ii) in relation to a Bank which becomes a bank after the Signing Date, the amount of a Guarantee Facility Commitment acquired by it pursuant to Clause 31.2 (Transfers by Banks),

to the extent not cancelled, reduced or transferred under this Agreement.

“Guarantors”

means the Original Guarantors and any Additional Guarantors.

“Hedging Letter”

means a letter prepared by the Parent describing the strategy and policy regarding hedging of the interest and currency rate exposure of the members of the Group.

“Interest Payment Date”

means the last Business Day of each Interest Period or, if the Interest Period is longer than three (3) months, the last Business Day of each three-month period during that Interest Period and the last day of that Interest Period.

“Interest Period”

means each period determined in accordance with Clause 10 (Interest Periods).

“Junior Bank”

means a Bank having a Commitment under the Junior Facilities or any of them.

“Junior Facilities”

means Revolving Credit Facility B, Revolving Credit Facility C and the Guarantee Facility.

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“Junior Security Documents”

means the Second Equipment Charge, the Second Mortgages, the Second Security Agreements, the Second Leiv Eiriksson Qualifying Contract Cash Deposit Account Pledge Agreement and the Second Share Pledge Agreements.

“Leiv Eiriksson Qualifying Contract”

means the drilling contract dated 20 October 2005 entered into in respect of “Leiv Eiriksson” by Ocean Rig 1 AS with Shell U.K. Limited, A/S Norske Shell and Shell E&P Ireland Limited at a daily rate (before index based rate revisions) of USD 465,000 and USD 500,000 (including uplift for 2/4 rotation), net of any withholding tax, mobilisation costs and other deductions, and assigned by Ocean Rig 1 AS to Ocean Rig North Sea AS pursuant to an assignment and assumption agreement dated 25 July 2008.

“Leiv Eiriksson Qualifying Contract Cash Deposit Account”

means an account to be held by Ocean Rig 1 Inc. with the Agent into which an amount of at least USD 15,872,000 (or in the event that the term of the Leiv Eiriksson Qualifying Contract has expired and the amount claimed by the relevant member of the Group to be outstanding thereunder is less than USD 15,872,000, such amount claimed by the relevant member of the Group to be outstanding thereunder) shall be deposited until the Leiv Eiriksson Qualifying Contract Expiry Date.

“Leiv Eiriksson Qualifying Contract Expiry Date”

means the date when the term of the Leiv Eiriksson Qualifying Contract has expired and Shell U.K. Limited, A/S Norske Shell and Shell E&P Ireland Limited have fulfilled all of their obligations thereunder.

“Letter of Credit”

means the irrevocable standby letter of credit in the amount of USD 20,000,000 issued by the Guarantee Bank in favour of the Beneficiary on 14 March 2008 under the Existing Guarantee Facility Agreement to support payments by Ocean Rig 2 AS under the New Eirik Raude Qualifying Contract, and deemed to be issued under the Guarantee Facility on and from the date the Agent has given notice to the Borrowers and the Banks pursuant to Clause 3.1 (Documentary conditions precedent), as amended, substituted or re-executed.

“LIBOR”

means, for any Interest Period (or other period for which an interest rate is to be calculated under any Finance Document):

(i) the rate per annum equal to the offered quotation for deposits in the relevant currency ascertained by the Agent to be the rate per annum as monitored on the Reuters screen LIBOR01 page at or about 11:00 hours (London time) on the applicable Quotation Date; or

(ii) if no such rate is available, the rate per annum determined by the Agent to be equal to the arithmetic mean (rounded upward to the nearest 1/16^th of one per cent.) of the rates per annum, as supplied to the Agent at its request, quoted by each Bank to leading banks in the London interbank market at or about 12:00 hours noon (London time) on the applicable Quotation Date for the offering of deposits in the relevant currency for a period comparable to the relevant Interest Period.

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“Loan”

means the principal amount of each borrowing by a Borrower under this Agreement, or the principal amount outstanding of any such borrowing from time to time.

“Loan Period”

means the period commencing on the date of the Original Facility Agreement and ending on the day on which all amounts outstanding under the Finance Documents have been repaid in full.

“Majority Banks”

means:

(i) if there is no Loan then outstanding, a Bank or Banks whose Commitments aggregate more than 66 2/3 per cent, of the Total Commitment (or, if the Total Commitments have been reduced to zero, aggregated more than 66 2/3 per cent, of the Total Commitment immediately prior to the reduction); or

(ii) at any other time, a Bank or Banks whose participation in the Loans then outstanding aggregate more than 66 2/3 per cent, of the Loans then outstanding.

“Majority Senior Banks”

means:

(i) if there is no Loan under any of the Senior Facilities then outstanding, a Senior Bank or Senior Banks whose Commitments under the Senior Facilities aggregate more than 66 2/3 per cent. of the aggregate Commitments of the Senior Banks under the Senior Facilities (or, if the aggregate Commitments of the Senior Banks under the Senior Facilities have been reduced to zero, aggregated more than 66 2/3 per cent. of the aggregate Commitments of the Senior Banks under the Senior Facilities immediately prior to the reduction); or

(ii) at any other time, a Senior Bank or Senior Banks whose participation in the Loans under the Senior Facilities then outstanding aggregate more than 66 2/3 per cent, of the Loans under the Senior Facilities then outstanding.

“Margin and Fee Letter”

means the letter dated 5 September 2008 from the Agent to the Borrowers setting out the Applicable Margin and commitment fee in respect of the Junior Facilities, the guarantee commission payable in respect of the Guarantee Facility, the amount of the arrangement fee referred to in Clause 26.2 (Arrangement fee) and the amount of the agency fee referred to in Clause 26.3 (Agency fee), and accepted by the Borrowers.

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“Market Value”

means the fair market value of each Unit in USD determined by calculating the arithmetic mean of independent valuations of each Unit obtained from two of the Approved Brokers. Such valuations to be made on the basis of a sale for prompt delivery, for cash at arm’s length on normal commercial terms as between a willing buyer and seller, on an “as is where is” basis free of any existing charter or other contract of employment and/or pool arrangements. If such two valuations in respect of a Unit differ with more than 10 per cent., the Agent may require an additional valuation by another Approved Broker, and the Market Value of such Unit shall then be determined by calculating the arithmetic mean of all three valuations.

“New Eirik Raude Qualifying Contract”

means the form of contract for the provision of semi-submersible drilling unit “Eirik Raude” and associated drilling services dated 15 February 2008 entered into by the Owner thereof with Tullow Oil Pic, 3^rd Floor - Building 11, Chiswick Park, 566 Chiswick High Road, London W4 5YS, England at an initial daily rate of USD 580,000 and an average daily rate of USD 605,760 (net of any withholding tax, mobilisation costs and other deductions), and as assigned, transferred and/or novated to Ocean Rig Ghana Limited.

“Obligor”

means any party (other than a Finance Party) to any of the Finance Documents.

“Original Facility Agreement”

means the guarantee, revolving credit and term loan facility agreement dated 17 September 2008 between Ocean Rig ASA and OR Norway as borrowers, the Original Guarantors (as defined therein) as original guarantors, the Original Banks (as defined therein) as original banks, the Guarantee Bank, the Arrangers and the Agent.

“Original Financial Statements

means the quarterly consolidated accounts of the Parent for the first quarter of the financial year of 2008.

“Owner”

means each of the registered owners of the Units from time to time.

“Parent”

means Ocean Rig ASA, org. no. NO 976 769 643, Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, and from and including the Restructuring Implementation Date and the release of Ocean Rig ASA of its obligations under the Finance Documents, Drill Rigs Holdings Inc., Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960.

“Participation”

means, in respect of a Bank, that part of the Loans which is owing to that Bank.

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“Party”

means a party to this Agreement.

“Project Company”

means any Subsidiary of the Parent:

(i) which is a single purpose company whose primary purpose is to invest in, lend to or carry out a specific project or portfolio of projects; and

(ii) none of whose liabilities to repay any indebtedness are the subject of security or a guarantee, indemnity or any similar form of assurance, undertaking or support by any member of the Group,

“Qualifying Contract”

means each of the New Eirik Raude Qualifying Contract and the Leiv Eiriksson Qualifying Contract.

“Quotation Date”

means, in relation to any period for which an interest rate is to be determined, two (2) Business Days before the first day of that period, unless market practice differs in the London interbank market, in which case the Quotation Date will be determined by the Agent in accordance with market practice in the London interbank market (and if quotations would normally be given by leading banks in the London interbank market on more than one day, the Quotation Date will be the last of those days.

“Reduction Date”

means each date on which a Revolving Credit Facility Commitment shall be reduced pursuant to this Agreement, provided that if any such day is not a Business Day, the relevant Reduction Date shall instead be the next Business Day in the same calendar month, provided that if there is no next Business Day in the same calendar month, the relevant Reduction Date shall instead be the preceding Business Day.

“Renewal Notice”

means a request made by or on behalf of a Borrower for the selection of a new Interest Period in accordance with Clause 10.1 (Selection), substantially in the form set out in Schedule 4 {Form of Renewal Notice).

“Repayment Date”

means each repayment date determined in accordance with Clause 8 (Repayment and reduction).

“Restatement Agreement”

means the amendment and restatement agreement of even date herewith for the amendment and restatement of the Original Facility Agreement.

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“Restructuring”

means the re-domicile project involving the re-domicile of the members of the Group as further described in the step plan dated 12 October 2009.

“Restructuring Implementation Date”

means the date when all of the steps described in the step plan dated 12 October 2009 have been implemented and the Restatement Date (as defined in the Restatement Agreement) has occurred.

“Revolving Credit Facilities”

means Revolving Credit Facility A, Revolving Credit Facility B and Revolving Credit Facility C.

“Revolving Credit Facility A”

means a revolving credit facility made available under this Agreement originally in the amount of up to USD 350,000,000.

“Revolving Credit Facility A Commitments”

means:

(i) in relation to an Original Bank, the amount in USD set opposite its name under the heading “Revolving Credit Facility A Commitments” in Part 2 of Schedule 1 (Banks and Commitments); and

(ii) in relation to a Bank which becomes a bank after the Signing Date, the amount of a Revolving Credit Facility A Commitment acquired by it pursuant to Clause 31.2 (Transfers by Banks),

to the extent not cancelled, reduced or transferred under this Agreement.

“Revolving Credit Facility B”

means a revolving credit facility made available under this Agreement originally in the amount of up to USD 250,000,000.

“Revolving Credit Facility B Commitments”

means:

(i) in relation to an Original Bank, the amount in USD set opposite its name under the heading “Revolving Credit Facility B Commitments” in Part 2 of Schedule 1 (Banks and Commitments); and

(ii) in relation to a Bank which becomes a bank after the Signing Date, the amount of a Revolving Credit Facility B Commitment acquired by it pursuant to Clause 31.2 (Transfers by Banks),

to the extent not cancelled, reduced or transferred under this Agreement.

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“Revolving Credit Facility C”

means a revolving credit facility made available under this Agreement in the amount of up to USD 20,000,000.

“Revolving Credit Facility C Commitments”

means:

(i) in relation to an Original Bank, the amount in USD set opposite its name under the heading “Revolving Credit Facility C Commitments” in Part 2 of Schedule 1 (Banks and Commitments’)”, and

(ii) in relation to a Bank which becomes a bank after the Signing Date, the amount of a Revolving Credit Facility C Commitment acquired by it pursuant to Clause 31.2 (Transfers by Banks),

to the extent not cancelled, reduced or transferred under this Agreement.

“Revolving Loan”

means a Loan under a Revolving Credit Facility.

“Rollover Loan”

means one or more Revolving Loans:

(i) made or to be made on the same day that a maturing Revolving Loan is due to be repaid;

(ii) the aggregate amount of which is equal to or less than the maturing Revolving Loan; and

(iii) made or to be made to a Borrower for the purpose of refinancing a maturing Revolving Loan.

“Second Equipment Charge”

means a second priority all asset security, or such other security over moveable assets required by the Agent (acting on the instructions of the Majority Banks) granted or to be granted by each Owner in favour of the Agent as security for the obligations of the relevant Owner under the Finance Documents in relation to the Junior Facilities.

“Second Leiv Eiriksson Qualifying Contract Cash Deposit Account Pledge Agreement”

means a second priority pledge agreement in respect of the Leiv Eiriksson Qualifying Contract Cash Deposit Account, entered into or to be entered into between Ocean Rig 1 Inc. and the Agent as security for the obligations of Ocean Rig 1 Inc. under the Finance Documents in relation to the Junior Facilities, in such form and substance the Agent may require.

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“Second Mortgages”

means the second priority mortgage and the deed of covenants collateral thereto executed or to be executed and recorded by the relevant Owner against each of the Units in the Bahamas Ship Register (or such other ship register acceptable to the Agent) in favour of the Agent as security for the obligations of the relevant Owner under the Finance Documents in relation to the Junior Facilities.

“Second Security Agreements”

means the second priority security agreements and/or deeds of assignment for each Unit in respect of (i) the assignment of Earnings (including any guarantee received by a Group Contract Party as security for the payment of Earnings), (ii) all insurances to be taken out in respect of the relevant Unit and (iii) the pledge of the relevant Earnings Account, entered into or to be entered into between each Group Contract Party (other than with effect from the Restructuring Implementation Date, Ocean Rig 2 AS and Ocean Rig Norway AS) and the Agent as security for the obligations of the relevant Group Contract Party under the Finance Documents in relation to the Junior Facilities, if entered into, as a Norwegian law security agreement, substantially in the form set out in Appendix 1 (Form of First Security Agreement), but including provisions effecting the junior ranking thereof, and if entered into as an English law deed of assignment, in such form as the Agent may require.

“Second Share Pledge Agreements”

means the second priority share pledge agreements in respect of all of the shares in each of the Guarantors (other than the Parent) and Ocean Rig 2 AS and Ocean Rig North Sea AS, entered into or to be entered into as security for the obligations of the Obligors under the Finance Documents in relation to the Junior Facilities.

“Security Documents”

means each of the documents referred to in Clause 13 (Security) and all such other documents which may be executed at any time in favour of the Agent or any of the other Finance Parties as security for the obligations of any of the Obligors under the Finance Documents or any of them.

“Security Interest”

means any mortgage, pledge, lien, charge (whether fixed or floating), assignation, assignment, finance lease, sale-and-repurchase or sale-and-leaseback arrangement, sale of receivables on a recourse basis or any other agreement or arrangement having the effect of conferring security, except for liens arising solely by operation of law, and/or in the ordinary course of business, securing amounts not more than 30 days overdue.

“Senior Bank”

means a Bank having a Commitment under the Senior Facilities or any of them.

“Senior Facilities”

means the Term Loan Facility and Revolving Credit Facility A.

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“Senior Security Documents”

means the First Equipment Charge, the First Mortgages, the First Security Agreements, the First Leiv Eiriksson Qualifying Contract Cash Deposit Account Pledge Agreement and the First Share Pledge Agreements.

“Signing Date”

means the date of this Agreement.

“Subsidiary”

means an entity of which a person has direct or indirect control or owns directly or indirectly more than 50 per cent, of the voting capital or similar right of ownership.

“Tax on Overall Net Income”

means, in respect of a Finance Party, tax imposed on it by the jurisdiction under the laws of which it has been incorporated or in which it is located on (i) its world-wide net income, profits or gains and/or (ii) such of the net income, profits or gains of that Finance Party as are considered to arise in or to relate to or are taxable in that jurisdiction.

“Term Loan”

means a Loan under the Term Loan Facility.

“Term Loan Facility”

means the term loan facility made available under this Agreement in the amount of up to USD 400,000,000.

“Term Loan Facility Commitments”

means:

(i) in relation to an Original Bank, the amount in USD set opposite its name under the heading “Term Loan Facility Commitments” in Part 2 of Schedule 1 (Banks and Commitments); and

(ii) in relation to a Bank which becomes a bank after the Signing Date, the amount of a Term Loan Facility Commitment acquired by it pursuant to Clause 31.2 (Transfers by Banks),

to the extent not cancelled, reduced or transferred under this Agreement.

“Total Commitment”

means the aggregate of all the Commitments, being USD 1,040,000,000 at the date of the Original Facility Agreement.

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“Total Loss”

means:

(i) an actual, constructive, compromised, agreed, arranged or other total loss of a Unit;

(ii) any expropriation, confiscation, requisition or acquisition of a Unit, whether for full consideration, a consideration less than her proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority, excluding a requisition for hire for a fixed period against payment of market hire, not exceeding one year without any right to extension; and

(iii) any condemnation of a Unit by any tribunal or by any person or persons claiming to be a tribunal.

“Total Loss Date”

means:

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

(ii) in the case of a constructive, compromised, agreed or arranged total loss of a Unit, the earlier of (a) the date on which a notice of the abandonment is given to the insurers, and (b) the date of any compromise, arrangement or agreement made by or on behalf of a member of the Group with the Unit’s insurers in which the insurers agree to treat the Unit as a total loss; and

(iii) 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.

“Total Revolving Credit Facility A Commitment”

means the aggregate of all the Revolving Credit Facility A Commitments, being USD 350,000,000 at the date of the Original Facility Agreement.

“Total Revolving Credit Facility B Commitment”

means the aggregate of all the Revolving Credit Facility B Commitments, being USD 250,000,000 at the date of the Original Facility Agreement.

“Total Revolving Credit Facility C Commitment”

means the aggregate of all the Revolving Credit Facility C Commitments, being USD 20,000,000 at the date of the Original Facility Agreement.

“Total Term Loan Facility Commitment”

means the aggregate of all the Term Loan Facility Commitments, being USD 400,000,000 at the date of the Original Facility Agreement.

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“Transaction Documents”

means this Agreement, the Security Documents, the Employment Contracts, and any document or agreement from time to time entered into pursuant to the terms of any such document.

“Transfer Certificate”

means a certificate evidencing the obligations of a New Bank (as defined in Clause 31.2 (Transfer by Banks)) following a transfer by a Bank of a part of its Commitments, such certificate to be substantially in the form set out in Schedule 5 (Form of Transfer Certificate).

“Units”

means the two 5^th generation Bingo-9000 design semi-submersible deep-water drilling rigs “Eirik Raude” and “Leiv Eiriksson”, and “Unit” means any of them.

“Unsecured Bond Loan Agreement”

means the USD 250,000,000 loan agreement dated 29 March 2006 between Ocean Rig ASA as borrower and Norsk Tillitsmann ASA as security trustee on behalf of certain bondholders in relation to the bond issue named FRN Ocean Rig ASA Senior Open Bond Issue 2006/2011.

“Utilisation”

means the advance of a Loan or the deemed issue of the Letter of Credit under this Agreement.

“Utilisation Date”

means a Drawdown Date or the date the Letter of credit is deemed to be issued under this Agreement.

1.2 Construction

(a) Words importing the singular shall (unless the contrary intention appears) include the plural and vice versa.

(b) Reference to a Clause or a Schedule or an Appendix is respectively a reference to a clause of or schedule or appendix to this Agreement.

(c) A provision of law is a reference to that provision as amended or re-enacted from time to time, and to any regulations made by the appropriate authority pursuant to such law.

(d) Reference to a document is to be construed as a reference to such document as amended or supplemented (with any necessary consent) from time to time.

(e) Reference to a time is reference to Oslo time unless otherwise stated.

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(f) Reference to the “Agent”, any “Arranger”, any “Bank”, any “Finance Party”, the “Parent”, any “Borrower”, any “Guarantor”, any “Obligor” or any “Party” shall be construed as to include its successors in title, permitted assigns or permitted transferees.

(g) Reference to a “person” includes any individual, company, corporation, unincorporated association or body (including a partnership, trust, joint venture or consortium), government, state, agency, organisation or other entity whether or not having separate legal personality.

(h) Reference to a person being “controlled” by another person means that the other person (whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, contract or otherwise) has the power to appoint or remove the majority of the members of the board of directors or managerial, administrative, supervisory or other governing body of the person or otherwise controls or has the power to control the affairs and policies of that person, and “control” shall be construed accordingly.

2 THE FACILITIES

2.1 The Term Loan Facility

Subject to the terms of this Agreement, each Senior Bank agrees to participate in the Term Loan Facility and to make available to the Borrowers a term loan facility up to an aggregate amount in USD not exceeding its Term Loan Facility Commitments.

2.2 The Revolving Credit Facilities

Subject to the terms of this Agreement:

(i) each Senior Bank agrees to participate in Revolving Credit Facility A and to make available to the Borrowers a revolving credit facility up to an aggregate amount in USD not exceeding its Revolving Credit Facility A Commitments;

(ii) each Junior Bank agrees to participate in Revolving Credit Facility B and to make available to the Borrowers a revolving credit facility up to an aggregate amount in USD not exceeding its Revolving Credit Facility B Commitments; and

(iii) each Junior Bank agrees to participate in Revolving Credit Facility C and to make available to the Borrowers a revolving credit facility up to an aggregate amount in USD not exceeding its Revolving Credit Facility C Commitments.

2.3 The Guarantee Facility

Subject to the terms of this Agreement, the Guarantee Bank agrees to participate in the Guarantee Facility and to maintain the Letter of Credit up to an aggregate amount in USD not exceeding its Guarantee Facility Commitments.

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2.4 Purpose and application

(a) The Borrowers shall apply all amounts borrowed by them under the Term Loan Facility and Revolving Credit Facility A towards refinancing the Existing Facilities and for general corporate purposes.

(b) The Borrowers shall apply all amounts borrowed by them under Revolving Credit Facility B for general corporate purposes.

(c) The Borrowers shall apply all amounts borrowed by them under Revolving Credit Facility C for the purpose of serving as a cash reserve for required expenditure in relation to extraordinary maintenance or repair of a Unit having caused unforeseen operation downtime of that Unit.

(d) The purpose of the Guarantee Facility is to maintain the Letter of Credit issued in favour of the Beneficiary on behalf of and for the account of the Borrowers to support payments by Ocean Rig 2 AS and/or Ocean Rig Ghana Limited under the New Eirik Raude Qualifying Contract.

(e) Without affecting the obligations of any Obligor in any way, none of the Finance Parties is bound to monitor or verify the application of amounts borrowed issued under this Agreement.

2.5 Nature of rights and obligations of the Borrowers

The obligations of the Borrowers under this Agreement are joint and several obligations. The liability of a Borrower for the obligations of another Borrower under this Agreement shall be covered by its liabilities as a Guarantor hereunder and governed by the provisions of Clause 20 (Guarantee and indemnity).

2.6 Nature of rights and obligations of the Banks

(a) The obligations of the Banks under this Agreement are several. Failure of a Bank to carry out its obligations under this Agreement shall not relieve any other Party of any of its obligations under this Agreement. No Bank shall be responsible for the obligations of any other Bank hereunder.

(b) The rights of each Bank under this Agreement are separate and independent rights. A Bank may, except as otherwise stated in this Agreement, separately enforce those rights.

3 CONDITIONS PRECEDENT

3.1 Documentary conditions precedent

The obligations of each Bank to the Borrowers under this Agreement, and to participate in the first Utilisation to be made hereunder, are subject to the condition precedent that the Agent has notified the Borrowers and the Banks that it has received all of the documents set out in Part I of Schedule 6 (Conditions precedent documents) in a form and substance satisfactory to the Agent.

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3.2 Further conditions precedent

The obligation of each Bank to participate in a Utilisation, is subject to the further conditions precedent that on both the date of a Drawdown Notice, the Drawdown Date for that Loan and on the date of each Renewal Notice:

(i) the representations and warranties in Clause 21 (Representations and Warranties) deemed to be repeated on those dates are correct and not misleading and will be correct and not misleading immediately after the relevant Drawdown Date with reference to the facts and circumstances then prevailing, unless otherwise informed to the Agent in writing and, if not permitted under this Agreement, waived by the Majority Banks prior to the relevant date; and

(ii) in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed Loan and, in the case of any other Loan, no Default is outstanding or would result from the making of that Loan.

4 UTILISATION OF THE TERM LOAN FACILITY

4.1 Utilisation — maximum number of Term Loans

Subject to the terms of this Agreement, the Term Loan Facility will be made available to the Borrowers in up to five (5) Term Loans.

4.2 Drawdown conditions for each Term Loan

(a) Subject to Clause 3 (Conditions precedent), a Term Loan will be made available to the Borrowers, if:

(i) not later than 10:00 a.m. three (3) Business Days prior to the requested Drawdown Date of such Term Loan, the Agent has received a properly completed Drawdown Notice; and

(ii) the requested Drawdown Date is a Business Day during the Availability Period in respect of the Term Loan Facility.

(b) Subject to the terms of this Agreement, each Drawdown Notice shall be irrevocable and the relevant Borrower shall be bound to accept the Term Loan in accordance with the Drawdown Notice.

(c) The Agent shall upon receipt of the completed Drawdown Notice notify each Bank of the details of the requested Term Loan and the amount of that Bank’s participation in such Term Loan.

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4.3 Amount of each Bank’s participation in the Term Loans

The amount of a Bank’s participation in each Term Loan will be the proportion of that Term Loan which such Bank’s Term Loan Facility Commitments bears to the aggregate Term Loan Facility Commitments of all the Banks immediately prior to making the relevant Term Loan.

5 UTILISATION OF THE REVOLVING CREDIT FACILITIES

5.1 Utilisation of the Revolving Credit Facilities

Subject to Clause 8.2 (b) in relation to Revolving Credit Facility C, the Borrowers may utilise the Revolving Credit Facilities for drawdown of Revolving Loans on a revolving basis so that any amounts repaid prior to or at the end of the Availability Period in respect thereof may be redrawn by the Borrowers subject to the terms and conditions of this Agreement.

5.2 Drawdown conditions for each Revolving Loan

(a) Subject to Clause 3 (Conditions precedent), a Revolving Loan, will be made available to the Borrowers, if:

(i) the sum of the requested Revolving Loan and the aggregate amount of all outstanding Revolving Loans under the relevant Revolving Credit Facility (other than Revolving Loans that are due to be repaid or prepaid on or before the proposed Drawdown Date) does not exceed the relevant Revolving Credit Facility Commitment;

(ii) not later than 10:00 a.m. three (3) Business Days prior to the requested Drawdown Date of such Revolving Loan, the Agent has received a properly completed Drawdown Notice, which, once received by the Agent, shall be irrevocable;

(iii) the requested Drawdown Date is a Business Day during the Availability Period in respect of the relevant Revolving Credit Facility; and

(iv) the amount and currency of the proposed Revolving Loan shall be (a) a minimum of USD 10,000,000 and in integral multiples thereof (or in any other amount approved by the Agent), or (b) the balance of the relevant Revolving Credit Facility undrawn on the requested Drawdown Date.

(b) Subject to the terms of this Agreement, each Drawdown Notice shall be irrevocable and the relevant Borrower shall be bound to accept the Revolving Loan in accordance with the Drawdown Notice.

(c) The Agent shall upon receipt of the completed Drawdown Notice notify each Bank of the details of the requested Revolving Loan and the amount of that Bank’s participation in such Revolving Loan.

(d) The aggregate number of Revolving Loans outstanding under this Agreement at any time shall not exceed ten (10).

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5.3 Additional drawdown conditions for each Revolving Loan under Revolving Credit Facility B

(a) The following conditions shall apply to any Revolving Loan requested to be made under Revolving Credit Facility B in addition to those set out in Clause 5.2 (Drawdown conditions for each Revolving Loan):

(i) not later than 10:00 a.m. three (3) Business Days prior to the requested Drawdown Date of such Revolving Loan, the Agent has received an updated calculation of the Borrowing Base Amount, in a form and substance satisfactory to the Agent; and

(ii) the sum of the requested Revolving Loan and the aggregate amount of all outstanding Revolving Loans under Revolving Credit Facility B does not exceed the Borrowing Base Amount as so calculated.

(b) No Drawdown Notice may be delivered requesting a Revolving Loan under Revolving Credit Facility B until the Agent has received in a form and substance satisfactory to it true and certified copies of the Qualifying Contracts and any Employment Contracts entered into between any of the members of the Group, and any guarantee or other surety issued for the obligations of the Qualifying Contract Party thereunder, including in respect of the New Eirik Raude Qualifying Contract an on demand bank guarantee in the amount of at least USD 85,000,000.

5.4 Additional drawdown conditions for each Revolving Loan under Revolving Credit Facility C

The following conditions shall apply to any Revolving Loan requested to be made under Revolving Credit Facility C in addition to those set out in Clause 5.2 (Drawdown conditions for each Revolving Loan):

(i) not later than 10:00 a.m. three (3) Business Days prior to the requested Drawdown Date of such Revolving Loan, the Agent has received evidence satisfactory to it that (A) an unforeseen operation downtime has occurred in respect of a Unit and (B) that the relevant unforeseen operation downtime has resulted in a need for expenditure;

(ii) not more than 30 days have elapsed since the date on which the event causing the relevant unforeseen operational downtime occurred; and

(iii) the Junior Banks have approved the making of that Loan (in their sole discretion).

5.5 Each Bank’s participation in Revolving Loans

(a) The amount of a Bank’s participation in each Revolving Loan under Revolving Credit Facility A will be the proportion of that Revolving Loan which such Bank’s Revolving Credit Facility A Commitment bears to the Revolving Credit Facility A Commitments of all the Banks under Revolving Credit Facility A on the date of receipt of the relevant Drawdown Notice.

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(b) The amount of a Bank’s participation in each Revolving Loan under Revolving Credit Facility B will be the proportion of that Revolving Loan which such Bank’s Revolving Credit Facility B Commitment bears to the Revolving Credit Facility B Commitments of all the Banks under Revolving Credit Facility B on the date of receipt of the relevant Drawdown Notice.

(c) The amount of a Bank’s participation in each Revolving Loan under Revolving Credit Facility C will be the proportion of that Revolving Loan which such Bank’s Revolving Credit Facility C Commitment bears to the Revolving Credit Facility C Commitments of all the Banks under Revolving Credit Facility C on the date of receipt of the relevant Drawdown Notice.

6 UTILISATION OF THE GUARANTEE FACILITY

6.1 Utilisation of the Guarantee Facility

The Guarantee Facility shall be utilised by the issuance of the Letter of Credit deemed to take effect under the Guarantee Facility automatically on and from the date the Agent has given notice to the Borrowers, the Guarantee Bank and the Banks pursuant to Clause 3.1 (Documentary conditions precedent). At the same time the obligations of those of the Obligors that are party to the Existing Guarantee Facility Agreement shall be deemed to be fulfilled and be replaced by the obligations of the Obligors in relation to the Guarantee Facility set out in this Agreement.

6.2 Each Bank’s participation in the Letter of Credit

The Letter of Credit has been issued by the Guarantee Bank for its own account.

7 DEMAND UNDER THE LETTER OF CREDIT

7.1 Demand under the Letter of Credit

(a) If the Beneficiary makes a demand under the Letter of Credit in accordance with its terms, the Guarantee Bank shall promptly notify the Borrowers specifying:

(i) the aggregate amount of the demand (the “Claimed Amount”);

(ii) the date on which payment is to be made (the “Payment Date”); and

(iii) the details of the account to which payment is to be made.

(b) The Borrowers shall, not later than 11.00 a.m. (2) two Business Days prior to the Payment Date, pay to the Guarantee Bank the Claimed Amount.

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(c) The provisions of this Clause 7.1 are without prejudice to any other rights which the Guarantee Bank may have against the Borrowers under this Agreement (including, but without limitation, under Clause 11.3 (Default Interest)).

7.2 Counter indemnity

Each Borrower hereby irrevocably and unconditionally:

(i) authorises and directs the Guarantee Bank to pay any demand made by the Beneficiary under or by reference to the Letter of Credit on first request or demand being made in accordance with the terms thereof without requiring proof of the agreement of the Borrowers that the amounts so demanded are or were due and notwithstanding (a) that the Borrowers may dispute the validity of any such request, demand or payments, or make any set-off, counter-claim or defence against such demand for payment and/or (b) whether the Beneficiary is actually entitled to make a claim against a Borrower or any other member of the Group;

(ii) undertakes to reimburse to the Guarantee Bank on demand any and all sums which the Guarantee Bank may pay to the Beneficiary under the Letter of Credit, in the currency paid by the Guarantee Bank, together with interest at the rate determined in accordance with Clause 11.3 (Default interest) for overdue amounts from the date such payment is made by the Guarantee Bank until payment in full of such reimbursement;

(iii) undertakes to keep the Guarantee Bank indemnified against any and all liabilities, losses, damages, claims, demands, expenses (including, without limitation, legal fees and VAT) or actions which the Guarantee Bank suffer or incur in any way whatsoever under or in connection with or arising out of the Letter of Credit; and

(iv) agrees that the obligations of the Borrowers under this Agreement shall not be affected by any act, omission, matter or thing which, but for this provision, might operate to release or exonerate the Borrowers from its obligations hereunder in whole or in part, including, without limitation and whether or not known to the Borrowers or any other person:

(a) any time or waiver granted to or composition with the Beneficiary or any other person; or

(b) any taking, variation, compromise, renewal or release of, or refusal or neglect to perfect or enforce any rights, remedies or security available to the Guarantee Bank or the Beneficiary or any other person; or

(c) any variation of the terms of or substitution of the Letter of Credit so that references in this Agreement to the Letter of Credit shall include references to the Letter of Credit as so varied or substituted.

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7.3 Continuing indemnity

The indemnity set out in Clause 7.2 (Counter indemnity) shall be a continuing indemnity, and shall extend to the ultimate balance of all amounts which may be or become due, owing or payable under this indemnity and shall continue in force notwithstanding any intermediate payment in whole or in part of any such amounts.

7.4 Certificate from the Guarantee Bank

A certificate in writing signed by the Guarantee Bank, certifying any amount due from the Borrowers under this indemnity which is a Claimed Amount as defined in Clause 7.1 (Demand under the Letter of Credit) shall be conclusive evidence of the matters so certified, save in the case of manifest error.

7.5 Invalidity

No invalidity or unsenforceability of all or any part of this Clause 7 shall affect any rights of indemnity or otherwise which the Guarantee Bank would or may have in the absence of or in addition to this Clause 7.

8 REPAYMENT AND REDUCTION

8.1 Repayment of the Term Loan

The Borrowers shall repay the Term Loan in full on the Final Maturity Date in respect thereof.

8.2 Repayment of Revolving Loans

(a) The Borrowers shall repay each Revolving Loan on the last day of the Interest Period relating thereto and shall repay all Revolving Loans outstanding under a Revolving Credit Facility in full on the Final Maturity Date in respect of the relevant Revolving Credit Facility, provided however that where a Revolving Loan (the “New Loan”) is, subject to and in accordance with the other terms of this Agreement, to be made on a day on which another Revolving Loan (the “Maturing Loan”) is due to be paid, and further provided that the New Loan is denominated in the same currency as the Maturing Loan, then;

(i) the Maturing Loan shall be deemed to be repaid in whole on its Repayment Date if the amount of the New Loan is equal to or greater than the amount of the Maturing Loan or in part if the New Loan is less than the Maturing Loan. To the extent that the Maturing Loan is so deemed to have been repaid, the principal amount of the New Loan to be made on such date shall be deemed to have been credited to the account of the relevant Borrower by the Banks in accordance with the terms of this Agreement; and

(ii) the Banks shall only be obliged to make available an amount equal to the amount by which the New Loan exceeds the Maturing Loan.

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(b) In addition to the repayment required to be made pursuant to paragraph (a) above, the Borrowers shall repay each Revolving Loan made under Revolving Credit Facility C in full at the latest on the date occurring six (6) calendar months after the Drawdown Date of the first Revolving Loan made in relation to the operational downtime of the Unit to which the relevant Revolving Loan relates.

8.3 Reduction of the Total Revolving Credit Facility A Commitment

(a) The Total Revolving Credit Facility A Commitment shall on the date occurring three (3) months after the date of the Original Facility Agreement automatically be reduced by an amount equal to USD 17,500,000, and quarterly thereafter in the same amount until the Final Maturity Date in respect thereof. On the Final Maturity Date in respect thereof, the Total Revolving Credit Facility A Commitment shall automatically be reduced to zero.

(b) If, on any Reduction Date, the aggregate amount of all outstanding Revolving Loans under Revolving Credit Facility A would exceed the aggregate amount of the Total Revolving Credit Facility A Commitment (as so reduced), the Borrowers shall, on such Reduction Date, prepay (together with breakage costs, if any) or repay an amount of the Revolving Loans under Revolving Credit Facility A equal to such excess together with all interest accrued thereon to the relevant Reduction Date.

(c) Any reduction of the Total Revolving Credit Facility A Commitment shall reduce rateably the Revolving Credit Facility A Commitment of each Bank.

8.4 Reduction and repayment of the Total Revolving Credit Facility B Commitment

(a) The Total Revolving Credit Facility B Commitment shall on the date occurring three (3) months after the date when Earnings have started to accrue to the relevant Group Contract Party under the New Eirik Raude Qualifying Contract automatically be reduced by an amount each quarter representing a linear reduction of the Total Revolving Credit Facility B Commitment down to zero on the Final Maturity Date in respect of Revolving Credit Facility B. The Borrowers shall promptly give written notice to the Agent as soon as Earnings have started to accrue to the relevant Group Contract Party under the New Eirik Raude Qualifying Contract.

(b) If, on any Reduction Date, the aggregate amount of all outstanding Revolving Loans under Revolving Credit Facility B would exceed the aggregate amount of the Total Revolving Credit Facility B Commitment (as so reduced), the Borrowers shall, on such Reduction Date, prepay (together with breakage costs, if any) or repay an amount of the Revolving Loans under Revolving Credit Facility B equal to such excess together with all interest accrued thereon to the relevant Reduction Date.

(c) Any reduction of the Total Revolving Credit Facility B Commitment shall reduce rateably the Revolving Credit Facility B Commitment of each Bank.

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8.5 Final Maturity Date

On the Final Maturity Date in respect of a Facility, the Borrowers shall pay to the Agent (on behalf of the Finance Parties) all sums then owing under the Finance Documents in relation to such Facility.

9 PREPAYMENT AND CANCELLATION

9.1 Voluntary prepayment

The Borrowers may (without penalty or premium, but subject to Clause 28.2 (Other indemnities)), by giving not less than ten (10) Business Days’ prior written notice to the Agent, prepay the whole or any part of a Loan in an amount being a minimum of USD 5,000,000 or in integral multiples thereof in each case, or in such other amounts as the Agent may from time to time agree.

9.2 Voluntary cancellation

The Borrowers may (without penalty or premium), by giving not less than ten (10) Business Days’ prior written notice to the Agent, cancel any undrawn portion of the Total Commitment in minimum amounts of USD 5,000,000 or in integral multiples thereof in each case, or in such other amounts as the Agent may from time to time agree.

9.3 Mandatory prepayment — sale or Total Loss

(a) If a Unit is sold or is otherwise disposed of, or all of the shares in an Owner or in a member of the Group which is a direct or indirect shareholder in an Owner are sold, transferred or otherwise disposed of, the Borrowers shall, unless otherwise agreed in writing by the Banks, make prepayment of the Loans, and the Total Commitment shall automatically be cancelled, in an amount equal to the ratio of (i) the sales proceeds (net of taxes payable and reasonable costs incurred in connection therewith) received or receivable by the relevant member of the Group in connection with such sale or other disposal to (ii) the aggregate of such net sales proceeds and the updated (as of the date of completion of the relevant sale, transfer or other disposal) Market Value of the other Unit. In addition all interest and costs and any other amount owing in connection with the prepaid amount under this Agreement shall be paid together with the prepaid amount.

(b) If a Unit becomes a Total Loss, the Borrowers shall, unless otherwise agreed in writing by the Banks, make prepayment of the Loans, and the Total Commitment shall automatically be cancelled, in an amount equal to the ratio of such Unit’s updated (as of the Total Loss Date) Market Value to the aggregate updated (as of the Total Loss Date) Market Value of both Units, plus interest and costs and any other amount owing in connection with the prepaid amount under this Agreement.

(c) Prepayment pursuant to paragraphs (a) and (b) above shall be made:

(i) in the case of a sale or other disposal of a Unit, or a sale, transfer or other disposal of shares in an Owner or in a member of the Group which is a direct or indirect shareholder in an Owner, on or before the date on which the sale, transfer or other disposal is completed by delivery of the relevant Unit or shares to the buyer thereof; or

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(ii) in the case of a Total Loss, on the earlier of (A) the date falling 180 days after the Total Loss Date, and (B) the date of 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 relevant Unit, on the date of such requisition for title).

9.4 Mandatory prepayment – change of control

(a) If, at any time, any person or persons acting in concert (other than DryShips Inc. or other companies controlled by Mr. George Economou) obtains control (directly or indirectly) of 1/3 or more of the shares in the Parent:

(i) the Borrowers (whichever becomes first aware) shall promptly notify the Agent upon becoming aware of that event;

(ii) the Agent shall (if so instructed by any Bank) by not less than 60 days notice to the Borrowers, which notice must be received by the Borrowers no later than 90 days after receipt by the Agent of the notice referred to in sub-paragraph (i) above, cancel the Total Commitment and declare all outstanding Loans, together with accrued interest, and all other amounts accrued under this Agreement due and payable on any Business Day occurring after the expiry of such 60 days period, whereupon the Total Commitment will be cancelled and all such outstanding amounts will become due and payable on such Business Day, and on such Business Day the Borrowers shall deposit immediate cash collateral cover with the Agent in amounts and currencies identical to the amounts representing the maximum contingent liability under the Letter of Credit, plus any outstanding costs, fees, interests and/or expenses, which amounts shall be placed on a blocked deposit account with the Agent bearing interest at the Agent’s usual rate for comparable deposits (so entitled as to indicate the interest of the Agent (on behalf of the Junior Banks) in such account) and the Borrowers agree that such amounts may be applied in fulfilment pro tanto of the Borrowers’ obligations hereunder and that the amounts so deposited will only be released to the Borrowers as and to the extent that they exceed the aggregate of the maximum contingent liability under the Letter of Credit and any outstanding costs, fees, interests and expenses.

(b) For the purpose of paragraph (a) above “acting in concert” means a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition of shares in the Parent by any of them, either directly or indirectly, to obtain or consolidate control of the Parent.

9.5 Mandatory prepayment – Employment Contracts

If at any time any Employment Contract is terminated by an Employment Contract Party (other than following an event set out in Clause 24.17 (Eirik Raude – Employment Contracts)), or an event of default (other than an event set out in Clause 24.17 (Eirik Raude – Employment Contracts)) occurs thereunder for any reason whatsoever which in the reasonable opinion of the Majority Banks might adversely affect any Obligor’s ability to perform its obligations under any of the Transaction Documents to which it is a party, then:

(i) the Obligor which becomes first aware shall promptly notify the Agent upon becoming aware of that event; and

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(ii) the Agent shall (if so instructed by any Bank) by not less than 60 days notice to the Borrowers, which notice must be received by the Borrowers no later than 90 days after receipt by the Agent of the notice referred to in sub-paragraph (i) above, cancel the Total Commitment and declare all outstanding Loans, together with accrued interest, and all other amounts accrued under this Agreement due and payable on any Business Day occurring after the expiry of such 60 days period, whereupon the Total Commitment will be cancelled and all such outstanding amounts will become due and payable on such Business Day, and on such Business Day the Borrowers shall deposit immediate cash collateral cover with the Agent in amounts and currencies identical to the amounts representing the maximum contingent liability under the Letter of Credit, plus any outstanding costs, fees, interests and/or expenses, which amounts shall be placed on a blocked deposit account with the Agent bearing interest at the Agent’s usual rate for comparable deposits (so entitled as to indicate the interest of the Agent (on behalf of the Junior Banks) in such account) and the Borrowers agree that such amounts may be applied in fulfilment pro tanto of the Borrowers’ obligations hereunder and that the amounts so deposited will only be released to the Borrowers as and to the extent that they exceed the aggregate of the maximum contingent liability under the Letter of Credit and any outstanding costs, fees, interests and expenses.

9.6 Mandatory prepayment – Borrowing Base Amount

(a) The Borrowers shall together with each Compliance Certificate and each Drawdown Notice requesting a Revolving Loan under Revolving Credit Facility B, deliver to the Agent an updated calculation of the Borrowing Base Amount, and in the event that the aggregate principal amount of the Revolving Loans under Revolving Credit Facility B (including any requested Revolving Loans) at any such time exceeds the Borrowing Base Amount, the Borrowers shall (i) in connection with the delivery of a Compliance Certificate, at the latest on the first Reduction Date following the due date for delivery of the relevant Compliance Certificate, and (ii) in connection with the delivery of a Drawdown Notice, at the latest 30 days after the delivery of the relevant Drawdown Notice, make prepayment of the Revolving Loans under Revolving Credit Facility B in an amount not less than the amount by which the principal amount of such Revolving Loans exceeds the Borrowing Base Amount as recalculated.

(b) The Agent may (acting on the instructions of a Junior Bank) at any time require an updated calculation of the Borrowing Base Amount, and the Borrowers shall deliver such updated calculation to the Agent as soon as possible and at the latest three (3) Business Days after the receipt of such request from the Agent. In the event that the aggregate principal amount of the Revolving Loans under Revolving Credit Facility B at any such time exceeds the Borrowing Base Amount by more than what would follow from a normal reduction of the Borrowing Base Amount, the Borrowers shall at the latest 30 days after the delivery of the relevant updated calculation, make prepayment of the Revolving Loans under Revolving Credit Facility B in an amount not less than the amount by which the principal amount of such Revolving Loans exceeds the Borrowing Base Amount as recalculated.

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(c) Without prejudice to the rights of the Agent pursuant to paragraph (ii) of Clause 9.5 (Mandatory prepayment – Employment Contracts), if a Qualifying Contract (the “Expiring Qualifying Contract”) expires or is terminated, cancelled or otherwise ceases to be in full force and effect, the Borrowing Base Amount shall be recalculated and the Borrowers shall on the date occurring 30 days after the expiry, termination, cancellation etc. of the Expiring Qualifying Contract make prepayment of the Revolving Loans under Revolving Credit Facility B, and the Total Revolving Credit Facility B Commitment shall be automatically cancelled, in an amount not less than the amount (if any) by which the principal amount of such Revolving Loans exceeds the Borrowing Base Amount as recalculated.

9.7 Additional right of prepayment

lf:-

(i) a Borrower is required to pay to a Bank any additional amounts under Clause 15 (Taxes); or

(ii) a Borrower is required to pay to a Bank any amount under Clause 17 (Increased costs); or

(iii) a Borrower is required to pay to a Bank interest at a rate set under Clause 16.5 (Alternative rate of interest in absence of agreement);

then, without prejudice to its obligations under those Clauses, that Borrower may, subject to Clause 9.8 (Miscellaneous provisions), whilst the circumstances continue, serve a notice of prepayment and cancellation on that Bank through the Agent. On the date falling three (3) Business Days after the date of service of the notice, the Borrowers shall prepay that Bank’s Participation and, if that Bank is the Guarantee Bank, release that Bank from its participation in the Letter of Credit in a manner reasonably acceptable to that Bank or, if no Loan or Letter of Credit is then outstanding, that Bank’s Commitment shall be cancelled.

9.8 Miscellaneous provisions

(a) Any notice of prepayment or cancellation under this Agreement shall be irrevocable and shall specify the date on which the prepayment or cancellation is to be made and the amount to be prepaid or cancelled. The Agent shall notify the Banks promptly of the receipt and contents of any such notice.

(b) All prepayments under this Agreement shall be made together with accrued interest and costs in respect of the amount prepaid and any Break Costs.

(c) Any amount prepaid under Clause 9.1 (Voluntary prepayment) shall be applied as determined by the Borrower making the prepayment.

(d) Any amount prepaid under Clause 9.3 (Mandatory prepayment – sale or Total Loss) shall be applied pro rata against the principal amount outstanding under the Term Loan Facility and the Revolving Credit Facilities, and in respect of Revolving Credit Facility A and Revolving Credit Facility B, to be applied pro rata against the remaining reductions thereunder.

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10 INTEREST PERIODS

10.1 Selection

(a) The relevant Borrower shall select the Interest Period for each Loan in the Drawdown Notice related thereto, and each Interest Period shall commence on the relevant Drawdown Date. Each subsequent Interest Period shall commence on the expiry of the preceding Interest Period.

(b) The relevant Borrower shall by serving a Renewal Notice on the Agent not later than 10:00 a.m. three (3) Business Days before the beginning of the next Interest Period, specify the duration of each subsequent Interest Period of the Term Loan.

(c) Each Interest Period shall be for a period of one (1), three (3), six (6) or nine (9) months, or subject always to availability to all Banks, such other period as the Agent and the relevant Borrower may agree in writing. The Borrowers may not request more than three (3) one- month Interest Periods for each Loan during any calendar year.

(d) If a Borrower fails to select an Interest Period in accordance with paragraph (a) above, that Interest Period will, subject to the other provisions of this Agreement, be three (3) months.

(e) Notwithstanding the above, the Borrowers may with the consent of the Agent select Interest Periods of a duration other than as set out in paragraph (c) for the purpose of consolidating Interest Periods and Loans.

10.2 Non-Business Days

If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

10.3 No overrunning

If an Interest Period in respect of a Loan would otherwise extend beyond a Repayment Date or the Final Maturity Date in respect of the Facility under which the Loan has been made, it shall be shortened so that it ends on such Repayment Date or such Final Maturity Date (as the case may be).

10.4 Notification

The Agent shall notify the Banks of the duration of each Interest Period promptly after ascertaining its duration.

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11 INTEREST AND GUARANTEE COMMISSION

11.1 Interest rate

The rate of interest on each Loan for an Interest Period shall be the rate per annum determined by the Agent to be the aggregate of:

(i) the Applicable Margin; and

(ii) LIBOR.

11.2 Due dates

Except as otherwise provided in this Agreement, accrued interest on each Loan shall be payable by the Borrowers on each Interest Payment Date for that Loan.

11.3 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, subject to paragraph (b) below, is determined by the Agent to be the sum of two (2) per cent, per annum, the Applicable Margin and LIBOR for such periods as the Agent may select. Any interest accruing under this Clause 11.3 shall be compounded at the end of each such period selected by the Agent but shall be immediately payable by the relevant Obligor on demand from the Agent.

(b) If any overdue amount consists of all or part of a Loan which has become due on a day which is not the last day of an Interest Period for that Loan:

(i) the first period selected by the Agent for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period; and

(ii) the rate of interest applying to the overdue amount during that period shall be 2 per cent. per annum higher than the rate which would have applied if the overdue amount had not become due.

11.4 Notification

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

11.5 Break Costs

(a) The Borrowers shall, within three (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 being paid by a Borrower on a day other than the last day of an Interest Period for that Loan.

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(b) Each Bank 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.

11.6 Guarantee commission

The Borrowers shall pay to the Agent (for the account of the Guarantee Bank) a guarantee commission on the outstanding amount of the Letter of Credit from time to time during the period beginning on the date the Agent has given notice to the Borrowers and the Banks pursuant to Clause 3.1 (Documentary conditions precedent) and ending on the Expiry Date in respect of the Letter of Credit, such commission to be calculated at the rate per annum set out in the Margin and Fee Letter of the amount of the Letter of Credit, and to be payable quarterly in arrears on the last date of each successive period of three (3) months which ends during such period, and on the Expiry Date.

12 PAYMENTS

12.1 Place

All payments by an Obligor or a Bank under a Finance Document shall be made to the Agent to its account at such office or bank as it may notify to such Obligor or such Bank for this purpose.

12.2 Funds

Payments under a Finance Document to the Agent shall be made for value on the due date at such times and in such funds as the Agent may specify as being customary at the time for the settlement of transactions in the relevant currency in the place for payment.

12.3 Distribution

(a) Each payment received by the Agent under a Finance Document for another Party shall, subject to paragraphs (b) and (c) below, be made available by the Agent to that Party by payment (on the date and in the currency and funds of receipt) to its account with such office or bank in the principal financial centre of the country of the relevant currency as it may notify to the Agent for this purpose by not less than five (5) Business Days prior written notice.

(b) The Agent may with written notice to the relevant Obligor apply any amount received or held by it for such Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from such Obligor under any Finance Document or in or towards the purchase of any amount of any currency to be so applied.

(c) Where a sum is to be paid to the Agent under any Finance Document for distribution to another Party, the Agent shall not be obliged to pay that sum to that Party until it has established that it has actually received that sum. The Agent may, however, assume that the sum has been paid to it in accordance with the relevant Finance Document and, in reliance on that assumption, make available to that Party a corresponding amount. If the sum has not

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been received but the Agent has paid a corresponding amount to another Party and the Party liable does not forthwith on demand pay such amount to the Agent together with interest on that amount from the date of payment to the date of receipt, calculated at a rate determined by the Agent to reflect its cost of funds, the Party receiving the sum shall forthwith on demand by the Agent refund such amount to the Agent together with interest on that amount calculated as above.

12.4 Currency

(a) Except as otherwise provided in this Agreement, any amount payable under a Finance Document shall be payable in Dollars.

(b) Amounts payable in respect of costs, expenses, taxes and other liabilities shall be payable in the currency in which they are incurred.

12.5 Set-off and counterclaim

All payments made by an Obligor under a Finance Document shall be made without set-off or counterclaim.

12.6 Non-Business Days

If a payment under a Finance Document is due on a day which is not a Business Day, the due date for that payment shall instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

12.7 Partial payments

If the Agent receives a payment insufficient to discharge all the amounts then due and payable by an Obligor under this Agreement, the Agent shall apply that payment towards the discharge of the obligations of that Obligor under this Agreement in the following order:

(i) firstly, in or towards payment pro rata of any unpaid costs and expenses of the Agent and the Senior Banks under the Finance Documents;

(ii) secondly, in or towards payment pro rata of any accrued fees due but unpaid under Clause 26 (Fees) in relation to the Senior Facilities;

(iii) thirdly, in or towards payment pro rata of any accrued interest (including default interest) due but unpaid under this Agreement in relation to the Senior Facilities;

(iv) fourthly, in or towards payment pro rata of any principal due but unpaid under this Agreement in relation to the Senior Facilities;

(v) fifthly, in or towards payment pro rata of any other sum due but unpaid under this Agreement in relation to the Senior Facilities;

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(vi) sixthly, in or towards payment pro rata of any unpaid costs and expenses of the Junior Banks under the Finance Documents;

(ii) seventhly, in or towards payment pro rata of any accrued fees due but unpaid under Clause 26 (Fees) in relation to the Junior Facilities;

(iii) eighthly, in or towards payment pro rata of any accrued interest (including default interest) due but unpaid under this Agreement in relation to the Junior Facilities;

(iv) ninthly, in or towards payment pro rata of any principal due but unpaid under this Agreement in relation to the Junior Facilities;

(v) tenthly, in or towards payment pro rata of any other sum due but unpaid under this Agreement in relation to the Junior Facilities.

13 SECURITY

13.1 Security

(a) The obligations and liabilities of each Obligor under the Finance Documents in relation to the Senior Facilities, including without limitation any derived liability whatsoever of an Obligor towards the Finance Parties in connection with the Finance Documents in relation to the Senior Facilities, shall be secured by:

(i) the guarantee and indemnity set out in Clause 20 (Guarantee and indemnity);

(ii) the First Mortgages;

(iii) the First Security Agreements;

(iv) the First Equipment Charges;

(v) the First Leiv Eiriksson Qualifying Contract Cash Deposit Account Pledge Agreement; and

(vi) the First Share Pledge Agreements.

(b) The obligations and liabilities of each Obligor under the Finance Documents in relation to the Junior Facilities, including without limitation any derived liability whatsoever of an Obligor towards the Finance Parties in connection with the Finance Documents in relation to the Junior Facilities, shall be secured by:

(i) the guarantee and indemnity set out in Clause 20 (Guarantee and indemnity);

(ii) the Second Mortgages;

(iii) the Second Security Agreements;

(iv) the Second Equipment Charges;

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(v) the Second Leiv Eiriksson Qualifying Contract Cash Deposit Account Pledge Agreement; and

(vi) the Second Share Pledge Agreements.

13.2 Set-off

(a) Without prejudice to any other rights which it may have, each Finance Party may at any time, at its discretion and without prior notice, apply any balance (whether then due or not) which then stands to the credit of any of the Obligors at any branch or other office of that Finance Party in any country in or towards satisfaction of any amount then due from the Obligors to that Finance Party under any of the Finance Documents and, for that purpose, may:

(i) break, or change the maturity of, all or part of a deposit of an Obligor;

(ii) convert all or any part of a deposit or other credit balance from one currency into another; and

(iii) enter into any other transaction or make any entry with regard to the credit balance which the relevant Finance Party considers appropriate.

(b) For the purposes of paragraph (a) above, an amount payable by an Obligor to the Agent for distribution to, or for the account of, a Bank shall be treated as a sum due to that Bank.

14 COORDINATION OF SENIOR SECURITY DOCUMENTS AND JUNIOR SECURITY DOCUMENTS

14.1 Undertakings of the Junior Banks to the Senior Banks

Each Junior Bank hereby agrees with and undertakes to the Senior Banks that:

(i) its rights under the Junior Security Documents shall in all respects rank with priority below the rights of the Senior Banks under the Senior Security Documents;

(ii) all insurance proceeds and requisition compensation in respect of a Unit shall be paid and applied in accordance with the provisions of this Agreement and the Senior Banks shall have the absolute prior right to settle, agree, compromise and give a good discharge for and in respect of any claim in respect of the same, and it will, promptly on receiving written notice from the Senior Banks to that effect, forthwith at the expense of the Borrowers execute any document reasonably required by the Senior Banks for the purpose of effecting, completing or perfecting any such settlement agreement compromise and/or discharge;

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(iii) it will not take any action to enforce any of its rights and powers under the Junior Security Documents unless and until:

(a) all sums secured by the Senior Security Documents up to the maximum principal amount secured by the Senior Security Documents pursuant to paragraph (i) of Clause 14.2 (Undertakings of the Senior Banks to the Junior Banks) have been paid to the Senior Banks; or

(b) the Senior Banks have given their prior written consent thereto;

(iv) it shall not in any way hinder the Senior Banks or the Agent in exercising the Senior Banks’ rights under the Senior Security Documents. Nothing herein shall preclude its right to join in or otherwise support any proceedings arising from or relating to the arrest or detention of a Unit or any equipment pertaining thereto or in any way relating to the Senior Security Documents by any other person (including the Senior Banks) with a view to substantiating, preserving or protecting its interest in the Junior Security Documents;

(v) it has not entered into and will not during the subsistence of the Senior Security Documents enter into any arrangement whereby the rights or securities of the Senior Banks thereunder is or may reasonably be expected to be prejudiced in any manner whatsoever;

(vi) the Senior Banks shall be entitled to exercise any rights available to them under the Senior Security Documents on such conditions and in such manner as the Senior Banks shall determine, without any responsibility or duty on the part of the Senior Banks to protect the rights and privileges of the Junior Banks, and for this purpose it covenants with the Senior Banks that it shall procure the discharge the Junior Security Documents and will co-operate fully with the Senior Banks in the completion of such exercising of rights by the Senior Banks, PROVIDED ALWAYS, that the Senior Banks shall, if considered by the Senior Banks not to prejudice the exercise of its rights under the Senior Security Documents, consult with the Junior Banks in connection with any such exercise, and comply with all laws and regulations applicable to such exercise of rights; and

(vii) it shall in connection with any sale of a Unit, when so directed by the Senior Banks, execute and deliver to the Senior Banks, or order all such documents required in order to discharge the Junior Security Documents.

14.2 Undertakings of the Senior Banks to the Junior Banks

Each Senior Bank hereby agrees and undertakes with the Junior Banks that:

(i) the maximum principal amount from time to time secured by the Senior Security Documents shall not exceed USD 750,000,000, plus interest, costs and expenses secured thereby;

(ii) it will through the Agent notify the Junior Banks in writing if it intends to exercise any of its rights under the Senior Security Documents, whereupon the Junior Banks shall have the option, to be exercised within ten (10) Business Days from receipt of such notification, to pay to the Senior Banks within twenty (20) Business Days from receipt of such notification all sums secured by the Senior Security Documents, against an assignment and transfer of the rights established pursuant to the Senior Security Documents to or for the benefit of the Junior Banks;

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(iii) the Senior Security Documents shall not secure any indebtedness other than the obligations of the Obligors under the Finance Documents in relation to the Senior Facilities; and

(iv) the rights of the Junior Banks and the Agent on their behalf under the Junior Security Documents have the full right of succession as and when claims due to the Senior Banks under the Finance Documents are paid off or redeemed.

15 TAXES

All payments by an Obligor under any Finance Document shall be made free and clear of and without deduction for or on account of any taxes, except to the extent that the relevant Obligor is required by law to make payment subject to any taxes. If by requirement of law any tax or amount in respect of tax must be deducted or withheld from any amount payable or paid by an Obligor to the Agent or any other Finance Party, or payable or paid by the Agent to a Finance Party, under any Finance Document, the relevant Obligor (or, as the case may be, the Agent) shall pay such tax to the relevant authority and the relevant Obligor shall pay such additional amounts as may be necessary to ensure that the Agent or, as the case may be, the relevant Finance Party receives (free from any liability in respect of any such deduction or withholding) a net amount equal to the full amount which it would have received had payment not been made subject to tax or other deduction. The Obligors shall promptly deliver to the Agent any receipts, certificates or other proof evidencing the amounts paid or payable in respect of any deduction or withholding as aforesaid.

16 MARKET DISRUPTION

16.1 Market disruption

The Agent shall promptly notify the Borrowers and each of the Banks if:

(a) no rate is quoted on the Reuters Page LIBOR01 and two or more of the Banks fail to provide quotations to the Agent, before 1.00 p.m. (London time) on any Quotation Date, in order to fix LIBOR; or

(b) at least one (1) Business Day before the start of an Interest Period, Banks having Participations totalling in aggregate more than 30 per cent. of the Loans (or, if no Loan has been made, Commitments totalling in aggregate more than 30 per cent. of the Total Commitment) notify the Agent that LIBOR fixed by the Agent would not accurately reflect the cost to those Banks of funding their respective Participations for that Interest Period in the London interbank eurocurrency market; or

(c) at least one (1) Business Day before the start of an Interest Period, the Agent is notified by a Bank (the “Affected Bank”) that for any reason it is unable to obtain Dollars in the London interbank eurocurrency market in order to fund its Participation for that Interest Period.

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16.2 Suspension of drawdown

If the Agent’s notice under Clause 16.1 (Market disruption) is given before a Loan has been advanced:

(i) in circumstances falling within Clause 16.1 (a) or (b), the Banks’ obligations to advance the Loans;

(ii) in circumstances falling within Clause 16.1 (c), the Affected Bank’s obligation to participate in the Loans;

shall be suspended while the relevant circumstances continue to exist.

16.3 Negotiation of alternative rate of interest

If the Agent’s notice under Clause 16.1 is given after a Loan has been advanced, the Borrowers, the Agent and the Banks or (as the case may be) the Affected Bank shall use reasonable efforts to agree, within 30 days after the date of the Agent’s notice (the “Negotiation Period”), an alternative interest rate or an alternative basis for the Banks or (as the case may be) the Affected Bank to fund or continue to fund their respective Participations during the relevant Interest Period.

16.4 Application of agreed alternative rate of interest

Any alternative interest rate or alternative basis which is agreed during the Negotiation Period shall take effect in accordance with the terms agreed.

16.5 Alternative rate of interest in absence of agreement

If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances continue to exist at the end of the Negotiation Period, then the Agent shall set an interest period and interest rate representing the cost of funding of the Banks or (as the case may be) the Affected Bank in Dollars or in any available currency of their respective Participations plus the Applicable Margin; and the procedure provided for by this Clause 16 shall be repeated if the relevant circumstances continue to exist at the end of the interest period so set by the Agent.

17 INCREASED COSTS

If by reason of (i) changes in any existing law, rule or regulation, or (ii) the adoption of any new law, rule or regulation, or (iii) any change in the interpretation or administration of (i) or (ii) above by any governmental authority, or (iv) compliance with any directive (including the Basel Rules) or request from any governmental authority (whether or not having the force of law, but generally applicable to banks and/or other financial institutions) not known by the relevant Bank on the date of the Original Facility Agreement, any of the Banks:

(a) incurs a cost as a result of its having entered into this Agreement and/or performing its obligations hereunder; or

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(b) incurs an increase in the cost of maintaining or funding its participation in a Utilisation; or

(c) becomes liable for any new taxes (other than Tax on Overall Net Income) calculated by reference to a Utilisation; or

(d) becomes subject to any new or modified capital adequacy or similar requirements which has the effect of increasing the amount of capital required or expected to be maintained by such Bank based on such Bank’s obligations hereunder; or

(e) in any other manner suffers a reduction of its effective return hereunder;

then the Borrowers shall compensate that Bank for any such cost, liability or reduction of return upon request by the Agent, either in the form of an increased margin or in the form of an indemnification. The relevant Bank shall via the Agent give the Borrowers notice, within a reasonable time, of its intention to claim compensation under this Clause and it shall specify the form and amount of such compensation. The relevant Bank’s determination of the amount of compensation to be made under this Clause shall, absent manifest error, be conclusive.

18 ILLEGALITY

In the event that it shall be unlawful for any Bank to make available its Commitment or maintain or fund its participation in any Utilisation, then such Bank’s obligations shall terminate and all amounts owing by the Obligors to such Bank shall become due and payable on demand by such Bank through the Agent and the Obligors shall, if that Bank is the Guarantee Bank, release that the Guarantee Bank from its participation in the Letter of Credit in a manner reasonably acceptable to the Guarantee Bank.

19 MITIGATION

If circumstances arise in respect of any Bank which would, or would upon the giving of notice, result in:

(i) a Borrower being obliged to pay to that Bank any amounts pursuant to Clause 15 (Taxes) or Clause 17 (Increased costs); or

(ii) a Borrower being obliged to prepay that Bank’s Participation or that Bank’s Commitment being cancelled pursuant to Clause 18 (Illegality);

then, without in any way limiting, reducing or otherwise qualifying the Borrowers’ obligations under Clauses 15 (Taxes) to 18 (Illegality) (inclusive), that Bank shall, in consultation with the Agent and the Borrowers, endeavour to take such steps (without being under a legal obligation so to do) as may be open to it to mitigate or remove such circumstances, including (without limitation) the transfer of its rights and obligations under this Agreement to another bank or financial institution reasonably acceptable to the Borrowers, unless to do so might (in the opinion of the Bank at its absolute discretion) be prejudicial to it.

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20 GUARANTEE AND INDEMNITY

20.1  Guarantee obligations

Each Guarantor absolutely, irrevocably and unconditionally, jointly and severally:

(a) guarantees to each Finance Party as and for its own debt and not merely as surety the punctual performance by each Obligor of all of each Obligor’s obligations under the Finance Documents;

(b) undertakes with each Finance Party that whenever an Obligor does not pay any amount when due under or in connection with the Finance Documents, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and

(c) indemnifies each Finance Party immediately on demand against any cost, loss or liability suffered by that Finance Party if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Finance Party would otherwise have been entitled to recover from the Obligors or any of them.

20.2  Demands

Each Guarantor unconditionally and irrevocably undertakes immediately on written demand by the Agent from time to time to make payment in accordance with its guarantee obligations (the “Guarantee Obligations”) under Clause 20.1 (Guarantee obligations) where such demand is accompanied by a statement of the Agent that a payment has fallen due under the Finance Documents, that an Obligor has failed to make such payment when due and that notice of such non-payment has been issued. Each of such payments so demanded shall be made by the Guarantors to such account as the Agent may from time to time notify in writing.

20.3  Scope of liability

The liability of each Guarantor shall be limited to USD 1,040,000,000, plus any unpaid amount of interest, fees, liability and expenses under the Finance Documents.

20.4  Number of claims

There is no limit on the number of claims that may be made by the Agent on behalf of the Finance Parties under this guarantee.

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20.5  Continuing guarantee

This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by the Obligors under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

20.6  Survival of the Guarantors’ liability

(a) The Guarantors’ liability to the Finance Parties under this guarantee shall not be discharged, impaired or otherwise affected by reason of any of the following events or circumstances (regardless of whether any such events or circumstances occur with or without the Guarantors’ knowledge or consent):

(i) any time, waiver, consent, forbearance or other indulgence given or agreed by the Finance Parties with any Obligor or any third party in respect of any of its obligations under the Finance Documents, including, but not limited to, any postponement of repayments or the Final Maturity Date, any increase of any Commitment, prepayments in an other manner than scheduled in this Agreement, and any other issues;

(ii) any legal limitation, disability or incapacity of any Obligor or any third party related to the Finance Documents;

(iii) any invalidity, irregularity, unenforceability, imperfection or avoidance of or any defect in any security granted by, or the obligations of any party to the Finance Documents, or any amendment to or variation thereof, or of any other document or security comprised therein;

(iv) the liquidation, bankruptcy or dissolution (or proceedings analogous thereto) or the appointment of a receiver for an Obligor or any third party, or the occurrence of any circumstances whatsoever affecting the liability of any party to discharge its obligations under the Finance Documents;

(v) any challenge, dispute or avoidance by any liquidator of an Obligor or any third party in respect of any claim by an Obligor by right of subrogation in any such liquidation;

(vi) any release, discharge, renewal, amendment, extension, compromise, exchange or realisation of any security, obligation or term of the Finance Documents, or any further security for the obligations of the Obligors under the Finance Documents;

(vii) any failure on the part of the Finance Parties (whether intentional or not) to take or perfect any security agreed to be taken under or in relation to the Finance Documents; or

(viii) any other act, matter or thing (save for discharge in full of all of the Obligors’ obligations under the Finance Documents) which might otherwise constitute a legal discharge of the obligations of the Obligors under the Finance Documents.

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(b) Each Guarantor specifically waives all rights under the provisions of the Norwegian Financial Services Act of 25 June 1999 No. 46 not being mandatory provisions, including the following provisions (the main contents of the relevant provisions being as indicated in the brackets):

(i) § 62 (1) (a) (to be notified of any security the giving of which was a precondition for the advance of any Loan or the issuance of the Letter of Credit, but which has not been validly granted or has lapsed);

(ii) § 63 (1) - (2) (to be notified of any event of default hereunder and to be kept informed thereof);

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

(iv) § 63 (4) (to be notified of an Obligor’s bankruptcy proceedings or debt reorganisation proceedings and/or any application for the latter);

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

(vi) § 66 (1) - (2) (that the Guarantor shall be released from its liabilities hereunder if security which was given, or the giving of which was a precondition for the advance of any Loan or the issuance of the Letter of Credit, is released by the Finance Parties without the consent of the Guarantor);

(vii) § 66 (3) (that the Guarantor shall be released from its liabilities hereunder if, without its consent, security the giving of which was a precondition for the advance of any Loan or the issuance of the Letter of Credit, was not validly granted);

(viii) § 67 (2) (about reduction of the Guarantor’s liabilities hereunder);

(ix) § 67 (4) (that the Guarantor’s liabilities hereunder shall lapse after ten years, as the Guarantor shall remain liable hereunder as long as any amount is outstanding under the Finance Documents);

(x) § 70 (as the Guarantor shall have no right of subrogation into the rights of the Finance Parties under the Finance Documents until and unless the Finance Parties shall have received all amounts due or to become due to them under the Finance Documents);

(xi) § 71 (as the Finance Parties shall have no liability first to make demand upon or seek to enforce remedies against the other Obligors or any other security provided in respect of the other Obligors’ liabilities under the Finance Documents before demanding payment under or seeking to enforce the security created hereunder);

(xii) § 72 (as all interest and default interest due under the Finance Documents shall be secured hereunder);

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(xiii) § 73 (1) - (2) (as all costs and expenses related to a default under the Finance Documents shall be secured hereunder); and

(xiv) § 74 (1) - (2) (as the Guarantor shall make no claim against the other Obligors for payment until and unless the Finance Parties first shall have received all amounts due or to become due to them under the Finance Documents).

20.7 Deferral of Guarantors’ rights

Each Guarantor does further undertake to the Finance Parties that as long as this guarantee is effective:-

(i) following receipt by the Guarantor of a notice from the Agent of the occurrence of any Event of Default which is unremedied, the Guarantor will not make demand for or claim payment of any moneys due to the Guarantor from any other Obligor, or exercise any other right or remedy to which the Guarantor is entitled in respect of such moneys unless and until all moneys owing or due and payable by the other Obligors to the Finance Parties under the Finance Documents have been irrevocably paid in full;

(ii) if any other Obligor shall become the subject of an insolvency proceeding or shall be wound up or liquidated, the Guarantor shall not (unless so instructed by the Agent or to protect its rights against such Obligor, and then only on condition that the Guarantor holds the benefit of any claim in such insolvency or liquidation to pay any amounts recovered thereunder to the Agent) make any claim in such insolvency, winding-up or liquidation until all moneys owing or due and payable by the other Obligors to the Finance Parties under the Finance Documents have been irrevocably paid in full;

(iii) if the Guarantor, in breach of paragraph (i) or (ii) above of this Clause 20.7 receives or recovers any money pursuant to any such exercise, claim or proof as therein referred to, such money shall be held by the Guarantor for the Agent to apply the same as if they were moneys received or recovered by the Agent hereunder; and

(iv) the Guarantor has not taken and will not take from any other Obligor any security whatsoever for the moneys hereby guaranteed.

20.8 Exclusion of Guarantors’ rights

Until all moneys owing or due and payable by the Obligors to the Finance Parties have been paid in full, no Guarantor will take any action which would result in such Guarantor sharing in or succeeding to or benefiting from (by subrogation or otherwise) any rights which the Finance Parties may have in respect of any moneys owing or due and payable by the other Obligors to the Finance Parties or any security therefore or all or any of the proceeds of such rights or security.

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20.9 Enforcement

(a) The Finance Parties shall not be obliged before taking steps to enforce this guarantee against the Guarantors:

(i) to obtain judgement against any Obligor or any third party in any court or other tribunal;

(ii) to make or file any claim in a bankruptcy or liquidation of any Obligor or any third party; or

(iii) to take any action whatsoever against any Obligor or any third party under the Finance Documents, except giving notice of payment of the relevant part of the amounts outstanding hereunder,

and each Guarantor hereby waives all such formalities or rights to which it would otherwise be entitled or which the Finance Parties would otherwise first be required to satisfy or fulfil before proceeding or making demand against the Guarantors hereunder, except as required hereunder or by mandatory law.

(b) Without affecting the obligations of the Guarantors hereunder, the Finance Parties may take such action as they in their own discretion may consider appropriate against any other person or parties and securities to recover moneys due and payable in respect of the obligations under the Finance Documents.

(c) Any release, discharge or settlement between a Guarantor and the Finance Parties or any of them in relation to this guarantee shall be conditional upon no right, security, disposition or payment to the Finance Parties by the other Obligors or any other person being void, set aside or ordered to be refunded pursuant to any enactment or law relating to breach of duty by any person, bankruptcy, liquidation, administration, protection from creditors generally or insolvency or for any reason. If any such right, security, disposition or payment is void or at any time so set aside or ordered to be refunded, the Finance Parties shall be entitled subsequently to enforce this guarantee against the Guarantors as if such release, discharge or settlement had not occurred and any such security, disposition or payment had not been made.

21 REPRESENTATIONS AND WARRANTIES

21.1 Representations and Warranties

Each Obligor makes the representations and warranties set out in this Clause 21 to each Finance Party.

21.2 Status and ownership

(a) Each of the Obligors is a limited liability company, duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and each has the power to own its assets and carry on its business as presently conducted.

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(b) The Parent is the legal and beneficial owner (directly or indirectly) of all the shares of each Guarantor (other than the Parent).

21.3 Powers and authority

Each of the Obligors has the power to enter into and perform, and has taken all necessary corporate action to authorise the entry into, performance and delivery of each of the Transaction Documents to which it is a party, and the transactions contemplated therein.

21.4 Legal validity and enforceability

Each Transaction Document constitutes (or will, when executed by the respective parties thereto, constitute) legal, valid and binding obligations of each Obligor which is party thereto, enforceable in accordance with its terms and, save as provided for therein and/or as have been or shall be completed prior to the relevant Drawdown Date, no registration, filing, payment of tax or fees or other formalities are necessary or desirable to render the relevant Transaction Document enforceable against each of the Obligors which is a party thereto and, in respect of the Units, for the First Mortgages to constitute valid and enforceable first priority mortgages and for the Second Mortgages to constitute valid and enforceable second priority mortgages.

21.5 Non-conflict

The entry into and performance by each of the Obligors of the Transaction Documents to which it is a party, and the transactions contemplated thereby, do not and will not conflict with:

(i) any present law or regulation or judicial or official order;

(ii) its articles of association, by-laws or other constitutional documents; or

(iii) any document or agreement which is binding on any of the Obligors.

21.6 No Default

(a) No Default exists or might result from the making of any Utilisation; and

(b) no other circumstances exist which constitute or (with the giving of notice, lapse of time, determination of materiality or the fulfilment of any other applicable condition, or any combination of the foregoing) would constitute a default under any document which is binding on any of the Obligors or any of their respective assets, and which may have a material effect on the ability of any of the Obligors to perform its obligations under the Transaction Documents to which it is a party.

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21.7 Authorisations and consents

All authorisations and consents required to be obtained by any member of the Group in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, each of the Transaction Documents have been obtained and are in full force and effect, or will be obtained prior to a Borrower serving any Drawdown Notice hereunder.

21.8 Financial and other information

(a) The consolidated accounts of the Parent most recently delivered to the Agent which, at the date of the Original Facility Agreement, are the Original Financial Statements:

(i) have been prepared in accordance with Approved Accounting Principles consistently applied;

(ii) fairly represent the consolidated financial condition of the Parent, as at the date on which they were drawn up,

and there has been no material adverse change in the consolidated financial condition of the Parent or any member of the Group since the date on which those accounts were drawn up, which might reasonably be expected to have a material adverse effect on the ability of any Obligors to perform its obligations under the Transaction Documents to which it is a party.

(b) All financial documents and information relating to the Obligors and the Group or otherwise relevant to the matters contemplated by this Agreement which have been supplied by or on behalf of the Obligors to any of the Finance Parties are complete and, as at the date of such documents or information, correct in all respects, and the Obligors have not omitted to disclose to any of the Finance Parties any off-balance sheet liabilities or other information, documents or agreements which, if disclosed, could reasonably be expected to affect the decision of the Banks to enter into this Agreement.

21.9 Litigation

No litigation, arbitration or administrative proceedings are current or, to its knowledge, pending or threatened against any of the Obligors which might, if adversely determined, be reasonably expected to have a material adverse effect on its ability to perform its obligations under any of the Transaction Documents to which it is a party.

21.10  No money laundering

Each Obligor is acting for its own account in relation to the Facilities and in relation to the performance and the discharge of its obligations and liabilities under the Transaction Documents and the transactions and other arrangements effected or contemplated by the Transaction Documents to which it is a party, and the foregoing will not involve or lead to contravention of any law, official requirement or other regulatory measure or procedure implemented to combat money laundering (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities).

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21.11  Compliance with laws and Environmental Claims

Except as may already have been disclosed in writing to, and acknowledged in writing by, the Agent:

(i) each Obligor is in compliance with the provisions of all laws, including without limitation all Environmental Laws, where failure to comply has or may have a Material Adverse Effect; and

(ii) no Environmental Claims which has or may have a Material Adverse Effect are pending or threatened against any of the Obligors and no incident, event or circumstance has occurred which may give rise to such an Environmental Claim.

21.12  Payment of taxes

Each Obligor has fully paid, when due, any and all taxes incurred to date in connection with the operation of its business, ownership or use of any of its assets, and conduct of its affairs on its premises, except for income and property taxes and assessments which are being contested in good faith and with due diligence, with adequate cash reserves in excess of the contested tax balances, in which case such balances will be paid before any tax liens ripen.

21.13  No deductions

No Obligor is required to make any deduction or withholding from any payment which it may become obliged to make to any of the Finance Parties under any of the Finance Documents.

21.14  Pari passu ranking

Each Obligor’s payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

21.15  No Security Interest

No Security Interest is created, incurred or assumed on any Unit or any other assets of an Owner or any other Group Contract Party, or any of the shares pledged to the Agent under the First Share Pledge Agreements and/or the Second Share Pledge Agreements, and no assignment of any Obligor’s rights to receive Earnings or proceeds of any insurance policy covering any Unit is made, other than those set out in Clause 22.17 (b) (Negative pledge).

21.16  No place of business in U.K. or U.S.A.

No Obligor (other than Ocean Rig Limited) has an established place of business in the United Kingdom or the United States of America.

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21.17  Times for making representations and warranties

The representations and warranties set out in this Clause 21, are made by each Obligor on the Signing Date and are deemed to be repeated by each Obligor on the date of each Drawdown Notice, on each Drawdown Date and on the first date of each Interest Period, with reference to the facts and circumstances then existing, unless otherwise notified to the Agent in writing, and if not permitted under this Agreement, waived by the Majority Banks prior to such dates.

22 UNDERTAKINGS

22.1 Duration

The undertakings in this Clause 22 shall remain in force during the entire Loan Period.

22.2 Financial information

(a) The Borrowers shall supply to the Agent in sufficient copies for all of the Banks:

(i) as soon as reasonably practicable after the same are available (and in any event within 120 days after the end of each financial year), the audited consolidated accounts of the Parent, including balance sheet, profit and loss statement and cash flow analysis for that financial year;

(ii) as soon as reasonably practicable after the same are available (and in any event within 60 days after the end of the relevant reporting period), the quarterly unaudited consolidated accounts of the Parent, together with updated liquidity forecasts; and

(iii) such other information in respect of the business, properties or condition, financial or otherwise, of each of the Obligors as the Agent may from time to time reasonably request,

all such accounts to be prepared in accordance with the Approved Accounting Principles, and the financial reporting shall be as comprehensive and detailed as if the Parent was listed on the Oslo Stock Exchange, the New York Stock Exchange, NASDAQ or such other stock exchange acceptable to the Banks.

(b) The Borrowers shall supply to the Agent in sufficient copies for all of the Banks as soon as reasonably practicable after the same are available (and in any event within 15 February each calendar year), operating budgets with cash flow projections for the Group for such calendar year, and such updates of such budgets and projections as the Agent may reasonably request.

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22.3 Compliance Certificates

The Borrowers undertake throughout the Loan Period:

(i) to provide to the Agent, on a quarterly basis together with the financial information to be provided by the Borrowers as specified in Clause 22.2 (a) (i) and (ii) (Financial information); and

(ii) to provide to the Agent on. a semi-annual basis, together with the valuations of the Market Value of the Units as specified in Clause 22.26 (Minimum value);

Compliance Certificates signed by the CEO or CFO of the Parent, enabling the Agent to determine and to monitor the compliance with the financial requirements set forth in Clause 23 (Financial covenants) and the compliance with the minimum value set forth in Clause 22.26 (Minimum Value), and containing an updated calculation of the Borrowing Base Amount as of the date the Compliance Certificate is received by the Agent.

22.4 Information - Miscellaneous

(a) Each Obligor shall provide to the Agent in writing, in sufficient copies for all of the Banks, promptly upon becoming aware of them, relevant details of any litigation, arbitration or administrative proceedings which are current or, to its knowledge, threatened or pending against it or any of the other Obligors and which might, if adversely determined, be reasonably expected to have a material adverse effect on the ability of any of the Obligors to perform its obligations under those of the Transaction Documents to which it is a party, and further details of any such matters previously disclosed to the Agent, as the Agent or any Bank acting through the Agent may reasonably request.

(b) The Obligors shall give written notice to the Agent promptly upon the entering into of by any member of the Group of any Employment Contract, and promptly thereafter forward a copy of the relevant Employment Contract to the Agent.

22.5 Notification of Default

The Obligors shall notify the Agent of any Default which occurs (and the steps, if any, being taken to remedy it) promptly upon its occurrence.

22.6 Insurances

(a) Subject to paragraph (g) below, the Obligors shall procure that each Unit is fully insured against such risks (including, but not limited to Hull and Machinery, Hull Interest, Freight Interest, Protection & Indemnity (including club cover for oil pollution liability for each Unit in accordance with first class industry standards), War Risk (including terrorism) and Loss of Hire, in such amounts, on such terms (always applying Norwegian law and including the terms of the Norwegian Marine Insurance Plan of 1996, version 2007 (as amended from time to time) or such other terms as the Agent may approve in relation to losses payable thereunder) and with such insurance brokers and insurers as the Agent may approve or require.

(b) The insured value of each Unit shall at all times be equal to or greater than its Market Value, and the aggregate insured value of both Units shall be equal to or greater than 120 per cent, of the aggregate amount of the Loans and the maximum amount payable under the Letter of Credit.

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Furthermore, the Hull and Machinery insured value of each Unit shall at all times cover 80 per cent. of its Market Value, while the remaining cover may be taken, out by way of Hull and Freight Interest insurances.

(c) In addition, to the insurances specified above, the Agent will take out Mortgagee Interest Insurance in an amount equal to 120 per cent, of the aggregate amount of the Loans and the maximum amount payable under the Letter of Credit and may at any time and at its discretion take out a Mortgagee Interest Insurance Additional Perils Pollution insurance equal to 110 per cent. of the aggregate amount of the Loans and the maximum amount payable under the Letter of Credit, and the Borrowers shall reimburse the Agent any and all sums paid as premium in respect of such insurance cover.

(d) Not later than 14 days before the expiry date of the relevant insurances, the Borrowers shall deliver to the Agent a certificate from the insurance broker(s) through whom the insurances relevant to the Units have been placed, evidencing that all insurances referred to in paragraph (a) above have been renewed and taken out in respect of the Units with insurance values as required by paragraph (b), that such insurances are in full force and effect and that the interests of the Finance Parties therein, have been noted by the relevant insurers.

(e) The Obligors shall procure that the Units are always employed in conformity with the terms of the instruments of insurance (including any expressed or implied warranties) and shall comply with such requirements as to extra premium or otherwise as the insurers may prescribe.

(f) The Obligors shall procure that no more than one (I) Unit is employed in the Gulf of Mexico at any given time as long as the insurance markets practice limitations on coverage in such area, unless (i) otherwise agreed by the Agent (acting on the instructions of the Banks) in writing, or (ii) any shortfall in the applicable insurance cover is covered by the relevant Employment Contract Party to the satisfaction of the Agent (acting on the instructions of the Banks).

(g) For as long as the insurance markets practice limitations of coverage in the Gulf of Mexico for named windstorms, and in the event that a Unit is employed in the Gulf of Mexico, the Finance Parties approve that such Unit is insured against Hull and Machinery, Hull Interest, Freight Interest and Loss of Hire combined in an amount of at least USD 602,800,000 each loss and in the aggregate combined single limit whilst the Unit is able to move off location, and in an amount of at least USD 332,800,000 each loss and in the aggregate combined single limit whilst the Unit is attached to the riser or is unable to move off location.

22.7 Notification of certain events

The Obligors shall immediately notify the Agent of:

(i) any accident to any Unit involving repairs the cost of which is likely to exceed USD 5,000,000;

(ii) a Total Loss;

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(iii) the occurrence of any Environmental Claim against any Obligor or any Unit, or any incident, event or circumstances which may give rise to any such an Environmental Claim;

(iv) any capture, seizure, arrest, confiscation or detention of any Unit or the exercise or purported exercise of any lien on any Unit, its insurances, the Earnings or any Earnings Account; and

(v) the occurrence of any litigation, arbitration or administrative proceedings current or, to an Obligor’s knowledge, pending or threatened against any of the Obligors.

22.8 Total Loss

In the event of a Total Loss, the Borrowers shall, within 120 days after the Total Loss Date, obtain and present to the Agent a written confirmation from the relevant insurers that the claim relating to the Total Loss has been accepted in full, and the insurance proceeds shall, as soon as they are released, be paid to the Agent and applied in prepayment of the Loans in accordance with Clause 9.3 (Mandatory prepayment – sale or Total Loss).

22.9 Class and International Regulations

The Obligors shall procure that each Unit is classified and maintained in the highest class, with no overdue recommendations, with Det Norske Veritas or another classification society acceptable to the Agent, and at all times comply with the rules and regulations of the relevant classification society. Furthermore, the Obligors shall at all times ensure compliance with all international conventions and regulations, including SOLAS conventions and the International Management Code for the Safe Operation of Ships and for Pollution Prevention adopted by the International Maritime Organisation and the International Ship and Port Security Code adopted by the Assembly of the International Maritime Organisation. In particular, the Obligors shall ensure compliance with the ISM-Code and the ISPS-Code and shall ensure that any charterer of any Unit and any company performing management services on behalf of any Obligor complies with said conventions and regulations.

22.10  Repair and compliance with laws etc.

(a) The Obligors shall procure that each Unit is kept in a good and safe condition and state of repair consistent with first class ownership and management practice.

(b) The Obligors shall procure that no material alteration or replacement is made which may affect the structure of any Unit.

(c) The Obligors shall procure that no part or any material equipment pertaining to any Unit is removed unless immediately replaced or substituted with parts or equipment of at least the same value and quality.

(d) The Obligors shall procure compliance with all Environmental Laws and all other laws and regulations relating to the Units, its ownership, operation and management or to the business of the Obligors where failure to comply has or may have a Material Adverse Effect.

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22.11  Flag, name and registry

The Obligors shall not change the flag, name or registry of any Unit, or register any Unit simultaneously in more than one registry, without the prior written consent of the Agent (acting on the instructions of the Banks). The Banks hereby confirm that the flags of Bermuda, Cyprus, Cayman Islands, Marshall Islands, Singapore and Bahamas shall for the purposes of this Agreement be regarded as acceptable flags.

22.12  Management

The Obligors shall continue with the management of the Units within the Group, and no changes in such management shall be made without the prior written consent of the Agent (acting on the instructions of the Majority Banks).

22.13  Inspection and class records

(a) One person appointed by the Agent shall be permitted to inspect each Unit once every twelve (12) months, for the account of the Borrowers, upon the Agent giving prior notice thereof, such inspections not to interfere with the running management, operation and safety of the relevant Unit (provided, however, that if a Default shall occur the Agent shall have the right to a reasonable number of inspections of each Unit for the account of the Borrowers), and the Obligors shall upon the Agent’s request provide it with copies of the latest inspection reports in respect of the Units which are available to any of the Obligors or any managers.

(b) The Obligors shall instruct the classification society referred to in Clause 22.9 (Class and International Regulations) to send to the Agent, following receipt of a written request from the Agent, copies of all class records held by the classification society in relation to the Units.

22.14  Bank accounts

(a) The Obligors shall maintain all their operating accounts into which any Earnings are paid, with the Agent.

(b) All Earnings of each Unit shall be paid directly to the Earnings Accounts opened by each Group Contract Party with the Agent in respect of each Unit.

(c) The Parent shall procure that all other bank accounts and the cash management of the Group are kept with the Agent, provided that the Agent can offer competitive terms, and provided that this shall not apply to accounts required to be held in jurisdictions where the Agent does not have any office.

22.15  Performance of Finance Documents

Each of the Obligors shall perform all of its obligations under the Finance Documents at the times, in the manner and upon the terms set out therein.

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22.16  Payment of taxes

Each of the Obligors shall duly and punctually pay and discharge all taxes imposed on it or its assets within the time period allowed without incurring penalties (save to the extent that (i) payment is being contested in good faith and/or payment can be lawfully withheld and (ii) adequate reserves are being maintained for those taxes).

22.17  Negative pledge

(a) The Obligors shall procure that no Security Interest is created, incurred or assumed on any Unit or any other assets of an Owner or any other Group Contract Party, or any of the shares pledged to the Agent under the First Share Pledge Agreements and/or the Second Share Pledge Agreements, and that no assignment of any Obligor’s rights to receive Earnings or proceeds of any insurance policy covering any Unit is made.

(b) Paragraph (a) above does not apply to Security Interest:

(i) granted pursuant to the Finance Documents;

(ii) arising by operation of law in the ordinary course of business, and not arising as a result of any default or omission on the part of an Obligor;

(iii) arising under any retention of title or sales lien arrangements entered into in the ordinary course of business which are required by any supplier of any goods to any member of the Group in the normal course of such supplier’s business;

(iv) arising by way of set off or other standard netting, cash management or account-zeroing arrangements in connection with the Group’s banking arrangements;

(v) existing on the date of the Original Facility Agreement and until the first Drawdown Date and granted as security for the Existing Facilities; or

(vi) consented to in writing by the Majority Banks.

22.18  Financial Indebtedness restrictions

(a) No Obligor shall, and the Parent shall ensure that no other member of the Group shall, incur, create or permit to subsist any Financial Indebtedness.

(b) Paragraph (a) above does not apply to Financial Indebtedness:

(i) incurred under the Finance Documents;

(ii) incurred through any derivative transaction entered into in the ordinary course of business in connection with protection against or benefit from fluctuation in any rate or price;

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(iii) which is unsecured and fully subordinated to the rights of the Finance Parties under the Finance Documents (both in terms of ranking and in terms of debt service) on terms acceptable to the Agent (acting on the instructions of the Majority Banks);

(iv) incurred by way of (A) an unsecured convertible bond loan in a principal amount not exceeding USD 200,000,000 or (B) an ordinary unsecured bond loan in a principal amount not exceeding USD 200,000,000 to be applied for investment in a drilling unit or a company owning drilling unit(s), provided always that the Borrowers are able to demonstrate to the satisfaction of the Agent (acting on the instructions of the Majority Banks) that the Earnings under the Employment Contracts will be sufficient to service Revolving Credit Facility B when taking into account the debt service obligations incurred in connection with such Financial Indebtedness;

(v) incurred by a Project Company;

(vi) existing on the date of the Original Facility Agreement and until 30 days after the first Drawdown Date and incurred under the Existing Facilities; or

(vii) consented to in writing by the Majority Banks.

22.19  Merger and reconstruction restrictions

(a) The Obligors shall not merge or consolidate with any other company, de-merge or undertake any corporate restructuring, without the prior written consent of the Majority Banks, other than any intra-Group merger, de-merger or re-organisation on a solvent basis.

(b) The Finance Parties hereby agree in principle to a reconstruction whereby the Group is moved to Cyprus or Marshall Islands jurisdiction with an equivalent structure of the Group as the one in existence at the date of the Original Facility Agreement and the transfer of the Facilities and the Units to the new entities, provided that the financial condition of the new entities is not weaker than that of the Obligors and that satisfactory financing and security documentation equivalent to the Finance Documents is entered into by the new entities with the Finance Parties and customary conditions precedent documentation is delivered by the Obligors to the Finance Parties.

22.20  Disposal restrictions

(a) No Obligor shall, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, without the prior written consent of the Banks, sell, transfer, grant or lease out (on financial leasing terms) or otherwise dispose of any Unit or all of its shares in an Owner or in a direct or indirect shareholder in an Owner without making prepayment in accordance with the provisions of Clause 9.3 (Mandatory prepayment – sale or Total Loss), other than any sale or transfer made to another member of the Group in connection with a change of flag permitted by Clause 22.11 (Flag, name and registry), provided always that the members of the Group enter into such documentation for the amendment of this Agreement or any other Finance Document and/or the maintenance of the security constituted by the Security Documents as the Agent (acting on the instructions of the Majority Banks) may require.

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(b) No Obligor shall, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, without the prior written consent of the Banks, sell, transfer, grant or lease out (on financial leasing terms) or otherwise dispose of less than 100 per cent of all shares in an Owner or in a direct or indirect shareholder in an Owner.

(c) No Obligor shall, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, without the prior written consent of the Majority Banks, sell, transfer, grant or lease out (on financial leasing terms) or otherwise dispose of the whole or a substantial part of its assets (other than those referred to in paragraphs (a) and (b) above), or sell, transfer, grant or lease out or otherwise dispose of any of its assets other than at market value, against cash payment and on arms length terms.

22.21  Dividend restrictions

(a) The Parent shall not in any circumstances, without the prior written consent of the Banks, pay or declare any dividend or reduction of share capital, or pay, declare or make any other distribution to its shareholders or any of them if less than six (6) months (excluding options) remains of the contract period under the New Eirik Raude Qualifying Contract, unless the New Eirik Raude Qualifying Contract has been replaced with another Employment Contract which in the opinion of the Majority Banks is at least as favourable to the relevant member of the Group as the New Eirik Raude Qualifying Contract and is entered into with a contract party which in the opinion of the Majority Banks has a financial standing at least equal to the financial standing that Tullow Oil Plc had at the time Tullow Oil Plc entered into the New Eirik Raude Qualifying Contract.

(b) Until Earnings have started to accrue to the relevant Group Contract Party under the New Eirik Raude Qualifying Contract, the Parent shall not, without the prior written consent of the Banks, pay or declare any dividend or reduction of share capital, or pay, declare or make any other distribution to its shareholders exceeding the aggregate principal amount of the Loans under Revolving Credit Facility B outstanding at the time such dividend or other distribution is made.

22.22  Change of business

(a) The Obligors shall not, without the prior written consent of the Majority Banks, engage in any business other than the businesses in which they are engaged as of the date of the Original Facility Agreement and activities directly related thereto, and similar or related business (for the avoidance of doubt, management of drilling units owned by third parties shall not be regarded as a change of business).

(b) The Obligors shall not, without the prior written consent of the Majority Banks, change its type of organisation, jurisdiction of organisation, legal name or financial year (other than the pre-approved change of jurisdiction to either Cyprus, Bermuda, Cayman Islands, Marshall Islands, Singapore or Bahamas).

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22.23  Employment Contracts

The Obligors shall not, without the prior written consent of the Majority Banks, materially vary or amend, or terminate, or agree to any material variation or amendment of, or termination of, or waive any of its rights under, any Employment Contract, or enter into any further agreements related thereto, provided always that any variation or amendment which reduces or postpones the payment of any amount payable to a member of the Group thereunder or reduces the contract period, shall, without limitation, be deemed to be material for the purpose of this Clause.

22.24  Arm’s length terms

All agreements and transactions between the members of the Group shall be entered into and made on arm’s length terms, and all Employment Contracts entered into between any of the members of the Group shall be made in writing.

22.25  Hedging policy

(a) No Obligor shall enter into any interest and currency hedging, or other derivative transactions, for speculative purposes.

(b) The Borrowers shall hedge their interest and currency rate exposure in accordance with the Hedging Letter, and no amendments shall be made to the hedging policy set out therein without the prior written consent of the Agent.

22.26  Minimum value

(a) The Borrowers shall ensure that the aggregate Market Value of the Units (plus any additional security previously provided by the Obligors under paragraph (b) below) is at all times at least equal to 135 per cent of the principal amount of the Loans outstanding under the Term Loan Facility, Revolving Credit Facility A and Revolving Credit Facility C.

(b) The Borrowers shall, if the Market Value does not comply with the requirements set out in paragraph (a) above, within ten (10) Business Days either make a prepayment of the Loans in accordance with Clause 9.1 (Voluntary prepayment), or provide the Finance Parties with such additional security, in form and substance satisfactory to the Majority Banks, required to restore the aforesaid ratio.

(c) The Market Value shall be determined semi-annually at the expense of the Borrowers.

23 FINANCIAL COVENANTS

23.1 Definitions

In this Clause 23 (and in any other relevant Clauses in this Agreement):

“Capital Expenditure”

means, at the date of calculation (on a consolidated basis for the Group for such period), the aggregate of investments in the acquisition (calculated on the basis of the Enterprise Value), construction, development or improvement of any asset or business (including shares) which shall be treated as a capital asset in accordance with the Approved Accounting Principles.

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“Cash and Cash Equivalents”

means, at the date of calculation (on a consolidated basis for the Group), the aggregate amount of the Group’s:

(i) cash in hand or on deposit with any bank or financial institution; and

(ii) cash equivalents (as reported in the Parent’s consolidated financial statements in accordance with the Approved Accounting Principles),

as set out in the Group’s latest available balance sheet (whether audited or unaudited, as the case may be) and in all cases unencumbered by any Security Interest (other than pursuant to the Finance Documents) and provided that the relevant member of the Group’s use of such cash, deposit or cash equivalents is unrestricted.

“Current Assets”

means the aggregate value of the Group’s (on a consolidated basis) assets which are treated as current assets in accordance with the Approved Accounting Principles.

“Current Liabilities”

means the aggregate value of the Group’s (on a consolidated basis) liabilities which are treated as current liabilities in accordance with the Approved Accounting Principles, excluding the current portion of long term debt and the current portion of amortised loan issuance costs.

“EBITDA”

means, at the date of calculation (on a consolidated basis for the Group), earnings before interest, tax, depreciation and amortisation, not taking into account extraordinary and non-recurring items and non-cash option costs in relation to the Group’s employee shares option program or any allocation of such costs to the Group, and excluding any profit or loss arising from the disposal of fixed assets and realised and unrealised exchange gains and losses.

“Enterprise Value”

means in respect of an acquisition (without double counting), the aggregate of (i) the consideration paid by the relevant member of the Group for the shares or other assets acquired, (ii) the amount of any Financial Indebtedness of any company acquired not repaid and discharged on or prior to the closing of the relevant acquisition and (iii) the amount of any Financial Indebtedness taken over by the relevant member of the Group in connection with the relevant acquisition.

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“Free Cash”

means, at the date of calculation (on a consolidated basis for the Group), the aggregate amount of the Group’s cash on deposit with the Agent.

“Gross Interest Bearing Debt”

means, at the date of calculation (on a consolidated basis for the Group), the aggregate of the Group’s indebtedness for or in respect of:

(i) moneys borrowed;

(ii) any amount raised by acceptance under any acceptance credit facility;

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

(iv) the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with the Approved Accounting Principles, be treated as a financial lease;

(v) any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing; and

(vi) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution for the purpose of securing advance payments made by third parties to a member of the Group.

“Gross Interest Costs”

means, at the date of calculation (on a consolidated basis for the Group), the aggregate of the Group’s interest, commissions, periodic fees and other financing charges, incurred by the Group and paid or payable in cash during a Measurement Period (including the interest element payable under any financial lease, but excluding any upfront fees payable under this Agreement). For the avoidance of doubt it is specified that agio gains or losses on currency transactions shall not be considered as Gross Interest Costs.

“Measurement Period”

means a period of 12 months ending on the last day of a financial quarter, a financial half year or a financial year of the Parent.

“Net Interest Bearing Debt”

means, at the date of calculation (on a consolidated basis for the Group), the aggregate amount of the Group’s Gross Interest Bearing Debt less the total amount of the Group’s Cash and Cash Equivalents in excess of USD 30,000,000.

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“Net Interest Costs”

means, at the date of calculation (on a consolidated basis for the Group), Gross Interest Costs less the aggregate of the Group’s interest and other financing income received or receivable in cash during a Measurement Period. For the avoidance of doubt it is specified that agio gains on currency transactions shall not be considered as income.

“Value Adjusted Total Assets”

means at the date of calculation (on a consolidated basis for the Group), the aggregate book value (adjusted to reflect the Market Value of the Units) of those of the Group’s assets which,, according to the Approved Accounting Principles, shall be included as assets in a balance sheet.

“Value Adjusted Total Equity”

means, at the date of calculation (on a consolidated basis for the Group), the Group’s nominal book equity adjusted to reflect the Market Value of the Units.

23.2 Calculations

(a) For the purpose of this Clause 23, all calculations shall be conducted in accordance with the terms defined in Clause 1.1 (Definitions) and Clause 23.1 (Definitions) and, to the extent not inconsistent with those definitions, the Approved Accounting Principles applicable from time to time.

(b) For the purpose of determining EBITDA for the calculation of the leverage ratio pursuant to Clause 23.4 (Leverage ratio) for each Measurement Period ending 30 September 2008, 31 December 2008 and 31 March 2009, the amount thereof shall be calculated by annualising the actual figures as follows:

(i) for the period from 1 July to 30 September 2008, the actual figures of the Group for the period multiplied by four (4);

(ii) for the period from 1 July to 31 December 2008, the actual figures of the Group for the period multiplied by two (2); and

(iii) for the period from 1 July 2008 to 31 March 2009, the actual figures of the Group for the period multiplied by four (4) and divided by three (3).

(c) For the purpose of determining EBITDA, Gross Interest Cost and Net Interest Costs for the calculation of the interest coverage ratio pursuant to Clause 23.5 (Interest coverage ratio) for each Measurement Period ending 30 June, 30 September and 31 December 2008, the amount thereof shall be calculated by annualising the actual figures as follows:

(i) for the period from 31 March to 30 June 2008, the actual figures of the Group for the period multiplied by four (4);

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(ii) for the period from 31 March to 30 September 2008, the actual figures of the Group for the period multiplied by two (2); and

(iii) for the period ending 31 December 2008, the actual figures of the Group for the period from 1 January to 31 December 2008.

(d) In relation to the first four Measurement Periods ending after the Restructuring Implementation Date, the calculations of EBITDA, Gross Interest Costs and Net Interest Costs shall be made on the basis of pro forma numbers taking into account the EBITDA, Gross Interest Costs and Net Interest Costs of Ocean Rig ASA (on a consolidated basis) for the relevant part of each Measurement Period in order to enable reporting on a 12 months rolling basis.

(e) Any calculation under this Clause 23 shall exclude any Project Company.

(f) No item must be credited or deducted more than once in any calculation under this Clause 23.

23.3 Minimum liquidity

The Parent shall ensure that the Group’s (on a consolidated basis) Free Cash shall not at any time be less than USD 30,000,000.

23.4 Leverage ratio

The Parent shall ensure that the ratio of Net Interest Bearing Debt to EBITDA for the Parent measured at the end of each Measurement Period on the basis of 12 months rolling EBITDA (starting with the financial quarter ending 30 September 2008) at all times complies with the following maximum numbers:

As from quarter end	Ratio
30 Sep 2008	6.0
31 Dec 2008	6.0
31 Mar 2009	5.5
30 Jun 2009	5.5
30 Sep 2009	5.5
31 Dec 2009	5.5
31 Mar 2010	5.0
30 Jun 2010	5.0
30 Sep 2010	5.0
31 Dec 2010	5.0
Thereafter	4.5

23.5 Interest coverage ratio

The Parent shall ensure that the ratio of EBITDA to Net Interest Costs measured at the end of each Measurement Period on a 12 months rolling basis (starting with the financial quarter ending 30 June 2008) shall not at any time in the period to an including the financial quarter ending 30 June 2008 be less than 2.0, and thereafter not be less than 2.5.

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23.6 Current ratio

The Parent shall ensure that the ratio of Current Assets to Current Liabilities measured at the end of each Measurement Period (starting with the financial quarter ending 30 June 2008) shall not at any time be less than 1.00, provided however that in relation to the financial quarter ending 30 June 2008, the amount outstanding at that time under the Unsecured Bond Loan Agreement shall not be included in the calculation of Current Liabilities for the purpose of this Clause.

23.7 Equity ratio

The Parent shall ensure that the ratio of Value Adjusted Equity to Value Adjusted Total Assets measured at the end of each Measurement Period (starting with the financial quarter ending 30 September 2008) shall not at any time be less than 0.25.

23.8 Capital Expenditure

The Parent shall ensure that the Capital Expenditure measured the end of each financial year shall not in any financial year exceed USD 50,000,000 (or the equivalent in any other currencies), and in the event of Capital Expenditure in excess of USD 30,000,000 in relation to the investment in one asset or group of assets, the Parent shall prior to the relevant Capital Expenditure being committed, present a finance plan to the Agent, which plan shall be accepted in writing by the Agent (acting on the instructions of the Majority Banks) before the relevant Capital Expenditure is committed.

24 EVENT OF DEFAULT

24.1 Event of Default

Each of the events set out in Clauses 24.2 to 24.17 (inclusive) is an Event of Default.

24.2 Non-payment

An Obligor does not pay on the due date an amount payable by it under any Finance Document at the place at, and in the currency in, which it is expressed to be payable, provided that if, such failure to pay has arisen as a consequence of an administrative or technical error only, then such event shall not be an Event of Default unless such failure continues for a period in excess of three (3) Business Days.

24.3 Breach of other obligations

A member of the Group does not comply with any provision of a Finance Document to which it is a party (not otherwise specifically referred to in this Clause 24), provided that if such non-compliance is, in the opinion of the Agent, capable of remedy:

(i) the Agent notifies the Borrowers of such non-compliance; and

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(ii) such non-compliance remains unremedied for a period exceeding ten (10) Business Days.

For the avoidance of doubt, a breach of Clause 22.6 (Insurances) is not capable of remedy.

24.4 Misrepresentation

A representation, warranty or statement made or repeated in or in connection with any Finance Document or in any document delivered by or on behalf of any Obligor under or in connection with a Finance Document was incorrect or misleading in any material respect when made or deemed to be made or repeated.

24.5 Breach of financial covenants

The financial covenants set out in Clause 23.3 (Minimum liquidity) to 23.8 (Capital Expenditure) (both inclusive) are not complied with.

24.6 Cross-default

Any of the following occurs in respect of any member of the Group (other than a Project Company), DryShips Inc. or any other person controlling (directly or indirectly) 1/3 or more of the shares in the Parent:

(i) any of its Financial Indebtedness (other than the obligations under the Finance Documents) is not paid when due (after the expiry of any originally applicable grace period);

(ii) any of its Financial Indebtedness where it is a guarantor is not paid, unless contested in good faith, when due;

(iii) any of its Financial Indebtedness:

a. becomes prematurely due and payable;

b. is placed on demand; or

c. is declared by a creditor to be prematurely due and payable or being placed on demand,

in each case, as a result of an event of default (howsoever described); or

(iv) any commitment for its Financial Indebtedness is cancelled or suspended as a result of an event of default (howsoever described),

provided, however, that no Event of Default will occur under this Clause 24.6 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (i) to (iv) above is less than USD 1,500,000 (or its equivalent in other currencies).

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24.7 Liens

A maritime or other lien (not being a lien for crew’s wages, salvage or a lien arising solely by operation of law and/or in the ordinary course of business), arrest, distress or similar charge is levied upon, or against any Unit, the Earnings, any Earnings Account or any other assets of any Obligor and is not discharged within fifteen (15) Business Days after the relevant Obligor became aware of the same, or unless the Finance Parties have been provided with additional security in such form and for such amounts as the Majority Banks may require.

24.8 Loss of property

A substantial part of any Obligor’s business or assets is destroyed, abandoned, seized, appropriated or forfeited for any reason provided, in the reasonable opinion of the Agent, that such occurrence will adversely affect that Obligor’s ability to perform its obligations under the Transaction Documents to which it is a party.

24.9 Insolvency

(a) Any member of the Group is, or for the purpose of law is deemed to be, unable to pay its debts as they fall due by reason of actual or anticipated financial difficulties or becomes insolvent, or admits inability or intention not to pay its debts as they are due; or

(b) any member of the Group, by reason solely of financial difficulties, begins negotiations with its creditors with a view to the readjustment or rescheduling of any of its indebtedness; or any step is taken with a view to an arrangement with its creditors; or

(c) a meeting of any member of the Group is convened for the purpose of considering any resolution for its winding-up or its administration or any such resolution is passed, ordered, or requested; or

(d) any other step (including petition (other than a frivolous or vexatious petition which is contested in good faith or set aside within 30 days after a Borrower or the relevant member of the Group became aware of the same), proposal or convening a meeting) is taken with a view to the administration, liquidation, winding-up (other than a solvent winding-up), dissolution or general debt negotiations of any member of the Group or any other insolvency proceedings involving a member of the Group,

provided, however, that no Event of Default shall occur if any of the circumstances set out in this Clause 24.9 are applicable only to a Project Company.

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24.10 Appointment of receiver, etc.

Any liquidator, receiver, administrator or the like is appointed or requested to be appointed in respect of any member of the Group (other than a frivolous or vexatious petition which is contested in good faith), provided, however, that no Event of Default shall occur if any of the circumstances set out in this Clause 24.10 are applicable only to a Project Company.

24.11 Analogous proceedings

There occurs, in relation to any member of the Group, any event or circumstance which, in the reasonable opinion of the Majority Banks, appears to correspond with those mentioned in Clauses 24.9 (Insolvency) or 24.10 (Appointment of receiver, etc.), provided, however, that no Event of Default shall occur if any of the circumstances set out in this Clause 24.11 are applicable only to a Project Company.

24.12 Cessation of business

Any Obligor ceases or threatens to cease to carry on its business or changes its business, whether by one or a series of transactions, without the prior written consent of the Majority Banks.

24.13 Authorisations and consents

Any authorisation or consent required in connection with the entry into, performance, validity or enforceability of any of the Transaction Documents or any of the transactions contemplated thereby, or the business of any of the Obligors, is revoked, terminated or modified, or otherwise ceases to be in full force and effect, in a manner unacceptable to the Majority Banks.

24.14 Effectiveness of Finance Documents

(a) It is or becomes impossible or unlawful for any Obligor to perform any of its obligations under the Finance Documents.

(b) Any Finance Document does not at any time constitute legal, valid, binding and enforceable obligations in all respects of an Obligor being a party thereto, and, if in the reasonable opinion of the Agent capable of remedy, is not remedied to the satisfaction of the Agent within ten (10) Business Days after a Borrower or the relevant Obligor became or should have become aware of such event, or is alleged by an Obligor not to constitute its legal, valid, binding and enforceable obligations in any respect for any reason.

(c) A Security Document does not create the security it purports to create and the Borrowers do not within five (5) Business Days after receipt of notice from the Agent execute or procure the execution of such documentation as required by the Agent in order to remedy such defect, or if not, in the opinion of the Agent, remediable, the Borrowers do not within five (5) Business Days after receipt of a draft of security documentation procure that additional valid and duly perfected security of equal value to the security constituted by the relevant Security Document is put in place.

(d) An Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document.

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24.15 Material adverse change

Any event or series of events occurs which, in the reasonable opinion of the Majority Banks, may have a material adverse effect on the ability of any of the Obligors to comply with its obligations under any of the Transaction Documents to which it is a party.

24.16 Accession

A member of the Group does not accede to this Agreement in accordance with Clause 31.8 (Additional Guarantors) or deliver any of the documents required to be delivered to the Agent thereunder within the time and in the form and substance required thereunder.

24.17 Eirik Raude – Employment Contracts

Any member of the Group does not (unless such non-payment is a direct result of a reduction in the payments by Tullow Oil Plc under the New Eirik Raude Qualifying Contract which is made in accordance with the terms of the New Eirik Raude Qualifying Contract) pay on the due date thereof any amount payable by it under any Employment Contract entered into in respect of “Eirik Raude” at the place at, and in the currency in, which it is expressed to be payable, provided that if, such failure to pay has arisen as a consequence of an administrative or technical error only, then such event shall not be an Event of Default unless such failure continues for a period in excess of three (3) Business Days.

24.18 Acceleration

On and at any time after the occurrence of an Event of Default (unless remedied during any applicable remedy period), the Agent may, and shall if so directed by the Majority Banks, by notice to the Borrowers:-

(i) cancel the Total Commitment or any part thereof, whereupon it shall immediately be cancelled; and/or;

(ii) declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under any Finance Document be immediately due and payable, whereupon they shall become immediately due and payable; and/or

(iii) declare that all or part of the Loans be payable on demand, whereupon it shall immediately become payable on demand by the Agent on the instructions of the Majority Banks; and/or

(iv) demand immediate cash collateral cover to be deposited with the Agent in amounts and currencies identical to the amounts representing the maximum contingent liability under the Letter of Credit, plus any outstanding costs, fees, interests and/or expenses, whereupon the Borrowers shall pay such amounts to the Agent which amounts shall be placed on a blocked deposit account with the Agent bearing interest at the Agent’s usual rate for comparable deposits (so entitled as to indicate the interest of the Agent (on behalf of the Guarantee Bank) in such account) and the Borrowers agree that such amounts may be applied in fulfilment pro tanto of

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the Borrowers’ obligations hereunder and that the amounts so deposited will only be released to the Borrowers as and to the extent that they exceed the aggregate of the maximum contingent liability under the Letter of Credit and any outstanding costs, fees, interests and expenses.

(v) without prejudice to any other rights of the Finance Parties, with or without notice to any of the Obligors, take such other action as is available to the Finance Parties under any Finance Document.

25 THE AGENT AND THE ARRANGERS

25.1 Appointment as Agent

Each of the other Finance Parties hereby appoints the Agent to act as its agent under and in connection with the Finance Documents, and authorises the Agent on its behalf to perform the duties and to exercise the rights, powers and discretions that are specifically delegated to it under or in connection with the Finance Documents, together with any other incidental rights, powers and discretions. The Agent shall have only those duties which are expressly specified in a Finance Document.

25.2 Relationship

The relationship between the Agent and the other Finance Parties is that of agent and principal only and Agent shall not have any fiduciary relationship with or be a trustee for any other Party or any other person.

25.3 Majority Banks’ directions

The Agent will be fully protected if it acts in accordance with the instructions of the Majority Banks (save where any Finance Document provides for instructions by all the Banks) in connection with the exercise of any right, power or discretion or any matter not expressly provided for in any Finance Document. Any such instructions given by the Majority Banks will be binding on the Agent and all the other Finance Parties. In the absence of such instructions, the Agent may act in relation thereto as it considers to be in the best interests of all the Finance Parties. The Agent may not commence legal proceedings in a other Finance Party’s name without its consent.

25.4 Responsibility for documentation

Neither the Agent, nor any of its officers, employees or agents is responsible to any other Party for:

(i) the execution, genuineness, validity, enforceability or sufficiency of any of the Finance Documents or any other document;

(ii) the collectability of amounts payable under any of the Finance Documents; or

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(iii) the accuracy of any statements (whether written or oral) made in or in connection with any of the Finance Documents.

25.5 Default

(a) The Agent is not obliged to monitor or enquire as to whether or not a Default has occurred. The Agent will not be deemed to have knowledge of the occurrence of a Default (unless it has actual knowledge of a Default arising under Clause 24.2 (Non-payment)). However, if the Agent receives notice from a Party referring to this Agreement, describing the Default and stating that the event is a Default, or if the Agent in this capacity has otherwise acquired actual knowledge of a Default, it shall promptly notify the other Finance Parties.

(b) The Agent may require security satisfactory to it from any Finance Party, whether by way of payment in advance or otherwise, against any liability or loss which it will or may incur in taking any proceedings or action arising out of or in connection with any of the Finance Documents before it commences those proceedings or takes that action.

25.6 Exoneration

(a) Without limiting paragraph (b) below, the Agent will not be liable to any other Finance Parties for any action taken or not taken by it under or in connection with any of the Finance Documents, unless caused by its gross negligence or wilful misconduct.

(b) No Party may take any proceedings against any officer or employee of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind (including negligence or wilful misconduct) by that officer or employee in relation to any of the Finance Documents.

(c) Except as specifically provided in the Finance Documents, the Arrangers do not have any obligations of any kind to any other Party under or in connection with any Finance Document.

25.7 Reliance

The Agent and each Arranger may:

(i) rely on any notice or document reasonably believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person;

(ii) rely on any written statement made by a director or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; and

(iii) engage, pay for and rely on legal or other professional advisers selected by it (including those in the Agent’s employment and those representing a Party other than the Agent).

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25.8 Approval and appraisal

Without affecting the responsibility of the Borrowers for information supplied by it or on its behalf in connection with any of the Finance Documents, each of the other Finance Parties confirms to the Agent that it:

(i) has made its own independent investigation and assessment of the financial condition and affairs of each Obligor in connection with its participation in the Finance Documents; and

(ii) will continue to make its own independent appraisal of the creditworthiness of each Obligor at all times during the Loan Period.

25.9 Information

(a) The Agent shall forward to the relevant person the original or a copy of any document which is delivered to the Agent by a Party for that person.

(b) The Agent shall supply each Bank with a copy of each document received by the Agent under Clause 3 (Conditions precedent).

(c) Except where this Agreement specifically provides otherwise, the Agent is not obliged to review or check the accuracy or completeness of any document which it forwards to another Party.

(d) If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the Finance Parties.

(e) If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party under this Agreement it shall notify the other Finance Parties.

25.10 The Agent and the Arrangers as Banks

(a) The Agent and the Arrangers, as Banks, have the same rights, powers, obligations and liabilities under the Finance Documents as any other Bank and may exercise those rights and powers as though they were not, as the case may be, the Agent or an Arranger.

(b) The Agent and each Arranger may:-

(i) carry on any business with the Obligors and/or their related entities;

(ii) act as agent or trustee for, or in relation to, any financing involving the Obligors and/or their related entities; and

(iii) retain any profits or remuneration in connection with its activities as Agent or Arranger under this Agreement or in relation to any of the foregoing.

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25.11 Indemnities

(a) Without limiting the liability of the Obligors under this Agreement, each Bank shall forthwith on demand indemnify the Agent for its proportion of any liability or loss incurred by the Agent in any way relating to or arising out of its acting as Agent, except to the extent that the liability or loss arises from the Agent’s gross negligence or wilful misconduct.

(b) A Bank’s proportion of the liability or loss set out in paragraph (a) above will be the proportion which its Commitment bears to the Total Commitment at the date of demand or, if the Total Commitment has then been cancelled, bore to the Total Commitment immediately before being cancelled.

(c) The Borrowers shall forthwith on demand reimburse each Bank for any payment made by it under paragraph (a) above.

(d) Without prejudice to the liability of the Borrowers, each Bank shall on demand reimburse to the Agent the amount of such Bank’s pro rata share of charges and expenses covered by Clause 27 (Expenses) but not then reimbursed by the Borrowers.

25.12 Compliance

(a) The Agent may refrain from doing anything which might, in its opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation of any jurisdiction.

(b) Without limiting paragraph (a) above, the Agent shall not disclose any information relating to the Obligors or any other person if the disclosure might, in the reasonable opinion of the Agent, constitute a breach of any law or regulation or any duty of secrecy or confidentiality or be otherwise actionable at the suit of any person.

25.13 Resignation of the Agent

(a) Notwithstanding its appointment, the Agent may resign by giving notice to the Banks and the Borrowers, in which case the Majority Banks may, after consultation with the Borrowers, appoint a successor Agent.

(b) If the appointment of a successor Agent is to be made by the Majority Banks but they have not, within 45 days after notice of resignation, appointed a successor Agent which accepts the appointment, the retiring Agent may, after consultation with the Borrowers, appoint another bank to act as its successor.

(c) The resignation of the retiring Agent and the appointment of a successor will each become effective only upon the successor Agent notifying all the Parties that it accepts its appointment. On giving the notification, the successor Agent will succeed to the position of the retiring Agent and the term “Agent” will mean the successor Agent.

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(d) The retiring Agent shall, at its own cost, execute and make available to its successor such documents and records and provide such assistance as its successor may reasonably request for the purposes of performing its functions as the Agent under the Finance Documents.

(e) Upon its resignation becoming effective, this Clause 25 shall continue to benefit the retiring Agent in respect of any action taken or not taken by it under or in connection with the Finance Documents while it was the Agent and, subject to paragraph (d) above, it shall have no further obligation as Agent under the Finance Documents.

(f) If the Majority Banks so direct, the Agent shall resign in accordance with paragraph (a) above.

26 FEES

26.1 Commitment fee

(a) The Borrowers shall pay to the Agent (for distribution to the Senior Banks in accordance with a separate agreement between the Agent and each Senior Bank) a commitment fee calculated at the rate of 0.50 per cent. per annum of (i) the undrawn part of the Total Term Loan Facility Commitment during the period beginning on the date agreed separately between the Agent and the Borrower and ending on the last day of the Availability Period in respect of the Term Loan Facility and (ii) the undrawn part of the Total Revolving Credit Facility A Commitment during the period beginning on the date agreed separately between the Agent and the Borrower and ending on the last day of the Availability Period in respect of Revolving Credit Facility A, payable for the first time on the date occurring three (3) months after the date of the Original Facility Agreement and thereafter quarterly in arrears during such period.

(b) The Borrowers shall pay to the Agent (for distribution to the Junior Banks in accordance with a separate agreement between the Agent and each Junior Bank) a commitment fee calculated at the rate set out in the Margin and Fee Letter of the undrawn parts of the Total Revolving Credit Facility B Commitment and the Total Revolving Credit Facility C Commitment during the period beginning on the date agreed separately between the Agent and the Borrower and ending on the last day of the Availability Period in respect of Revolving Credit Facility B and Revolving Credit Facility C respectively, payable for the first time on the date occurring three (3) months after the date of the Original Facility Agreement and thereafter quarterly in arrears during such period.

26.2 Arrangement fee

The Borrowers shall pay to the Arrangers (for distribution in its sole discretion to the Banks) the non-refundable arrangement fee specified in the Margin and Fee Letter at the time and in the amount specified therein.

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26.3 Agency fee

The Borrowers shall pay to the Agent (for its own account) the non-refundable annual agency fee specified in the Margin and Fee Letter at the time and in the amount specified therein.

27 EXPENSES

27.1 Initial and special costs

The Borrowers shall promptly following demand pay to the Agent the amount of all costs and expenses (including external legal fees and fees to a marine insurance broker) properly and reasonably incurred and documented by the Agent in connection with:

(i) the mandate, evaluation, negotiation, syndication, travelling, preparation, due diligence, printing and execution of the Finance Documents and any other documents referred to in the Finance Documents;

(ii) any amendment, waiver, consent or suspension of rights (or any proposal for any of the foregoing) requested (or, in the case of a proposal, made) by or on behalf of an Obligor and relating to any of the Finance Documents or a document referred to in any of the Finance Documents;

(iii) the release and/or discharge of any security granted pursuant to the Security Documents; and

(iv) any other matter, not of an ordinary administrative nature, directly arising out of or in connection with any of the Finance Documents.

27.2 Enforcement costs

The Obligors shall promptly following demand pay to the Agent and/or any other Finance Party (as the case may be) the amount of all costs and expenses (including external and internal legal fees) properly incurred by it in connection with the enforcement of or the preservation of, any rights under any of the Finance Documents.

28 INDEMNITIES

28.1 Currency indemnity

(a) If a Finance Party receives an amount in respect of an Obligor’s liability under any of the Finance Documents (or in respect of a claim, proof, judgement or order into which such liability is converted) in a currency other than the currency (the “contractual currency”) in which the amount is expressed to be payable under the relevant Finance Document, that Obligor shall indemnify that Finance Party as an independent obligation against any loss or liability arising out of or as a result of the conversion.

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(b) The Obligors waive any right they may have by law to pay any amount under this Agreement in a currency other than the contractual currency.

28.2 Other indemnities

The Obligors shall forthwith on demand indemnify each Finance Party against any loss or liability (including funding breakage costs) which that Finance Party properly and reasonably incurs and which the Finance Party certifies (in a certificate containing reasonable detail) that it has incurred as a consequence of:

(i) the occurrence of any Event of Default;

(ii) the operation of Clause 24.18 (Acceleration);

(iii) any repayment or prepayment of principal or payment of an overdue amount being made otherwise than on the last day of an Interest Period (or other period selected under Clause 11.3 (Default interest)) relative to the amount so repaid, prepaid or paid; or

(iv) a Loan not being made available after a Borrower has delivered a Drawdown Notice or a Loan (or part of a Loan) not being prepaid or cancelled in accordance with a notice of prepayment or cancellation.

The liability of the Obligors in each case includes any loss of margin or other loss or expense on account of funds borrowed, contracted for or utilised to fund any amount payable under any of the Finance Documents, or any amount repaid or prepaid on the Loans, but the Obligors’ liability shall in no circumstances extend to any loss or expense to the extent that it arises as a consequence of any gross negligence or wilful default of a Bank.

29 CALCULATIONS

Interest, guarantee commission and commitment fees accrue from day to day and are calculated on the basis of the actual number of days elapsed and a year of 360 days.

30 AMENDMENTS AND WAIVERS

30.1 Procedure

(a) Subject to Clause 30.2 (Exceptions), any term of a Finance Document may be amended or waived with the written agreement of the Borrowers and the Majority Banks (or if authorised by the Majority Banks, the Agent). The Agent shall effect, on behalf of all Finance Parties, any amendment or waiver which has been so agreed.

(b) The Agent shall promptly notify all other Finance Parties of any amendment or waiver effected under paragraph (a) above and any such amendment or waiver shall be binding on all Finance Parties.

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30.2 Exceptions

(a) An amendment or waiver which relates to:

(i) the definition of “Majority Banks”;

(ii) any postponement, or alteration in the amount or currency, or waiver, of any payment of principal, interest, Applicable Margin, commitment fee, costs or any other amount payable to the Banks under any Finance Document;

(iii) the release of any security constituted by the Security Documents;

(iv) a term of any Finance Document which expressly requires the consent of each Bank;

(v) any variation of Clauses 2.5 (Nature of rights and obligations of the Borrowers), 2.6 (Nature of rights and obligations of the Banks), 13 (Security), 14 (Coordination of Senior Security Documents and Junior Security Documents), 16 (Market disruption), 17 (Increased costs), 19 (Illegality), 25 (The Agent and the Arrangers), 26 (Fees), 33 (Distribution and pro rata sharing), or this Clause 30;

(vi) any change to the Total Commitment;

(vii) the release or addition of any Borrower under this Agreement;

(viii) the release of any Guarantor from its obligations under this Agreement other than where such Guarantor is not the Parent or an Owner and has ceased to be a Group Contract Party; or

(ix) any admission of joint and several liability;

may not be effected without the consent of each Bank.

(b) Subject to paragraph (a) above, any term of a Finance Document may be amended or waived with the written consent of the Majority Senior Banks (or if authorised by the Majority Senior Banks, the Agent).

(c) No amendment or waiver which affects the rights of the Agent or the Junior Banks under a Junior Security Document may be effected without the consent of the Junior Banks.

(d) No amendment or waiver which affects the rights or obligations of the Agent or an Arranger may be effected without the consent of the Agent or the relevant Arranger (as the case may be).

30.3 Waivers and remedies cumulative

The rights of each Finance Party under the Finance Documents:

(i) may be exercised as often as necessary;

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(ii) are cumulative and not exclusive of its rights under the general law; and

(iii) may be waived only in writing.

No delay in exercising, or failure to exercise, any such right is a waiver of that right.

31 CHANGES TO THE PARTIES

31.1 Transfer by the Obligors

No Obligor may assign, transfer or dispose of any of, or any interest in, their rights and/or obligations under any of the Finance Documents.

31.2 Transfers by Banks

Subject to this Clause 31, a Bank (the “Existing Bank”) may (as long as no Default has occurred and is continuing, subject to the consent of, and without incurring any additional cost for, the Borrowers (unless the transfer is to another Bank or an affiliate of a Bank), which consent shall not be unreasonably withheld or delayed and which shall be deemed to have been given ten (10) Business Days after being sought unless expressly refused within that period) upon receiving the written approval of the Agent (such approval not to be unreasonably withheld or delayed) transfer all or any of its rights and/or obligations under the Finance Documents to another bank or financial institution (the “New Bank”).

31.3 Procedure for transfer

(a) To effect a transfer under Clause 31.2, the Existing Bank shall notify the Agent in writing of the proposed transfer, setting out the amount that it proposes to transfer and the identity of the bank or financial institution to which it proposes to make the transfer (the “Proposed Transferee”).

(b) The Agent shall have first right of refusal, to be exercised within fifteen (15) Business Days after receipt of the notice referred to in paragraph (a) above, to assume the rights and obligations of the Proposed Transferee in relation to the proposed transfer and become the New Bank.

(c) The Existing Bank and the New Bank (the Agent or the Proposed Transferee (as the case may be)) shall duly complete and execute a Transfer Certificate and deliver it to the Agent.

(d) As soon as reasonably practicable after receipt, the Agent shall execute the Transfer Certificate on behalf of itself, the Borrowers and each of the other Banks, and send a copy of the fully executed Transfer Certificate to the Borrowers, the Existing Bank, the New Bank and each of the other Banks.

(e) A Transfer Certificate shall become effective on the date specified in the Transfer Certificate as its effective date or, if later, on the date on which it is signed by the Agent.

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(f) Each New Bank shall on or before the date the Transfer Certificate becomes effective pay to the Agent a transfer fee in the amount of USD 1,500.

31.4 Authorisation of Agent to sign Transfer Certificates

Each Borrower and each Bank irrevocably authorises the Agent to sign Transfer Certificates on its behalf.

31.5 Effect of Transfer Certificate

A Transfer Certificate takes effect as follows:

(a) to the extent specified in the Transfer Certificate, all rights and interests which the Existing Bank has under or by virtue of the Finance Documents are assigned to the New Bank absolutely, free of any defects in the Existing Bank’s title and of any rights or equities which a Borrower or any other Obligor might have against the Existing Bank;

(b) the Existing Bank’s Commitment is discharged to the extent specified in the Transfer Certificate;

(c) the New Bank becomes a Bank with a Participation and/or (as the case may be) a Commitment of an amount specified in the Transfer Certificate;

(d) the New Bank becomes bound by all the provisions of the Finance Documents which are applicable to the Banks generally and, to the extent that the New Bank becomes bound by those provisions as specified in the Transfer Certificate, the Existing Bank ceases to be bound by them (other than those relating to exclusion of liability);

(e) any Loan or part thereof which the New Bank, advances after the transfer takes effect will rank as to priority and security in the same way as it would have ranked had it been advanced by the Existing Bank, assuming that any defects in the Existing Bank’s title and any rights or equities of a Borrower or any other Obligor against the Existing Bank had not existed;

(f) the New Bank becomes entitled to all the rights under the Finance Documents which are applicable to the Banks generally and, to the extent that the New Bank becomes entitled to such rights as specified in the Transfer Certificate, the Existing Bank ceases to be entitled to them; and

(g) in respect of any breach of a provision of a Finance Document or any misrepresentation made in or in connection with a Finance Document, the New Bank shall be entitled to recover damages by reference to the loss incurred by it as a result of the breach or misrepresentation, irrespective of whether the Existing Bank (or any prior transferor) would have incurred a loss of that kind or amount.

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31.6 Maintenance of register of Banks

(a) During the Loan Period, the Agent shall maintain a register in which it shall record the name, Commitment, Participation and administrative details (including the lending office) from time to time of each Bank and the Agent shall make the register available for inspection by any Bank and the Borrowers during normal banking hours, subject to receiving at least three (3) Business Days prior notice.

(b) The entries on that register shall, in the absence of manifest error, be conclusive in determining the identities of the Banks, the amounts of their Commitments and Participations and the effective dates of Transfer Certificates.

31.7 Change of lending office

A Bank may change its lending office by giving notice to the Agent and the change shall become effective on the later of:

(a) the date on which the Agent receives the notice; and

(b) the date, if any, specified in the notice as the date on which the change will come into effect.

31.8 Additional Guarantors

(a) The Parent shall procure that each of its Subsidiaries which becomes a Group Contract Party after the Signing Date and each of its Subsidiaries which is or becomes a direct or indirect shareholder in such Subsidiaries, shall accede to this Agreement as an Additional Guarantor (unless such Subsidiary is already a Guarantor) by delivering to the Agent the relevant documents and evidence listed in Part II of Schedule 6 (Condition precedent documents for an Additional Guarantor) in a form and substance satisfactory to the Agent. Such documents shall be delivered to the Agent within the earlier of (i) the date occurring 20 Business Days after the entering into of the relevant Employment Contract and (ii) the date when charter hire or other remuneration starts to accrue under the relevant Employment Contract.

(b) The relevant Subsidiary will become an Additional Guarantor when the Agent notifies the Banks and the Borrowers that it has received all of the documents and evidence referred to in paragraph (a) above in form and substance satisfactory to it, or on such earlier date as the Agent (acting on the instructions of the Banks) notifies the Banks and the Borrowers that the relevant Subsidiary has become an Additional Guarantor.

(c) Delivery of an Accession Agreement, executed by the relevant Subsidiary and the Parent, to the Agent constitutes confirmation by that Subsidiary and the Parent that the representations and warranties set out in Clause 21 (Representations and warranties) are then correct.

31.9 Resignation of Borrowers

On the Restructuring Implementation Date, Ocean Rig ASA and Ocean Rig Norway AS shall automatically cease to be Borrowers under this Agreement, and Drill Rigs Holdings Inc. shall remain the sole Borrower under this Agreement and shall automatically assume the liabilities of Ocean Rig ASA and Ocean Rig Norway AS as Borrowers under this Agreement and the other Finance Documents.

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31.10 Resignation of Guarantors

On the Restructuring Implementation Date, Ocean Rig ASA, Ocean Rig Norway AS, Ocean Rig 1 AS, Ocean Rig 2 AS and Ocean Rig North Sea AS shall automatically cease to be Guarantors under this Agreement.

32 DISCLOSURE OF INFORMATION

32.1 Restrictions on use of information

Any information relating to the Obligors shall be used by the Finance Parties only for the purposes of this Agreement and shall be held in confidence and, subject to Clause 32.2 (Exceptions), not disclosed to any person without the prior written consent of a Borrower. Any such consent may be given by a Borrower subject to compliance with any stipulated conditions.

32.2 Exceptions

A Finance Party shall not require the consent of the Borrowers for the disclosure of any information required to be disclosed by law or for the disclosure of any information disclosed in the circumstances described below, namely:

(i) to a Subsidiary, its parent company or another Subsidiary of its parent company; or

(ii) to its professional advisers or any banking or other regulatory or examining authorities (whether governmental or otherwise) with whose instructions banks are accustomed to comply; or

(iii) to any person with whom it is proposing to enter, or has entered into, any kind of transfer, participation or other agreement in relation to the Finance Documents, but only after such Bank has received from such person an undertaking in writing as to confidentiality; or

(iv) which is or has become publicly available otherwise than in breach of this Clause 32.

33 DISTRIBUTION AND PRO RATA SHARING

33.1 Distribution

All moneys from time to time received or recovered by the Agent in connection with the realisation and enforcement of all or any part of the security granted by this Agreement and the Security Documents and/or any of the claims of the Finance Parties under the Finance Documents shall be held by the Agent on trust to apply them as soon as reasonably practicable and to the extent permitted by applicable law, in the following order of priority:

(i) firstly, in or towards payment of costs and expenses incurred by the Agent and the other Finance Parties in connection with such realisation and enforcement;

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(ii) secondly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents in relation to the Senior Facilities; and

(iii) thirdly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents in relation to the Junior Facilities.

33.2 Redistribution

If any amount owing by an Obligor under any of the Finance Documents to a Bank (the “recovering Bank”) is discharged by payment, set-off or any other manner except through the Agent in accordance with Clause 12 (Payments) (a “recovery”), then:

(i) the recovering Bank shall, within three (3) Business Days, notify details of the recovery to the Agent;

(ii) the Agent shall determine whether the recovery is in excess of the amount which the recovering Bank would have received had the recovery been received by the Agent and distributed in accordance with Clause 12 (Payments);

(iii) subject to Clause 33.4 (Exceptions), the recovering Bank shall within three (3) Business Days of demand by the Agent pay to the Agent an amount (the “redistribution”) equal to that excess;

(iv) the Agent shall treat the redistribution as if it were a payment by the relevant Obligor under Clause 12 (Payments) and shall pay the redistribution to the Banks (other than the recovering Bank) in accordance with Clause 12.7 (Partial payments); and

(v) after payment of the full redistribution, the recovering Bank will be subrogated to the portion of the claims paid under item (iv) above and the relevant Obligor will owe the recovering Bank a debt which is equal to the redistribution, immediately payable and of the type originally discharged.

33.3 Reversal of redistribution

If, following a recovery under Clause 33.2 (Redistribution):

(i) a recovering Bank becomes obliged to return a recovery, or an amount measured by reference to a recovery, to an Obligor; and

(ii) the recovering Bank has paid a redistribution in relation to that recovery,

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each Bank shall, within three (3) Business Days of demand by the recovering Bank through the Agent, reimburse the recovering Bank all or the appropriate portion of the redistribution paid to that Bank. Thereupon, the subrogation in Clause 33.2 (v) will operate in reverse to the extent of the reimbursement.

33.4 Exceptions

(a) A recovering Bank need not pay a redistribution to the extent that it would not, after the payment, have a valid claim against the relevant Obligor in the amount of the redistribution pursuant to Clause 33.2 (v).

(b) A Bank is not entitled to participate in a redistribution if the redistribution results from the proceeds of a judicial enforcement order obtained by the recovering Bank, and the other Bank had adequate notice of and opportunity to participate in the proceedings concerned or bring its own proceedings but did not do so.

34 SEVERABILITY

If a provision of any Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect the validity or enforceability in that jurisdiction of any other provision of that or any other Finance Document or the validity or enforceability in other jurisdictions of that or any other provision of that or any other Finance Document.

35 NOTICES

35.1 Giving of notices

Unless otherwise specifically provided, all notices or other communications under or in connection with any Finance Document shall be given or made in writing, by letter, telefax or SWIFT. Any such notice or communication addressed as provided in Clause 35.2 (Addresses for notices) shall be deemed to be given or made as follows:

(i) if by letter, when delivered at the address of the relevant Party;

(ii) if by telefax or SWIFT, when received.

However, a notice given in accordance with the above but received on a day which is not a business day in the place of receipt, or after 3:00 p.m. on such a business day, shall only be deemed to be given at 9:00 a.m. on the next business day in that place.

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35.2 Addresses for notices

(a) The address, the telefax number and the SWIFT code:

(i) of the Agent is:

DnB NOR Bank ASA

Stranden 21

N-0021 Oslo, Norway

Attn: Loan Administration

Telefax: +47 22 48 28 94

SWIFT: DNBANOKK

(ii) of the Borrowers is:

c/o Ocean Rig ASA

Vestre Svanholmen 6, Forus

N-4313 Sandnes, Norway

Attn: Finance Manager Vidar Høyvik

Telefax: +47 51 96 90 99

or such other address, telefax number or SWIFT code and/or marked for such other attention as one Party may notify to the other Parties by not less than five (5) Business Days’ prior notice.

(b) All notices from or to the Borrowers related to any Finance Document shall be sent through the Agent.

(c) The Agent shall, promptly upon request from any Party, give to that Party the address, telefax number or SWIFT code of any other Party applicable at the time for the purposes of this Clause.

36 GOVERNING LAW

This Agreement is governed by Norwegian law.

37 ENFORCEMENT

37.1 Jurisdiction

(a) The courts of Norway have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute”), and any Dispute shall be referred to Oslo district court as the court of first instance.

(b) This Clause 37.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.

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37.2 Service of process

Without prejudice to any other mode of service, each Obligor:-

(i) irrevocably appoints Ocean Rig AS of Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway, as its agent for service of process relating to any proceedings before the Norwegian courts in connection with any Finance Document;

(ii) agrees that failure by its process agent to notify it of the process will not invalidate the proceedings concerned; and

(iii) consents to the service of process to any such proceedings before the Norwegian courts by prepaid posting of a copy of the process to its address set out in this Agreement or any Accession Agreement to which it is a party, or its address at any later time notified to the Agent in writing.

* * * * *

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SCHEDULE 1

PART I

ORIGINAL GUARANTORS

Name	Reg, no.	Registered address
Ocean Rig ASA	NO 976 769 643	Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway
Ocean Rig Norway AS	NO 879 750 172	Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway
Drill Rigs Holdings Inc.	32563	Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960
Primelead Ltd.	212406	Tribune House, 10 Skopa Street, 1075 Nicosia, Cyprus
Ocean Rig 1 AS	NO 979 750 188	Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway
Ocean Rig 2 AS	NO 979 750 196	Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway
Ocean Rig North Sea AS	NO 992 250 941	Vestre Svanholmen nr. 6, Forus, N-4313 Sandnes, Norway
Ocean Rig 1 Inc.	32564	Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960
Ocean Rig 2 Inc.	32566	Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960
Ocean Rig Limited	SC343123	Union Plaza, 6th Floor, 1 Union Wynd, Aberdeen AB10 1DQ, Scotland
Ocean Rig Ghana Limited	CA-47,913	33 Labone Crescent, Osu, Accra, Ghana
Ocean Rig 1 Shareholders Inc.	32565	Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960
Ocean Rig 2 Shareholders Inc.	32567	Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960

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SCHEDULE 1

PART 2

BANKS AND COMMITMENTS

Banks	Term Loan Facility Commitments	Revolving Credit Facility A Commitments	Revolving Credit Facility B Commitments
DnB NOR Bank ASA Stranden 21 N-0021 Oslo, Norway	USD 138,666,666.67	USD 97,066,666.67	USD 146,050,239
HSH Nordbank AG Gerhart-Hauptmann-Platz 50 D-20095 Hamburg, Germany	USD 53,333,333.33	USD 37,333,333.33	USD 0
Nordea Bank Norge ASA Middelthunsgate 17 N-0368 Oslo, Norway	USD 53,333,333.33	USD 37,333,333.33	USD 0
Skandinaviska Enskilda Banken AB (publ) SE-106 40 Stockholm, Sweden	USD 53,333,333.33	USD 37,333,333.33	USD 0
DVB Bank SE Nordic Branch Strandgaten 18 N-5013 Bergen, Norway	USD 26,666,666.67	USD 18,666,666.67	USD 0
Deutsche Schiffsbank Aktiengesellschaft Domshof 17 D-28195 Bremen, Germany	USD 26,666,666.67	USD 18,666,666.67	USD 0
National Bank of Greece S.A. 86 Eolou ste. 102 32 Athens, Greece	USD 32,000,000	USD 22,400,000	USD 0
Natixis 68/76 Quai de la Rappée F-75012 Paris, France	USD 16,000,000	USD 11,200,000	USD 0
	USD 400,000,000	USD 280,000,000	USD 146,050,239

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Banks	Revolving Credit Facility C Commitments	Guarantee Facility Commitments
DnB NOR Bank ASA Stranden 21 N-0021 Oslo, Norway	USD 20,000,000	USD 20,000,000
	USD 20,000,000	USD 20,000,000

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SCHEDULE 2

FORM OF

COMPLIANCE CERTIFICATE

[Ocean Rig ASA/Drill Rigs Holdings Inc.]

(the “Parent”)

To be submitted quarterly

USD 1,040,000,000 AMENDED AND RESTATED GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT DATED 19 NOVEMBER 2009 (THE “AGREEMENT”)

We refer to Clause 22.3 (Compliance Certificates) of the Agreement. Terms used in this Compliance Certificate shall have the same meaning as in the Agreement.

The undersigned, being the chief financial officer of the Parent, hereby confirms that the Group is in compliance with financial covenants set out in Clause 23 (Financial covenants), that no Event of Default set out in Clause 24 (Event of Default) has occurred or is threatened, that Representations and Warranties set out in Clause 21 (Representations and warranties) are true in all respects and that each Unit is insured in accordance with the requirements set forth in Clause 22.6 (Insurances).

Enclosed you will find the relevant calculations demonstrating compliance with financial covenants, together with a schedule containing supporting calculations.

[{place}], [{date}]

[OCEAN RIG ASA/DRILL RIGS HOLDINGS INC.]

Chief financial officer

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FINANCIAL COVENANTS

[quarter] [year]

Minimum liquidity:

Free Cash	USD	________
Requirement: Not less than USD 30,000,000
Leverage ratio:
EBITDA (a)	USD
Gross Interest Bearing Debt	USD
- Cash and Cash Equivalents	USD
+ minimum liquidity requirement	USD	30,000,000
= Net Interest Bearing Debt (b)	USD
Ratio (b)/(a)		________
Requirement: Ratio not to exceed [    ]
Interest coverage ratio:
EBITDA (a)	USD
Gross Interest Costs	USD
- interest and other financing income	USD
= Net Interest Costs (c)	USD
Ratio (a)/(c)		________
Requirement: Ratio not to be less than [    ]
Current ratio:
Current Assets (d)	USD
Current Liabilities (e)	USD
Ratio (d)/(e)		________
Requirement: Ratio not to be less than 1.00

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Equity ratio:
Value Adjusted Equity (f)	USD
Value Adjusted Total Assets (g)	USD
Ratio (f)/(g)		________
Requirement: Ratio not to be less than 0.25
Capital Expenditure:
Capital Expenditure	USD	________
Requirement: Maximum USD 50,000,000

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FORM OF

COMPLIANCE CERTIFICATE

[Ocean Rig ASA/Drill Rigs Holdings Inc.]

(the “Parent”)

To be submitted semi-annually

USD 1,040,000,000 AMENDED AND RESTATED GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT DATED 19 NOVEMBER 2009 (THE “AGREEMENT”)

We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

We confirm that:

(a) the Market Value of “Eirik Raude” as per [—] is USD [—];

(b) the Market Value of “Leiv Eiriksson” as per [—] is USD [—];

(c) Minimum requirement under the Agreement

(pursuant to Clause 22.26 (Minimum Value)): USD [—]

(d) no Event of Default set out in Clause 24 (Event of Default) has occurred or is threatened and that Representations and Warranties set out in Clause 21 (Representations and warranties) are true in all respects.

[{place}], [{date}]

[OCEAN RIG ASA/DRILL RIGS HOLDINGS INC.]

Authorised signatory

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SCHEDULE 3

FORM OF

DRAWDOWN NOTICE

To: DNB NOR BANK ASA as Agent

Attn: Loan Administration

Telefax No. +47 22 48 28 94

From: [            ]

Date: [    ]  [                    ]  [        ]

USD 1,040,000,000 AMENDED AND RESTATED GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT DATED 19 NOVEMBER 2009 (THE “AGREEMENT”)

We refer to Clauses 4 and 5 of the Agreement. Terms used in this Drawdown Notice have the same meanings as in the Agreement.

1. We wish to draw the Facilities as follows:

(a) Facility:                         

(b) Amount:                         

(c) Drawdown Date:                         

(d) First Interest Period:                         

(e) Instructions for payment of the Loan:                         

2. Please find attached an updated calculation of the Borrowing Base Amount, as well as supporting calculations showing the basis for the calculation thereof.¹

3. We confirm that:

(a) that each Unit is insured in accordance with the requirements set forth in Clause 22.6 (Insurances);

(b) no event or circumstance has occurred and is continuing, which constitutes a Default under the Agreement; and

(c) the representations and warranties contained in Clause 21 (Representations and warranties) of the Agreement are true and correct at the date hereof as if made with respect to the facts and circumstances existing at this date.

¹ Applicable only to drawings under Revolving Credit Facility B

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By:

[                ]

Authorised Signatory

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SCHEDULE 4

FORM OF

RENEWAL NOTICE

To: DNB NOR BANK ASA as Agent

Attn: Loan Administration

Telefax No. +47 22 48 28 94

From: [            ]

Date: [    ] [                    ][        ]

USD 1,040,000,000 AMENDED AND RESTATED GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT DATED 19 NOVEMBER 2009 (THE “AGREEMENT”)

We refer to Clause 10.1 of the Agreement. Terms used in this Renewal Notice have the same meanings as in the Agreement.

We hereby:

1. request an Interest Period in respect of [identify Loan] of [    ] months from the next Interest Payment Date; and

2. confirm that:

(a) that each Unit is insured in accordance with the requirements set forth in Clause 22.6 (Insurances);

(b) no event or circumstance has occurred and is continuing, which constitutes a Default under the Agreement; and

(c) the representations and warranties contained in Clause 21 (Representations and warranties) of the Agreement are true and correct at the date hereof as if made with respect to the facts and circumstances existing at this date.

By:

[            ]

Authorised Signatory

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SCHEDULE 5

FORM OF

TRANSFER CERTIFICATE

The Transferor and the Transferee accept exclusive responsibility for ensuring that this Certificate and the transaction to which it relates comply with all legal and regulatory requirements applicable to them.

To: DnB NOR Bank ASA, the Agent, for itself and for and on behalf of the Borrowers and each Bank, as defined in the Loan Agreement referred to below, other than the Transferor.

1. This Certificate relates to an Amended and Restated Guarantee, Revolving Credit and Term Loan Facility Agreement (the “Loan Agreement”) dated 19 November 2009 and made between and amongst (1) Ocean Rig ASA, Ocean Rig Norway AS and Drill Rigs Holdings Inc. as borrowers (the “Borrowers”), (2) the companies listed in part 1 of schedule 1 thereto as original guarantors, (3) the banks and financial institutions named therein as banks, (4) DnB NOR Bank ASA as guarantee bank, (5) DnB NOR Bank ASA, HSH Nordbank AG, Nordea Bank Norge ASA and Skandinaviska Enskilda Banken AB (publ) as arrangers and (6) DnB NOR Bank ASA as agent, for guarantee, revolving credit and term loan facilities of up to USD 1,040,000,000.

2. In this Certificate, terms defined in the Loan Agreement shall, unless the contrary intention appears, have the same meanings and:

“Relevant Parties” means the Agent, the Borrowers and each Bank, other than the Transferor;

“Transferor” means [full name] of [lending office]; and

“Transferee” means [full name] of [lending office].

3. The effective date of this Certificate is [—] or (if later) the date on which it is signed by the Agent.

4. The Transferor assigns to the Transferee absolutely all rights and interests which the Transferor has as a Bank under or by virtue of the Loan Agreement and every other Finance Document in relation to [—] per cent. of its Participation, which percentage represents USD [—].

5. By virtue of this Transfer Certificate and Clause 31 of the Loan Agreement, the Transferor is discharged [entirely from its Commitment which amounts to USD [—]]/[from [—] per cent. of its Commitment, which percentage represents USD [—]] and the Transferee acquires a Commitment of USD [—].

6. The Transferee undertakes with the Transferor and each of the Relevant Parties that the Transferee will observe and perform all the obligations under the Finance Documents which Clause 31 of the Loan Agreement provides will become binding on it upon this Certificate taking effect.

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7. The Agent accepts, for itself and for and on behalf of every other Relevant Party, this Certificate as a Transfer Certificate taking effect in accordance with Clause 31 of the Loan Agreement.

8. The Transferor:

(a) warrants to the Transferee and each Relevant Party that:

(i) it has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which are required in connection with this transaction; and

(ii) this Certificate is valid and binding on it;

(b) warrants to the Transferee that it is absolutely entitled, free of encumbrances, to all the rights and interests covered by the assignment in paragraph 4; and

(c) undertakes with the Transferee that it will, at its own expense, execute any documents which the Transferee reasonably requests for perfecting in any relevant jurisdiction the Transferee’s title under this Certificate or for a similar purpose.

9. The Transferee:

(a) confirms that it has received a copy of each of the other Finance Documents;

(b) agrees that it will have no rights of recourse on any ground against either the Transferor or any other Finance Party in the event that:

(i) any Finance Document proves to be invalid or ineffective,

(ii) any Obligor fails to observe or perform its obligations, or to discharge its liabilities, under any of the Finance Documents;

(iii) it proves impossible to realise any asset covered by a Security Interest created by a Finance Document, or the proceeds of such assets are insufficient to discharge the liabilities of the Obligors under the Finance Documents;

(c) agrees that it will have no rights of recourse on any ground against any Finance Party in the event that this Certificate proves to be invalid or ineffective;

(d) warrants to the Transferor and each Relevant Party that:

(i) it has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which are required in connection with this transaction; and

(ii) this Certificate is valid and binding on it; and

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(e) confirms the accuracy of its administrative details set out below.

10. The Transferor and the Transferee each undertake with the Agent, fully to indemnify the Agent on demand in respect of any claim, proceeding, liability or expense (including all legal expenses) which it may incur in connection with this Certificate or any matter arising out of it, except such as are shown to have been mainly and directly caused by the gross and culpable negligence or dishonesty of the Agent’s own officers or employees.

[Name of Transferor]	[Name of Transferee]
By:	By:
Date:	Date:
Agent
Signed for itself and for and on behalf of itself As Agent and for every other Relevant Party
[Name of Agent]
By:
Date:

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Administrative Details of Transferee

Name of Transferee:

Lending Office:

Contact Person

(Loan Administration Department):

Telephone:

Telex:

Fax:

Contact Person

(Credit Administration Department):

Telephone:

Telex:

Fax:

Account for payments:

Note:     This Transfer Certificate alone may not be sufficient to transfer a proportionate share of the Transferor’s interest in the security constituted by the Finance Documents in the Transferor’s or Transferee’s jurisdiction. It is the responsibility of each Bank to ascertain whether any other documents are required for this purpose.

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SCHEDULE 6

PART I

CONDITIONS PRECEDENT DOCUMENTS

1. In respect of each of the Obligors, certified copies or originals of:

(a) its articles of association;

(b) a certificate of registration;

(c) a resolution of its board of directors authorising it to execute each of the Finance Documents to which it is a party;

(d) if not included in the resolutions referred to in paragraph (c) above, a power of attorney to its representatives for the execution and registration of each of the Finance Documents to which it is a party; and

(e) such other documents and evidence as the Agent (or any bank through the Agent) shall from time to time require, based on law and regulations applicable from time to time and the Banks’ own internal guidelines applicable from time to time to identify the Borrowers and the other Obligors, including the ultimate legal and beneficial owner or owners of such entities, and any other persons involved or affected by the transaction(s) contemplated by this Agreement.

2. Certified copies of all approvals, authorisations and consents required by any government or other authority in order for each of the Obligors to enter into and perform its obligations under each of the Transaction Documents to which it is a party.

3. In respect of the Security Documents:

(a) the First Security Agreements and the factoring agreements required to be executed thereunder (if applicable), duly executed by each Group Contract Party, and in respect of the factoring agreements, registered with the Norwegian Register of Moveable Property (Løsøreregisteret) with first priority;

(b) the notices of assignment and acknowledgements and consents required to be executed under the First Security Agreements, duly executed;

(c) the First Mortgages and the deeds of covenants collateral thereto, duly executed by each Owner;

(d) the First Equipment Charges duly executed by each Owner, and registered with the Norwegian Register of Moveable Property (Løsøreregisteret) with first priority;

(e) the First Share Pledge Agreement in respect of all shares in each Original Guarantor (other than the Parent and Ocean Rig USA LLC) duly executed;

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(f) the notices of pledge and acknowledgements required to be executed under the First Share Pledge Agreement, duly executed;

(g) the Second Security Agreements and the factoring agreements required to be executed thereunder (if applicable), duly executed by each Group Contract Party, and in respect of the factoring agreements, registered with the Norwegian Register of Moveable Property (Løsøreregisteret) with second priority;

(h) the notices of assignment and acknowledgements and consents required to be executed under the Second Security Agreements, duly executed;

(i) the Second Mortgages and the deeds of covenants collateral thereto, duly executed by each Owner;

(j) the Second Equipment Charges duly executed by each Owner, and registered with the Norwegian Register of Moveable Property (Løsøreregisteret) with second priority;

(k) the Second Share Pledge Agreement in respect of all shares in each Original Guarantor (other than the Parent and Ocean Rig USA LLC) duly executed;

(1) the notices of pledge and acknowledgements required to be executed under the Second Share Pledge Agreement, duly executed; and

(m) the register of shareholders of each Original Guarantor (other than the Parent and Ocean Rig USA LLC) evidencing that the pledges of the shares in each Original Guarantor (other than the Parent and Ocean Rig USA LLC) under the First Share Pledge Agreement and the Second Share Pledge Agreement have been duly noted.

4. In respect of each Unit:

(a) evidence (by way of a transcript of registry issued by the relevant ship registry) that the Unit is registered in the name of the relevant Owner, free from encumbrances other than the relevant First Mortgage and Second Mortgage;

(b) evidence that the Unit is classed with the highest class in accordance with Clause 22.9 (Class and international regulations), free of all overdue recommendations of the relevant classification society;

(c) in addition to the documentation referred to in paragraph (b) above, the following documentation in relation to compliance with Clause 22.9 (Class and international regulations):

(i) the ISM Code Document of Compliance;

(ii) each Unit’s ISM Code Safety Management Certificate; and

(iii) each Unit’s ISPS Code Ship Security Certificate.

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(d) insurance policies/cover notes documenting that the insurance cover has been taken out in respect of the Unit in accordance with Clause 22.6 (Insurances) and an insurance opinion in respect thereof from an insurance consultant appointed by the Agent;

(e) a subordination undertaking by the managers of the Units named as additional assured under any of the insurances taken out in respect of the Units; and

(f) copies of any managements agreements entered into in respect of the Unit.

5. A Compliance Certificate confirming that the Group is in compliance with the financial covenants set out in Clause 23 (Financial covenants).

6. Appraisal reports from two of the Approved Brokers evidencing compliance with Clause 22.26 (Minimum value).

7. Evidence that the Existing Credit Facilities have been cancelled and repaid in full or will be repaid in full by use of the proceeds from the first Revolving Loan under Revolving Credit Facility A and the first Term Loan.

8. The Margin and Fee Letter duly executed by the Borrowers, and evidence that all fees, costs and expenses under any of the Finance Documents then due from the Borrowers to any of the Finance Parties have been paid or will be paid on the due date thereof.

9. The Hedging Letter duly executed by the Parent.

10. Confirmation of acceptance from the Borrowers to the Agent’s letter in respect of effective annual interest.

11. Favourable legal opinions in form and substance satisfactory to the Agent from lawyers appointed by the Agent on matters concerning all relevant jurisdictions.

PART II

CONDITIONS PRECEDENT DOCUMENTS FOR AN ADDITIONAL GUARANTOR

1. Updated articles of association.

2. Updated certificate of registration;

3. A resolution of its Board of Directors’ meeting, authorising the execution of the Accession Agreement, the First Security Agreement and the Second Security Agreement and the transactions contemplated thereby.

4. A power of attorney to its representatives for the execution and registration (if applicable) of the Accession Agreement, the First Security Agreement and the Second Security Agreement.

5. All approvals, authorisations and consents (if any) required by any government or other authorities in order for the Additional Guarantor to enter into and perform its obligations under and in relation to the Accession Agreement, the First Security Agreement and the Second Security Agreement.

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6. The Accession Agreement duly executed by the Parent and the Additional Guarantor.

7. A copy of the Employment Contract to which the Additional Guarantor is a party.

8. The First Security Agreement and the factoring agreement required to be executed thereunder (if applicable), duly executed by the Additional Guarantor, and in respect of the factoring agreement, registered with the Norwegian Register of Moveable Property (Løsøreregisteref) with first priority.

9. The notices of assignment and acknowledgements and consents required to be executed under the First Security Agreements, duly executed.

10. The Second Security Agreement and the factoring agreement required to be executed thereunder (if applicable), duly executed by the Additional Guarantor, and in respect of the factoring agreement, registered with the Norwegian Register of Moveable Property (Løsøreregisteref) with second priority.

11. The notices of assignment and acknowledgements and consents required to be executed under the Second Security Agreements, duly executed.

12. The First Share Pledge Agreement in respect of all shares in the Additional Guarantor duly executed by its shareholder(s).

13. The notices of pledge and acknowledgements required to be executed under the First Share Pledge Agreement, duly executed.

14. The Second Share Pledge Agreement in respect of all shares in the Additional Guarantor duly executed by its shareholder(s).

15. The notices of pledge and acknowledgements required to be executed under the Second Share Pledge Agreement, duly executed.

16. The register of shareholders of the Additional Guarantor evidencing that the pledges of all of the shares in the Additional Guarantor under the First Share Pledge Agreement and the Second Share Pledge Agreement have been duly noted.

17. Favourable legal opinions in form and substance satisfactory to the Agent from lawyers appointed by the Agent on matters concerning all relevant jurisdictions.

18. Such other document, authorisation, information, opinion or assurance reasonably required by the Agent.

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APPENDIX 1

FORM OF

FIRST SECURITY AGREEMENT

between

[—]

(as Assignor)

and

DNB NOR BANK ASA

(as Agent)

As security for certain of the obligations of the Assignor

under a USD 1,040,000,000

Amended and Restated

Guarantee, Revolving Credit and Term Loan Facility Agreement

dated 19 November 2009

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INDEX

Clause		Page No.
1	Interpretation
2	Assignment
3	Pledge of Accounts
4	Perfection
5	Assignment
6	No further assignment or pledge
7	Additional and continuing security
8	Notices
9	Governing law – jurisdiction – service of process
Appendix
A	Form of Notice of Assignment
B	Form of Acknowledgement and Consent
C	Form of Notice of Assignment
D	Form of Acknowledgement

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THIS SECURITY AGREEMENT (the “Security Agreement”) is made on [—] between:

(1) [—], org, no. [—], [— ] as assignor (the “Assignor”); and

(2) DNB NOR BANK ASA, Stranden 21, N-0021 Oslo, Norway, as agent (the “Agent”).

WHEREAS:-

(A) This Security Agreement is entered into in connection with a certain amended and restwted guarantee, revolving credit and term loan facility agreement in respect of a guarantee, term loan and revolving credit facility made or to be made to Ocean Rig ASA, Ocean Rig Norway AS and Drill Rigs Holdings Inc. (the “Borrowers”) by the banks and other financial institutions (collectively the “Banks”) which are a party to the amended and restated guarantee, revolving credit and term loan facility agreement dated 19 November 2009 (the “Facility Agreement”), among, inter alia, the Borrowers, the companies listed in part 1 of schedule 1[, including the Assignor,] as original guarantors, the Banks, DnB NOR Bank ASA as guarantee bank, DnB NOR Bank ASA, HSH Nordbank AG, Nordea Bank Norge ASA and Skandinaviska Enskilda Banken AB (publ) as arrangers and the Agent as agent for the Finance Parties, for the financing, inter alia, of the [—] (the “Unit”);

(B) the Assignor has entered into a [—] dated [—] (the “Contract”) with [—] (the “Charterer”) for the [—] of the Unit to the Charterer;

(C) [[—](the “Guarantor”) has issued a guarantee dated [—](the “Guarantee”) in favour of the Assignor to secure the obligations of the Charterer under the Contract;] and

(D) it is a condition precedent to the utilisation of the Facilities that the Assignor enters into this Security Agreement and grants the securities set out herein in favour of the Agent (on behalf of the Finance Parties).

NOW IT IS HEREBY AGREED AS FOLLOWS:

1 INTERPRETATION

1.1 Definitions

In this Security Agreement including the preamble hereto (unless the context otherwise requires) any term or expression defined in the preamble shall have the meanings ascribed to it therein. In addition, terms and expressions not defined herein but whose meanings are defined in the Facility Agreement shall have the meanings set out therein.

1.2 Construction

(a) Clause headings are inserted for convenience of reference only and shall be ignored in the construction of this Security Agreement;

(b) references to Clauses or Appendices are to be construed as references to clauses or appendices of this Security Agreement unless otherwise stated;

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(c) references to (or to any specified provision of) this Security Agreement or any other document shall be construed as references to this Security Agreement, that provision or that document as from time to time amended; and

(d) words importing the plural shall include the singular and vice versa.

2 ASSIGNMENT

2.1 Assignment

In order to secure the payment and discharge of the obligations of the Assignor under the Finance Documents in relation to the Senior Facilities and the payment of all sums which from time to time may become due thereunder, and to secure the performance and observance of, and, the compliance with all covenants, terms and conditions therein (collectively the “Secured Obligations”), the Assignor hereby assigns to the Agent (on behalf of the Finance Parties) on first priority:

(i) all Earnings relating to the Unit; and

(ii) [all amounts due or to become due from any insurers as payment of losses or as return of premia or otherwise, under any insurance policies taken out on the Unit, and all other sums whatsoever due or to become due in respect of the Unit or the insurance thereof (collectively the “Insurances”)]².

2.2 Notice and acknowledgement

(a) The Assignor undertakes to give notice of this Assignment to the Charterer [and the Guarantor], and any other charterer of the Unit and any [other] guarantor of the Charterer and any other charterer of the Unit in the form set out in Appendix 1 (A) hereto, and procure that the Charterer, the Guarantor, such other charterer or such other guarantor acknowledges receipt of such notice in the form of Appendix 1 (B) hereto.

(b) [The Assignor undertakes to insure and keep the Unit fully insured in accordance with clause 22.6 (Insurances) of the Agreement, and

(i) in the event that the Insurances, or any one of them, have been taken out on conditions other than the Norwegian Marine Insurance Plan of 1996, version 2007 (as amended from time to time) (the “Plan”), to give all the relevant insurers notice in the form of Appendix 2 (A) hereto, and procure that the said insurers acknowledge receipt of such notice in the form of Appendix 2 (B) hereto or give such other form of notice and procure such other form of acknowledgement as the Agent shall reasonably require in writing to the Assignor; and

² Applicable only to the Owners

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(ii) in the event that the Insurances, or any one of them, have been taken out according to the Plan, to procure written statements from all the relevant insurers and/or approved brokers confirming that the Agent (on behalf of the Finance Parties) has been duly registered as co-insured first priority mortgagee on all such insurance policies taken out for the Unit and that notice according to the Plan has been duly received by all the relevant insurers.]¹

[2.3 Loss Payable

Claims related to the Insurances in respect of an actual or constructive or agreed or arranged or compromised total loss or requisition for title or other compulsory acquisition of the Unit and claims payable in respect of a major casualty, that is to say any casualty where the aggregate of the claims exceeds USD 3,000,000 (United States Dollars three million) shall to the extent such Insurances have not been taken out in accordance with the Plan, be payable to the Agent and be applied by the Agent in accordance with the terms of the Facility Agreement. Subject thereto all other claims, unless and until the insurers have received notice from the Agent of Default which is unremedied under the Facility Agreement in which event all claims shall be payable directly to the Agent up to their mortgage interest, shall be released directly for the repair, salvage or other charges involved or to the Assignor as reimbursement if it has fully repaired the damage and paid all of the salvage or other charges or otherwise in respect of Assignor’s actual costs in connection with repair, salvage and/ or other charges. Any amounts paid to the Assignor directly shall be paid to the Earnings Account.]¹

3 PLEDGE OF ACCOUNTS

3.1 Pledge

The Assignor has opened the following account with the Agent (the “Earnings Account”):

(a) account no. [—] in the name of the Assignor with the Agent, designated as the Assignor’s “Earnings Account”.

In order to secure payment and discharge of the Secured Obligations, the Assignor hereby pledges to the Agent (on behalf of the Finance Parties) on first priority, the Earnings Account and such other account or accounts as may be agreed from time to time between the Agent and the Assignor, and all claims payable to the Assignor in connection therewith.

The Agent confirms, in its capacity as account holder and debtor of the Earnings Account, that the pledge of the Earnings Account is duly noted in its records.

3.2 Set-off

The Agent shall in an Event of Default be entitled to seek enforcement directly in the Earnings Account according to the applicable laws, and the Agent may apply any credit balance standing on the Earnings Account against the Secured Obligations. The Earnings Account shall following an Event of Default which is unremedied, be blocked in favour of the Finance Parties, and any subsequent funds paid to the Earnings Account or paid directly to the Agent shall be applied towards the Secured Obligations, with any balance to be promptly released.

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4 PERFECTION

The Assignor agrees that at any time and from time to time upon the written request of the Agent, it will promptly and duly execute and deliver to the Agent any and all such further instruments and documents as the Agent on behalf of the Finance Parties may reasonably deem necessary or desirable to register this Security Agreement in any applicable registry, and to maintain and/or perfect the security created by this Security Agreement and the rights and powers herein granted. [This shall include a standard Factoring Agreement in the amount of USD 750,000,000 to be registered against the Assignor in the Norwegian Register of Moveable Property (Løsøreregisteref).]³

5 ASSIGNMENT

The Banks may assign or transfer their rights hereunder to any person to whom the rights and obligations of the Banks under the Facility Agreement are wholly or partiaily assigned in accordance with clause 31 (Changes to the Parties) of the Facility Agreement.

6 NO AMENDMENTS OR WAIVERS AND NO FURTHER ASSIGNMENT OR PLEDGE

(a) The Assignor shall not, without the prior written consent of the Agent, materially vary or amend, or terminate, or agree to any material variation or amendment of, or termination of, or waive any of its rights under, the Contract [or the Guarantee], any other Employment Contract entered into in respect of the Unit or any [other] guarantee or other surety granted in respect of the Contract or any such other Employment Contract, or enter into any further agreements related thereto, provided always that any variation or amendment which reduces or postpones the payment of any amount payable to the Assignor thereunder or reduces the contract period [or term of the Guarantee], shall, without limitation, be deemed to be material for the purpose of this Clause.

(b) The Assignor shall not, other than pursuant to the Second Security Agreement, unless prior written consent has been obtained from the Agent or otherwise permitted under the Facility Agreement, be entitled to further assign or pledge the Contract [or the Guarantee], any other Employment Contract entered into in respect of the Unit or any [other] guarantee or other surety granted in respect of the Contract or any other Employment Contract entered into in respect of the Unit, the Earnings[, the Insurances] and/or the Earnings Account.

7 ADDITIONAL AND CONTINUING SECURITY

The security contemplated by this Security Agreement shall be in addition to any other security granted in accordance with the Facility Agreement, and shall be a continuing security in full force and effect as long as any obligations are outstanding under the Finance Documents.

³ Applicable only to Obligors incorporated in Norway

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8 NOTICES

Any notice, demand or other communication to be made or delivered by any party pursuant to this Security Agreement shall (unless the addressee has by five Business Days’ written notice to that party specified another address) be made or delivered:-

(i) if to the Assignor:

c/o Ocean Rig ASA

Vestre Svanholen 6, Forus

N-4313 Sandnes

Norway

Attn.: Finance Manager Vidar Høyvik

Telefax: +47 51 96 90 99

(ii) if to the Agent:

DnB NOR Bank ASA

Stranden 21

N-0021 Oslo

Norway

Attn.: Loan Administration

Telefax: +47 22 48 28 94

9 GOVERNING LAW – JURISDICTION

(a) This Security Agreement shall be governed by and construed in accordance with the laws of Norway.

(b) The Assignor and the Agent accept Oslo district court as non-exclusive venue, but this choice shall not prevent the Agent (on behalf of the Finance Parties) to enforce this Security Agreement against the Assignor in any other applicable jurisdiction.

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The Assignor:

[—]

By:

Name:

Title:

The Agent:

DnB NOR Bank ASA

By:

Name:

Title:

121/132

Appendix 1 (A)

FORM OF

NOTICE OF ASSIGNMENT

(regarding Assignment of Earnings)

To: [—]

We refer to the [—] dated [—] (the [“Contract” / “Guarantee”]) entered into between yourselves as [—] and ourselves as owners in respect of the [—].

We hereby give you notice that:

(a) by a security agreement dated [—] (the “Security Agreement”) made between us and DnB NOR Bank ASA (the “Agent”) on behalf of certain other banks (the “Finance Parties”), we with full title have assigned absolutely and have agreed to assign absolutely to and in favour of the Agent (on behalf of the Finance Parties) all our right, title and interest, present and future, to all moneys due and payable by yourselves to ourselves under the [Contract / Guarantee];

(b) you are hereby irrevocably authorised and instructed to continue the performance of your obligations under the [Contract / Guarantee];

(c) until you receive other instructions from the Agent, all moneys due and payable by yourselves to ourselves shall be paid to our account no. [—] (Earnings Account) with the Agent. The Agent may, however, at any time instruct you to pay such moneys directly to the Agent to such account and with such bank as the Agent shall determine; and

(d) the Security Agreement includes provisions that no material amendments or variations shall be made to the [Contract / Guarantee] (nor shall you be released from your obligations thereunder) without the previous written consent of the Agent (on behalf of the Finance Parties), provided always that any variation or amendment which reduces or postpones the payment of any amount payable to ourselves thereunder or reduces the [contract period / term of the Guarantee], shall, without limitation, be deemed to be material for the purpose of this notice, and that you shall remain liable to perform all your obligations under the [Contract / Guarantee] and the Agent shall be under no obligations of any kind whatsoever in respect thereof.

The authority and instructions herein contained cannot be revoked or varied by us without the consent of the Agent. The provisions of this notice and its acknowledgement shall be governed by the laws of Norway.

Please confirm your acknowledgement of and consent to the terms of this notice by completing the Acknowledgement attached hereto. Please return the signed and dated Acknowledgement to the Assignee at the following address:

DnB NOR Bank ASA

Stranden 21

N-0021 Oslo

Norway

122/132

Telefax: +47 [        ]

Attn.: [        ]

Date: [—]

[—]

[—]

123/132

Appendix 1 (B)

To:

DnB NOR Bank ASA

Stranden 21

N-0021 Oslo

Norway

Telefax: +47 [        ]

Attn.: [        ]

From: [—]

FORM OF

ACKNOWLEDGMENT

(regarding Assignment of Earnings)

We, [—], with reference to the [—] dated [—] (the [“Contract” / Guarantee]) for the employment of the [—] (the “Unit”) between ourselves and [—] (the “Assignor”) do hereby acknowledge receipt of the attached Security Agreement dated [—] (the “Security Agreement”) between the Assignor and DnB NOR Bank ASA, as agent (the “Agent”) to certain other banks (the Finance Parties”) in respect of the Unit and the Notice of Assignment dated [—] (the “Notice”) from the Assignor to ourselves pursuant thereto.

We hereby agree and consent to the assignment by the Assignor to the Agent on behalf of the Finance Parties in accordance with the terms and conditions of the Security Agreement and the Notice.

We further agree and consent that no material amendments or variations shall be made to the [Contract / Guarantee] (nor shall we be released from our obligations thereunder) without the previous written consent of the Agent (on behalf of the Finance Parties), provided always that any variation or amendment which reduces or postpones the payment of any amount payable to the Assignor thereunder or reduces the [contract period / term of the Guarantee], shall, without limitation, be deemed to be material for the purpose of this acknowledgment, and that we shall remain liable to perform all our obligations under the [Contract / Guarantee] and that the Agent shall be under no obligation of any kind whatsoever in respect thereof.

We have noted and agree that until we receive other instructions from the Agent, all moneys due and payable by ourselves to the Assignor shall be paid to account no. [—] (Earnings Account) with the Agent.

Date: [—]

[—]

[—]

124/132

Appendix 2 (A)¹

FORM OF

NOTICE OF ASSIGNMENT

(regarding Assignment of Insurances)

To: [The Insurers]

[•], as owner (the “Owner”) of the [•] (the “Unit”), hereby gives notice that all payments due to us from you in respect of the Unit have been (by way of security) assigned on first priority to DnB NOR Bank ASA, Stranden 21, N-0021 Oslo, Norway, as Agent for certain other banks (the “Mortgagee”) according to a security agreement dated [•] (the “Security Agreement”) and that all payments due to us under our policy(-ies) with yourselves must be made in accordance with the instruction, from time to time, of the Mortgagee.

Please note that all claims related to the insurances in respect of an actual or constructive or agreed or arranged or compromised total loss or requisition for title or other compulsory acquisition of the Platform and claims payable in respect of a major casualty, that is to say any claim or the aggregate of the claim exceeds USD 3,000,000 (United States Dollars three million) shall be payable to the Mortgagee and be applied by the Mortgagee in accordance with the terms of the Agreement. Subject thereto all other claims, unless and until the insurers have received notice from the Mortgagee of a default under the Agreement in which event all claims shall be payable directly to the Mortgagee up to their mortgage interest, shall be released directly for the repair, salvage or other charges involved or to the Owner as reimbursement if it has fully repaired the damage and paid all of the salvage or other charges or otherwise in respect of the Owner’s actual costs in connection with repair/salvage and/or other charges. Any payments paid directly to the Owner directly shall be paid to account no. [•] with the Mortgagee.

Please note that this instruction may not be varied except with the prior written consent of the Mortgagee.

Please confirm your acknowledgement of the terms of this notice by completing the Acknowledgement attached hereto. Please return the signed and dated Acknowledgement to the Mortgagee at the address set out above.

Date: [•]

[•]

[•]

125/132

Appendix 2 (B)¹

FORM OF

ACKNOWLEDGEMENT

(regarding Assignment of Insurances)

From:                     

We hereby acknowledge receipt of a Notice of Assignment (the “Notice”) from [•] (the “Owners”) dated [•] related to the [•] (the “Unit”).

We have duly noted and do accept that our payments due to the Owner, under the insurance policy(-ies) taken out for the Unit as an Owners’ Entry pursuant to our rules, shall be made in accordance with the instructions set out in the Notice, including the Loss Payable clause therein, and payment due to the Mortgagee will be made to such account as from time to time instructed by DnB NOR Bank ASA, Stranden 21, N-0021 Oslo, Norway, which bank has been duly noted by ourselves as the first priority mortgagee of the said Unit on its own behalf and on behalf of certain other banks as agent therefore.

We undertake to give the Mortgagee written notice in case of any termination or cancellation of the insurances or any non-payment by the Owners of any insurance premium. We further undertake to give the Mortgagee at least 14 days from receipt of notice to remedy any such event.

Place and date: [•]

[INSURERS]

By:

Name:

Title:

126/132

APPENDIX 2

FORM OF ACCESSION AGREEMENT

To:	DnB NOR Bank ASA as Agent Attn: Loan Administration Telefax No. +47 22 48 28 94
From:	[Ocean Rig ASA/Drill Rigs Holdings Inc.] and [proposed Guarantor]
Date:	[day] [month] [year]

USD 1,040,000,000 AMENDED AND RESTATED GUARANTEE, REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT DATED 19 NOVEMBER 2009 (THE “AGREEMENT”)

We refer to the Agreement. This is an Accession Agreement.

[Name of company] of [address/registered office] agrees to become an Additional Guarantor and to be bound by the terms of the Agreement as a Guarantor.

This Accession Agreement is governed by Norwegian law.

[OCEAN RIG ASA/DRILL RIGS HOLDINGS INC.]

By:

Name:

Title:

[PROPOSED GUARANTOR]

By:

Name:

Title:

The Agent confirms that this accession takes effect on [            ].

DNB NOR BANK ASA

By:

Name:

Title:

127/132

SIGNATORIES TO THE RESTATEMENT AGREEMENT

The Borrowers:

Ocean Rig ASA
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Ocean Rig Norway AS
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Drill Rig Holdings Inc.
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

The Original Guarantors:

Ocean Rig ASA
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Ocean Rig Norway AS
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Drill Rigs Holdings Inc.
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Primelead Ltd.
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

128/132

Ocean Rig 1 AS
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Ocean Rig 2 AS
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Ocean Rig North Sea AS
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Ocean Rig 1 Inc.
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Ocean Rig 2 Inc.
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Ocean Rig Limited
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact
Witness:	/s/ Vidar Hoyrik
Name:	VIDAR HOYRIK
Address:	HOGNESG. 11B, 4041 HAFRSFJORD, NORWAY

Ocean Rig Ghana Limited
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

129/132

Ocean Rig 1 Shareholders Inc.
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

Ocean Rig 2 Shareholders Inc.
By:	/s/ Jan Rune Steinsland
Name:	Jan Rune Steinsland
Title:	Attorney-in-fact

The Original Banks:

DnB NOR Bank ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

HSH Nordbank AG
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

Nordea Bank Norge ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

Skandinaviska Enskilda Banken AB (publ)
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

DVB Bank SE Nordic Branch
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

Deutsche Schiffsbank Aktiengesellschaft
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

130/132

Natixis
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

National Bank of Greece S.A.
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

The Guarantee Bank:

DnB NOR Bank ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

The Arrangers:

DnB NOR Bank ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

HSH Nordbank AG
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

Nordea Bank Norge ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

Skandinaviska Enskilda banken AB (publ)
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

131/132

The Agent:

DnB NOR Bank ASA
By:	/s/ Johan Rasmussen
Name:	Johan Rasmussen
Title:	Attorney-in-fact

132/132

EX-4.65

Exhibit 4.65

DATED 10 SEPTEMBER 2007

DRILLSHIP HYDRA OWNERS INC.

DRILLSHIP PAROS OWNERS INC.

(as Borrowers)

- and -

DVB BANK AG

and others (as Lenders)

- and -

DVB BANK AG

and others

(as Arrangers)

- and -

DVB BANK AG

(as Underwriter and Agent)

- and -

DVB BANK AG

(as Security Agent)

US$230,000,000 SECURED

LOAN AGREEMENT

STEPHENSON HARWOOD

One St. Paul’s Churchyard

London EC4M 8SH

Tel: 020 7329 4422

Fax: 020 7329 7100

Ref: 21.028

CONTENTS

	Page
1       Definitions and interpretation	2
2       The Loan and its Purpose	17
3       Conditions of Utilisation	17
4       Advance	19
5       Repayment	19
6       Prepayment	19
7       Interest	21
8       Indemnities	24
9       Fees	28
10     Security and Application of Moneys	29
11     Representations	32
12     Undertakings and Covenants	35
13     Events of Default	45
14     Assignment and Sub-Participation	50
15     The Agent, the Security Agent and the Lenders	52
16     Set-Off	61
17     Payments	61
18     Notices	63
19     Partial Invalidity	64
20     Remedies and Waivers	65

21     Joint and several liability	65
22     Miscellaneous	66
23     Law and Jurisdiction	67
24     Confidentiality	68
SCHEDULE 1: The Lenders, the Arrangers and the Commitments	69
SCHEDULE 2: Conditions Precedent and Subsequent	70
Part I: Conditions precedent	70
Part II: Conditions subsequent	75
SCHEDULE 3: Calculation of Mandatory Cost	77
SCHEDULE 4: Form of Drawdown Notice	80
SCHEDULE 5: Form of Transfer Certificate	81
SCHEDULE 6: Form of Compliance Certificate	84

LOAN AGREEMENT

Dated: 10 SEPTEMBER 2007

BETWEEN:

(1) DRILLSHIP HYDRA OWNERS INC (“Drillship Hydra”) and DRILLSHIP PMOS OWNERS INC (“Drillship Paros”), each a company incorporated under the laws of the Marshall Islands with its registered office at c/o The Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960; and (together the “Borrowers” and each a “Borrower”) jointly ,and severally; and

(2) the banks listed in Schedule 1 (The Lenders, the Arrangers and the Commitments), each acting through its office at the address indicated against its name in Schedule 1 (together the “Lenders” and each a “Lender”); and

(3) the arrangers listed in Schedule 1 (The Lenders, the Arrangers and the Commitments), each acting through its office at the address indicated against its name in Schedule 1 (together the “Arrangers” and each an “Arranger”); and

(4) DVB BANK AG, acting as agent through its office at Friedrich-Ebcrt-Anlage 2-14, D60325, Frankfurt am Main, Federal Republic of Germany (in that capacity the “Agent”); and

(5) DVB BANK AG, acting as underwriter and security agent through its office at Friedrich-Ebert-Anlage 2-14, D60325, Frankfurt am Main, Federal Republic of Germany (in that capacity the “Security Agent”).

WHEREAS:

(A) Each Borrower intends to agree to purchase the relevant Vessel from the Builder on the terms of the relevant Building Contract.

(B) Each of the Lenders has agreed to advance to the Borrowers on a joint and several basis its Commitment (aggregating, with all the other Commitments, up to one hundred and fifteen million Dollars ($115,000,000) per Vessel and two hundred and thirty million Dollars ($230,000,000) in the aggregate for both Vessels) to assist the Borrowers to finance part of the First Instalment and Second Instalment of each Vessel.

IT IS AGREED as follows:

1 Definitions and Interpretation

1.1 In this Agreement:

“Account Holder” means any bank or financial institution acceptable to the Agent (in its sole discretion) which at any time, with the Agent’s prior written consent, holds the Earnings Accounts.

“Administration” has the meaning given to it in paragraph 1.1.3 of the ISM Code.

“Ambassador” means Ambassador Shipping Corporation, a company incorporated under the laws of the Republic of the Marshall Islands with its registered office at do The Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Annex VI” means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as modified in 1978 and 1997).

“Assignments” means the deeds of assignment of the Insurances, Earnings and Requisition Compensation referred to in Clause 10.1.6 (Security Documents) and “Assignment” means any one of them.

“Availability Termination Date” means (a) 31 December 2007 in the case of each First Instalment and (b) 30 June 7,008 in the case of each Second Instalment or, in each case, such later date as the Lenders may in their discretion agree.

“Break Costs” means all sums payable by the Borrowers from time to time under Clause 8.3 (Break Costs).

“Builder” means Samsung Heavy Industries Co., Ltd., a corporation incorporated and existing under the laws of the Republic of Korea and having its registered office at 34^th floor, Samsung life Insurance Seocho Tower 1321-15, Seocho-Gu, Seoul_; Korea 137-15.

2

“Building Contracts” means the contracts between the relevant Borrower and the Builder on the tens and subject to the conditions of which the Builder has agreed to construct the Vessels for, and deliver the Vessels to, the Borrowers respectively (as the same may be further supplemented and/or amended from time to time) and “Building Contract” means either one of them.

“Building Contract Assignments” means the deeds of assignment of the Building Contracts and the Refund Guarantees referred to in Clause 10.1.1 (Security Documents) and “Building Contract Assignment” means either one of them.

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business in New York. London, Frankfurt, Piraeus and Rotterdam.

“Cardiff” means Cardiff Marine Inc., a company incorporated under the laws of the Republic of Liberia, with its registered office at 80 Broad Street, Monrovia, Liberia.

“Collateral Loan Agreement A” means the loan agreement dated 27 April 2005 made between (a) Oil Transport, Innovative and Musk, as joint and several borrowers, (b) HSH and others, as lenders, (c) HSH, as agent, (d) HSH, as security agent and (e) HSH, as swap provider.

“Collateral Loan Agreement B” means the loan agreement dated 26 September 2006 made between (a) HSH and others, as lenders, (b) HSH, as agent, (c) HSH, as security agent, (d) HSH, as swap provider and (e) Ambassador, as borrower.

“Collateral Loan Agreements” means Collateral Loan Agreement A and Collateral Loan Agreement B.

“Collateral Loan A Indebtedness” means the Indebtedness as such term is defined in the Collateral Agreement A.

“Collateral Loan B Indebtedness” means the Indebtedness as such term is defined in the Collateral Agreement B.

“Collateral Loan Indebtedness” means the aggregate of Collateral Loan A Indebtedness and Collateral Loan B Indebtedness.

“Collateral Owners” means Innovative, Oil Transport and Ambassador, or any other corporation who shall own a Collateral Vessel that is a substitute for any of m.vs “POMPANO”, “FERNANDINA” and “VENTURA” respectively and “Collateral Owner” means any one of them.

3

“Collateral Vessels” means the dry bulk vessels each of approximately 174,220 dwt and built in 2006 with the names set out below registered under the respective flags set out below in the ownership of the respective Collateral Owners set out below:

Name	Flag	Collateral Owner
m.v. “POMPANO”	Maltese	Innovative
m.v. “FERNANDINA”	Maltese	Oil Transport
m.v. “VENTURA”	Maltese	Ambassador

or any other vessel nominated by the Borrowers prior to the first Drawdown Date and acceptable to the Lenders in their sole discretion and “Collateral Vessel” means any one of them.

“Commitment” means, in relation to a Lender, the amount of the Loan which that Lender agrees to advance to the Borrowers as its several liability as indicated against the name of that Lender in Schedule 1 (The Lenders, the Arrangers and the Commitments) and/or, where the context permits, the amount of the Loan advanced by that Lender and remaining outstanding and “Commitments” means more than one of them.

“Compliance Certificate” means a certificate substantially in the form set out in Schedule 6 (Form of Compliance Certificate).

“Contract Price”, in respect of each Vessel, means an aggregate amount of six hundred and one million Dollars ($601,000,000), as evidenced by the relevant Building Contract.

“Corporate Guarantees” means the guarantees and indemnities referred to in Clause 10.1.2 (Security Documents) and ‘Corporate Guarantee” means any one of them.

4

“Corporate Guarantors” means Cardiff, Grand, and the Collateral Owners and “Corporate Guarantor” means any one of them.

“Currency of Account” means, in relation to any payment to be made to a Finance Party under a Finance Document, the currency in which that payment is required to be made by the terms of that Finance Document.

“Deeds of Covenants” means the deeds of covenants referred to in Clause 10.1.5 (Security Documents).

“Deeds of Co-ordination” means the deeds referred to in Clause 10.1.8 (Security Documents).

“Default” means an Event of Default or any event or circumstance specified in Clause 13.1 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

“Delivery Date” means the date of actual delivery of a Vessel to the relevant Borrower by the Builder under the relevant Building Contract.

“DOC means, in relation to the ISM Company, a valid Document of Compliance issued for the ISM Company by the Administration under paragraph 13.2 of the ISM Code.

“Dollars” and “$” each means available and freely transferable and convertible funds in lawful currency of the United States of America.

“Drawdown Date” means the date on which the relevant Drawing is advanced under Clause 4 (Advance).

“Drawdown Notice” means a notice substantially in the form set out in Schedule 4 (Form of Drawdown Notice).

“Drawing” means, in respect of a Vessel, a part of the Vessel Loan for that Vessel advanced or to be advanced pursuant to a Drawdown Notice for the purposes of financing the First Instalment or the Second Instalment for that Vessel and “Drawings” means more than one of them.

5

“Dryships” means Dryships Inc., a company incorporated under the laws of the Marshall Islands with its registered office at The Trust Company Complex, Ajeltake Island, P.O. Box 1405, Majuro, Marshall Islands.

“Earnings” means all hires, freights, pool income and other sums payable to or for the account of a Collateral Owner in respect of a Collateral Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of a Collateral Vessel.

“Earnings Account” means the bank accounts to be opened in the names of each of the Collateral Owners with the Account Holder and designated “Oil Transport Investments Limited - Earnings Account”, “Innovative Investments Limited - Earnings Account”, and “Ambassador Shipping Corporation - Earnings Account”.

“Earnings Accounts Charges” means the deeds of pledge or charge referred to in Clause 10.1.7 (Security Documents) and “Earnings Account Charge” means any one of them.

“Encumbrance” means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“Equity Portion” means that amount of an Instalment payable or paid by the Borrowers to the Builders pursuant to the Building Contract and not forming part of the Loan.

“Event of Default” means any of the events or circumstances set out in Clause 13.1 (Events of Default).

“Facility Period” means the period beginning on the date of this Agreement and ending on the date when the whole of the Indebtedness has been paid in full and the Security Parties have ceased to be under any further actual or contingent liability to the Finance Parties under or in connection with the Finance Documents.

6

“Fee Letter” means any letter or letters dated on or about the date of this Agreement between the Agent and the Borrowers setting out any of the fees referred to in Clause 9 (Fees).

“Final Maturity Date” means, in respect of the Vessel with hull number HN 1837, the date falling on the earlier of (i) its Delivery Date, and (ii) 30 March 2011 and, in respect of the Vessel with hull number HN 1838, the date falling on the earlier of (i) its Delivery Date and (ii) 30 June 2011, or in each case in the Agent’s absolute discretion (following the Borrowers’ request) such later date as the Agent may agree.

“Finance Documents” means this Agreement, the Security Documents, any Fee Letter and any other document designated as such by the Agent and the Borrowers and “Finance Document” means any one of them.

“Finance Parties” means the Agent, the Arrangers, the Security Agent and the Lenders and “Finance Party” means any one of them.

“Financial Indebtedness” means any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of:

(a) moneys borrowed;

(b) any acceptance credit;

(c) any bond, note, debenture, loan stock or similar instrument;

(d) any finance or capital lease;

(e) receivables sold or discounted (other than on a non-recourse basis);

(f) deferred payments for assets or services;

(g) any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

(h) any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

7

(i) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

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

“Financial Statements” means the financial statements of the Group and the Corporate Guarantors provided to the Agent in accordance with Clause 12.1.1.

“First Instalment” means, in respect of each Vessel, the sum of ninety million one hundred and fifty thousand Dollars ($90,150,000) representing fifteen per cent (15%) of the portion of the Contract Price which shall become due and payable and be paid by the relevant Borrower within three (3) New York Business Days from signing of the relevant Building Contract.

“GAAP” means generally accepted accounting principles in the United States of America.

“Grand” means Grand Investment Holdings Limited of c/o The Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Group” means all companies whose vessels are managed by Cardiff and are beneficially owned by the Personal Guarantor, but excluding any companies whose vessels are owned by Dryships.

“HSH” means HSH Nordbank AG, a company incorporated under the laws of the Federal Republic of Germany acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany.

“IAPPC” means a valid international air pollution prevention certificate for a Collated Vessel issued under Annex VI.

“Indebtedness” means the aggregate from time to time of: the amount of the Loan outstanding; all accrued and unpaid interest on the Loan; and all other sums of any nature (together with all accrued and unpaid interest on any of those sums) payable to any of the Finance Parties under all or any of the Finance Documents.

8

“Innovative” means Innovative Investments Limited, a company incorporated under the laws of the Marshall Islands with its registered office at c/o The Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Instalment” means any one of the First Instalments and the Second Instalments.

“Insurances” means all policies and contracts of insurance (including all entries in protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of or in connection with a Collateral Vessel or her increased value or her Earnings and (where the context permits) all benefits under such contracts and policies, including all claims of any nature and returns of premium.

“Interest Payment Date” means each date for the payment of interest in accordance with Clause 7.8 (Accrual and payment of interest).

“Interest Period” means each period for the determination and payment of interest selected by the Borrowers or agreed or selected by the Agent pursuant to Clause 7 (Interest).

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

“ISM Company” means, at any given time, the company responsible for a Collateral Vessel’s compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.

“ISPS” Code” means the International Ship and Port Facility Security Code.

“ISPS Company” means, at any given time, the company responsible for a Collateral Vessel’s compliance with the ISPS Code.

“ISSC” means a valid international ship security certificate for a Collateral Vessel issued under the ISPS Code.

“Leverage” means the ratio of total debt divided by the charter free market value of total assets, as each such term is defined in the applicable Financial Statements for the Group or, as the context may require Grand.

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“LIBOR” means:

(a) in relation to any Interest Period of 1 month or other period of months not exceeding 12 months, the rate per annum equal to the offered quotation for deposits in Dollars for a period equal to the relevant Interest Period which appears on Telerate Page 3750 at or about 11.00 a.m. (London time) on the second Business Day prior to the commencement of that Interest Period (and, for the purposes of this Agreement. “Telerate Page 3750” means the display designated as “Page 3750” on the Telerate Service or such other page as may replace Page 3750 on that service for the purpose of displaying rates comparable to that rate or on such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying the British Bankers’ Association Interest Settlement Rates for Dollars); or

(b) in relation to an Interest Period of any other duration or if no rate is quoted on Telerate Page 3750, the rate per annum determined by the Lender to be the rate at which deposits in Dollars are offered to prime banks in the London Interbank market at or about 11.00 a.m. (London time) on the second Business Day prior to the commencement of that Interest Period for a period equal to that Interest Period and for delivery on the first Business Day of it.

“Loan” means the aggregate amount of the Vessel Loans advanced or to be advanced by the Lenders to the Borrowers under Clause 4 (Advance) or, where the context permits, the amount of the Vessel Loans advanced and for the time being outstanding.

“Majority Lenders” means a Lender or Lenders whose Commitments aggregate more than sixty six per cent (66%) of the aggregate of all the Commitments.

“Management Agreements” means the agreements for the commercial and technical management of the Collateral Vessels each made between the relevant Collateral Owner respectively and the Managers and “Management Agreement” means any one of them.

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“Managers” means Cardiff in its capacity as commercial and/or, as the context may require, technical managers of the Vessels and the Collateral Vessels or such other commercial and/or technical managers of the Vessels and/or the Collateral Vessels nominated by the Borrowers or the Collateral Owners as the Agent may approve.

“Mandatory Cost” means the percentage rate per annum calculated by the Agent in accordance with Schedule 3 (Calculation of Mandatory Cost).

“Margin” means one point two five per cent (1.25%) per annum.

“Maximum Drawing Amount”, in respect of a Drawing, means an amount not exceeding the lesser of (a) fifty seven million five hundred thousand Dollars ($57,500,000) and (b) sixty four per centum (64%) of the relevant Instalment to be financed by that Drawing.

“Maximum Loan Amount” means an amount not exceeding the lesser of (a) two hundred and thirty million Dollars ($230,000,000) and (b) sixty four per centum (64%) of the aggregate of the First Instalments and the Second Instalments for both Vessels.

“Maximum Vessel Loan Amount” means, for each Vessel, an amount not exceeding the lesser of (a) one hundred and fifteen million Dollars ($115,000,000) and (b) 64% of the aggregate of the First Instalment and the Second Instalment of that Vessel.

“Minimum Liquidity” means the sum of cash and cash equivalents excluding restricted cash. as each such term is defined in the applicable Financial Statements for the Group.

“Minimum Net Worth” means the charter free market value of total assets less total liabilities, as each such term is defined in the applicable Financial Statements for the Group.

“Mortgagees’ Insurances” means all policies and contracts of mortgagees’ interest insurance, and any other insurance from time to time taken out by the Agent in relation to a Vessel.

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“Mortgages” means the statutory mortgages referred to in Clause 10.1.5 (Security Documents) together with the Deeds of Covenants and “Mortgage” means any one of them.

“Musk” means Musk Shipholding Inc., a company incorporated under the laws of the Marshall Islands with its registered office at c/o The Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Net Fair Market Value” means, in respect of a Collateral Vessel, the value of such Collateral Vessel based on the average of two valuations for that Collateral Vessel prima facie determined by two reputable, independent and first class firms of shipbrokers appointed by and reporting to the Agent on the basis of a charter-free sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing seller and a willing buyer less the Collateral Loan Indebtedness applicable to that Collateral Vessel.

“Oil Transport” means Oil Transport Investments Limited, a company incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Liberia.

“Original Financial Statements” means the audited consolidated financial statements of the Group and the Corporate Guarantors for the financial year ended 31 December 2006.

“Personal Guarantee” means the guarantee and indemnity referred to in Clause 10.1.3 (Security Documents).

“Personal Guarantor” a person acceptable to the Lenders in their discretion and/or (where the context permits) any other person who shall at any time during the Facility Period give to the Lenders or to the Security Agent on their behalf a guarantee and/or indemnity for the repayment of all or part of the Indebtedness.

“Pledgors” means, in the case of Drillship Hydra, Drillship Hydra Shareholders Inc., and, in the case of Drillship Paros, Drillship Paros Shareholders Inc., each a company incorporated under the laws of the Marshall Islands with its registered office at c/o The Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

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“Proportionate Share” means, at any time, the proportion which a Lender’s Commitment (whether or not advanced) then bears to the aggregate Commitments of all the Lenders (whether or not advanced).

“Reference Banks” means, in relation to LIBOR, the principal London offices of such banks as the Majority Lenders, may agree from time to time and as may be appointed by the Agent in consultation with the Borrowers.

“Refund Guarantees” means refund guarantees issued or to be issued by the Refund Guarantor in favour of the Borrowers respectively pursuant to the Building Contracts in respect of each Instalment and “Refund Guarantee” means any one of them.

“Refund Guarantor” means a financial institution acceptable to the Lenders in their absolute discretion.

“Relevant Documents” means the Finance Documents, the Building Contracts, the Refund Guarantees, the Management Agreements, the Managers’ confirmation specified in Part I of Schedule 2 (Conditions precedent), and the Account Holder’s confirmation specified in Part I of Schedule 2 (Conditions precedent).

“Requisition Compensation” means all compensation or other money which may from time to time be payable to a Collateral Owner as a result of a Collateral Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).

“Screen Rate” means in relation to LIBOR, the British Bankers’ Association Interest Settlement Rate for the relevant currency and period displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or the service ceases to be available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Borrowers and the Lenders.

“Second Instalment” means, in respect of each Vessel, the sum of ninety million one hundred and fifty thousand Dollars ($90,150,000) representing fifteen percent (15%) of the portion of the Contract Price which shall become due and payable and be paid by the relevant Borrower six months after the signing of the relevant Building Contract, in accordance with the relevant Building Contract.

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“Security Documents” means the Building Contract Assignments, the Corporate Guarantees, the Personal Guarantee, the Share Pledges, the Mortgages, the Deeds of Covenants, the Assignments, the Earnings Accounts Charges, the Deeds of Coordination or (where the context permits) any one or mom of them and any other agreement or document which may at any time be executed by any person as security for the payment of all or any part of the Indebtedness and “Security Document” means any one of them.

“Security Parties” means the Borrowers, the Corporate Guarantors, the Personal Guarantor, the Pledgors and any other person who may at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness, and “Security Party” means any one of them.

“Shares Pledges” means the pledges of shares referred to in Clause 10.1.4 and “Shares Pledge” means either one of them (Security Documents).

“SMC” means a valid safety management certificate issued for a Collateral Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.

“SMS” means a safety management system for a Collateral Vessel developed and implemented in accordance with the ISM Code.

“Subsidiaries” means any company or entity directly or indirectly controlled by such person, and for this purpose “control” means either the ownership of more than fifty per cent (50%) of the voting share capital (or equivalent rights of ownership) of such company or entity or the power to direct its policies and management, whether by contract or otherwise and “Subsidiary” means any one of them

“Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“Total Loss” means:

(a) an actual, constructive, arranged, agreed or compromised total loss of a Collateral Vessel; or

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(b) the requisition For title or compulsory acquisition of a Collateral Vessel by any government or other competent authority (other than by way of requisition for hire); or

(c) the capture, seizure, arrest, detention or confiscation of a Collateral Vessel by any government or by persons acting or purporting to act on behalf of any government, unless that Collateral Vessel is released and returned to the possession of the relevant Collateral Owner within one month after the capture, seizure, arrest, detention or confiscation in question.

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

“Transfer Date”, in relation to any Transfer Certificate, the later of:

(a) the proposed Transfer Date specified in the Transfer Certificate; and

(b) the date on which the Agent executes the Transfer Certificate.

“Trust Property” means:

(a) all benefits derived by the Security Agent from Clause 10 (Security and Application of Moneys); and

(b) all benefits arising under (including, without limitation, all proceeds of the enforcement of) each of the Security Documents,

with the exception of any benefits arising solely for the benefit of the Security Agent.

“Vessel Loan” means the amount advanced or to be advanced to the Borrowers by the Lenders in up to two Drawings in respect of that Vessel or, where the context permits, the aggregate principal amount so advanced and for the time being outstanding and “Vessel Loans” means both of them.

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“Vessels” means the two drillship newbuildings, each with an operating capacity of a water depth of up to 10,000 ft and a drilling depth of up to 35,000 ft and everything now or in the future belonging to them on board and ashore, currently under construction by the Builder with the Builder’s hull numbers set out below for the respective Borrowers set out below on the terms of the Building Contracts and “Vessel” means either one of them:

	Hull Number	Borrower	Expected Delivery Date
	HN 1837	Drillship Hydra	December 2010
	HN 1838	Drillship Paros	March 2011

1.2 In this Agreement:

1.2.1 words denoting the plural number include the singular and vice versa;

1.2.2 words denoting persons include corporations, partnerships, associations of persons (whether incorporated or not) or governmental or quasi-governmental bodies or authorities and vice versa;

1.2.3 references to Recitals, Clauses and Schedules are references to recitals, clauses and schedules to or of this Agreement;

1.2.4 references to this Agreement include the Recitals and the Schedules;

1.2.5 the headings and contents page(s) are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Agreement;

1.2.6 references to any document (including, without limitation, to all or any of the Relevant Documents) are, unless the context otherwise requires, references to that document as amended, supplemented, novated or replaced from time to time;

1.2.7 references to statutes or provisions of statutes are references to those statutes, or those provisions, as from time to time amended, replaced or re-enacted;

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1.2.8 references to any Finance Party include its successors, transferees and assignees; and

1.2.9 a time of day (unless otherwise specified) is a reference to London time.

1.3 Offer letter

This Agreement supersedes the terms and conditions contained in any correspondence relating to the subject matter of this Agreement exchanged between any Finance Party and the Borrowers or their representatives prior to the date of this Agreement.

2 The Loan and its Purpose

2.1 Amount Subject to the terms of this Agreement, the Lenders agree to make available to the Borrowers a term loan comprising both the Vessel Loans and not exceeding in aggregate the Maximum Loan Amount.

2.2 Finance Parties’ obligations The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other party to the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

2.3 Purpose The Borrowers shall apply the Loan for the purposes referred to in Recital (B).

2.4 Monitoring No Finance Party is bound to monitor or verify the application of any amount borrowed under this Agreement.

3 Conditions of Utilisation

3.1 Conditions precedent The Borrowers are not entitled to have any Drawing advanced unless the Agent has received all of the documents and other evidence listed in Part I of Schedule 2 (Conditions precedent), save that references in Section 2 of that Part I to “the Vessel” or to any person or document relating to a Vessel shall be deemed to relate solely to the Vessel specified in the relevant Drawdown Notice or to any person or document relating to that Vessel respectively.

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3.2 Further conditions precedent The Lenders will only be obliged to advance a Drawing if on the date of the Drawdown Notice and on the proposed Drawdown Date:

3.2.1  no Default is continuing or would result from the advance of that Drawing; and

3.2.2  the representations made by the Borrowers under Clause 11 (Representations) are true in all material respects.

3.3 Drawing limit The Lenders will only be obliged to advance a Drawing if:

3.3.1  that Drawing will not increase the Loan to a sum in excess of the Maximum Loan Amount:

3.3.2  that Drawing will not exceed the Maximum Drawing Amount or the Maximum Vessel Loan Amount;

3.3.3  the proposed Drawdown Date of that Drawing coincides with the due date for payment by the relevant Borrower of the relevant Instalment.

3.4 Conditions subsequent The Borrowers undertake to deliver or to cause to be delivered to the Agent on, or as soon as practicable after, the relevant Drawdown Date the additional documents and other evidence listed in Part II of Schedule 2 (Conditions subsequent), save that references in that Part II to “the Vessel” or to any person or document relating to a Vessel shall be deemed to relate solely to the Vessel specified in the relevant Drawdown Notice or to any person or document relating to that Vessel respectively.

3.5 No Waiver If the Lenders in their sole discretion agree to advance a Drawing to the Borrowers before all of the documents and evidence required by Clause 3.1 (Conditions precedent) have been delivered to or to the order of the Agent, the Borrowers undertake to deliver all outstanding documents and evidence to or to the order of the Agent no later than thirty (30) days after the relevant Drawdown Date or such other date specified by the Agent.

The advance of a Drawing under this Clause 3.5 shall not be taken as a waiver of the Lenders’ right to require production of all the documents and evidence required by Clause 3.1 (Conditions precedent).

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3.6 Form and content All documents and evidence delivered to the Agent under this Clause 3 shall:

3.6.1 be in form and substance acceptable to the Agent; and

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

4 Advance

4.1 Drawdown Request The Borrowers may request a Drawing to be advanced in one amount on any Business Day prior to the Availability Termination Date by delivering to the Agent a duly completed Drawdown Notice not more than ten (10) and not fewer than three (3) Business Days before the proposed Drawdown Date.

4.2 Lenders’ participation Subject to Clauses 2 (The Loan and its Purpose) and 3 (Conditions of Utilisation), the Agent shall promptly notify each Lender of the receipt of a Drawdown Notice, following which each Lender shall advance its Proportionate Share of the relevant Drawing to the Borrowers through the Agent on the relevant Drawdown Date.

5 Repayment

5.1 Repayment of each Vessel Loan The Borrowers agree to repay each Vessel Loan to the Agent for the account of the Lenders in one amount on the earlier of (i) the Delivery Date in respect of that Vessel and (ii) the Final Maturity Date applicable to that Vessel.

5.2 Reborrowing The Borrowers may not reborrow any part of a Vessel Loan which is repaid or prepaid.

6 Prepayment

6.1 Illegality If it becomes unlawful in my jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain the Loan:

6.1.1 that Lender shall promptly notify the Agent of that event;

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6.1.2 upon the Agent notifying the Borrowers, the Commitment of that Lender (to the extent not already advanced) will be immediately cancelled; and

6.1.3 the Borrowers shall repay that Lender’s Commitment in respect of each Vessel Loan (to the extent already advanced) on the last day of its current Interest Period or, if earlier, the date specified by that Lender in the notice delivered to the Agent and notified by the Agent to the Borrowers (being no earlier than the last day of any applicable grace period permitted by law) and the amount in respect of that Vessel Loan to be repaid in accordance with Clause 5.1 shall be reduced accordingly.

6.2 Voluntary prepayment of a Vessel Loan The Borrowers may prepay the whole or any part of any Vessel Loan (but, if in part, being an amount that reduces that Vessel Loan by a minimum amount of US$500,000) subject to giving the Agent not less than 5 Business Days’ (or such shorter period as the Majority Lenders may agree) prior written notice.

6.3 Mandatory prepayment on sale or Total Loss If a Collateral Vessel is sold by a Collateral Owner or becomes a Total Loss, the Borrowers shall, simultaneously with any such sale or within one hundred and twenty (120) days after any such Total Loss, apply all sale or insurance proceeds, following any prepayment under the Collateral Loan Agreements, directly forthwith in prepayment of each Vessel Loan then outstanding, each such prepayment amounting to an amount in aggregate not less than the higher of (a) the Net Fair Market Value of that Collateral Vessel on the date of such sale or Total Loss, less any Collateral Loan Indebtedness applicable to that Vessel and (b) the outstanding Indebtedness.

6.4 Mandatory prepayment on refinancing of a Vessel If the Borrowers intend to refinance a Vessel Loan, or intend to seek additional financing in respect of a Vessel with a financial institution other than the Agent the Borrowers shall, prior to, or simultaneously with the first drawdown of such refinancing or additional financing, prepay the Indebtedness applicable to that Vessel Loan PROVIDED THAT, the Agent shall have a right of first refusal to make such financing or refinancing with the relevant Borrower.

6.5 Restrictions Any notice of prepayment given under this Clause 6 shall be irrevocable and, unless a contrary indication appears in this Agreement shall specify the date or dates upon which the relevant prepayment is to be made and the amount of that prepayment.

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Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

If the Agent receives a notice under this Clause 6 it shall promptly forward a copy of that notice to the Borrowers or the Lenders, as appropriate.

7 Interest

7.1 Interest Periods The period during which each Vessel Loan shall be outstanding under this Agreement shall be divided into consecutive Interest Periods of one, two three, six, nine or twelve months’ duration, as selected by the Borrowers by written notice to the Agent not later than 11.00 a.m. on the third Business Day before the beginning of the Interest Period in question, or such other duration as may be agreed by the Agent (acting on the instructions of all the Lenders).

7.2 Beginning and end of Interest Periods Each Interest Period shall start on the first Drawdown Date of the relevant Vessel Loan or (if a Drawing of that Vessel Loan is already advanced) on the last day of the preceding Interest Period and end on the date which numerically corresponds to the first Drawdown Date of that Vessel Loan or the last day of the preceding Interest Period in the relevant calendar month except that, if there is no numerically corresponding date in that calendar month, the Interest Period shall end on the last Business Day in that month.

7.3 Second and subsequent Drawings If the second or any subsequent Drawing of a Vessel Loan is made otherwise than on the first day of an Interest Period for the balance of that Vessel Loan, there shall be a separate initial Interest Period for that Drawing commencing on its Drawdown Date and expiring on the final date of the then current Interest Period for the balance of that Vessel Loan.

7.4 Fixed interest rate option The Borrowers may, subject to giving the Agent not fewer than five (5) Business Days’ prior Written notice expiring on a Business Day of their intention to do so, and subject to availability and the Agent’s and the Lenders’ prior written approval, request that the interest rate of all or a substantial part of the Loan be fixed for a period not exceeding twelve (12) months.

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7.5 Non-Business Days If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

7.6 Interest rate During each Interest Period interest shall accrue on each Vessel Loan at the rate determined by the Agent to be the aggregate of either (a) the Margin, and (b) LIBOR and (c) the Mandatory Cost, or, if the fixed interest rate option has been selected pursuant to Clause 7.4, (a) the Margin, and (b) the level of the highest cost of funding to the Lenders for the fixed interest period in question and (c) the Mandatory Cost, if any.

7.7 Failure to select Interest Period If the Borrowers at any time fail to select or agree an Interest Period in accordance with Clause 7.1 (Interest Periods), or Clause 7.4 (Fixed Interest Rate Option) the interest rate applicable shall be the rate determined by the Agent in accordance with Clause 7.6 (Interest rate) for an Interest Period of such duration (not exceeding three months) as the Agent may select.

7.8 Accrual and payment of interest Interest shall accrue from day to day, shall be calculated on the basis of a 360 day year and the actual number of days elapsed (or, in any circumstance where market practice differs, in accordance with the prevailing market practice) and shall be paid by the Borrowers to the Agent for the account of the Lenders on the last day of each Interest Period and, if the Interest Period is longer than three months, on the dates falling at three monthly intervals after the first day of that Interest Period.

7.9 Default interest If a Borrower fails to pay any mount 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 the aggregate of (a) two per cent (2%) per annum, (b) the Margin and (c) LIBOR for such period, in the currency of the overdue amount for successive Interest Periods, each selected by the Agent (acting reasonably). Any interest accruing under this Clause 7.9 shall be immediately payable by that Borrower on demand by the Agent. If unpaid, any such interest 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.

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7.10 Changes in market circumstances If at any time the Agent determines (which determination shall be final and conclusive and binding on the Borrowers) that, by reason of changes affecting the London interbank market, adequate and fair means do not exist for determining the rate of interest on a Vessel Loan for any Interest Period:

7.10.1 the Agent shall give notice to the Lenders and the Borrowers of the occurrence of such event; and

7.10.2 the rate of interest on each Lender’s Commitment in that Vessel Loan for that Interest Period shall be the rate per annum which is the sum of:

(a) the Margin; and

(b) the rate notified to the Agent by that Lender as soon as practicable, and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its Commitment in that Vessel Loan from whatever source it may reasonably select;

(c) the Mandatory Cost, if any, applicable to that Lender’s Commitment in that Vessel Loan,

PROVIDED THAT if the resulting rate of interest on any Commitment in that Vessel Loan is not acceptable to the Borrowers:

7.10.3 the Agent on behalf of the Lenders will negotiate with the Borrowers in good faith with a view to modifying this Agreement to provide a substitute basis for determining the rate of interest which is financially a substantial equivalent to the basis provided for in this Agreement;

7.10.4 any substitute basis agreed pursuant to Clause 7.10.3 shall be binding on all the parties to this Agreement and shall apply to all Commitments in that Vessel Loan; and

7.10.5 if, within thirty (30) days of the giving of the notice referred to in Clause 7.10.1, the Borrowers and the Agent fail to agree in writing on a substitute basis for determining the rate of interest, the Borrowers will immediately prepay the relevant Commitment in that Vessel Loan, together with any Break Costs, and the remaining amount in respect of that Vessel Loan shall be reduced accordingly.

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7.11 Determinations conclusive The Agent shall promptly notify the Borrowers of the determination of a rate of interest under this Clause 7 and each such determination shall (save in the case of manifest error) be final and conclusive.

8 Indemnities

8.1 Transaction expenses The Borrowers will, within fourteen (14) days of the Agent’s written demand, pay the Agent (for the account of the Finance Parties) the amount of all costs and expenses (including legal fees and Value Added Tax or any similar or replacement tar if applicable) reasonably incurred by the Finance Parties or any of them in connection with:

8.1.1 the negotiation, preparation, printing, execution and registration of the Finance Documents (whether or not any Finance Document is actually executed or registered and whether or not all or any part of the Loan is advanced);

8.1.2 any amendment, addendum or supplement to any Finance Document (whether or not completed); and

8.1.3 any other document which may at any time be required by a Finance Party to give effect to any Finance Document or which a Finance Party is entitled to call for or obtain under any Finance Document.

8.2 Funding costs The Borrowers shall indemnify each Finance Party, by payment to the Agent (for the account of that Finance Party) on the Agent’s written demand, against all losses and costs incurred or sustained by that Finance Party if, for any reason, a Drawing is not advanced to the Borrowers after the relevant Drawdown Notice has been given to the Agent, or is advanced on a date other than that requested in the Drawdown Notice (unless, in either case, as a result of any default by a Finance Party).

8.3 Break Costs The Borrowers shall indemnify each Finance Party, by payment to the Agent (for the account of that Finance Party) on the Agent’s written demand, against all costs, losses, premiums or penalties incurred by that Finance Party as a

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result of its receiving any prepayment of all or any part of the Loan (whether pursuant to Clause 6 (Prepayment) or otherwise) on a day other than the last day of an Interest Period in respect of the same, or any other payment under or in relation to the Finance Documents on a day other than the due date for payment of the sum in question, including (without limitation) any losses or costs incurred in liquidating or re-employing deposits from third parties acquired to effect or maintain all or any part of the Loan, and any liabilities, expenses or losses incurred by that Finance Party in terminating or reversing, or otherwise in connection with, any interest rate and/or currency swap, transaction or arrangement entered into by that Finance Party to hedge any exposure arising under this Agreement, or in terminating or reversing, or otherwise in connection with, any open position arising under this Agreement.

8.4 Currency indemnity In the event of a Finance Party receiving or recovering any amount payable under a Finance Document in a currency other than the Currency of Account, and if the amount received or recovered is insufficient when converted into the Currency of Account at the date of receipt to satisfy in full the amount due, the Borrowers shall, on the Agent’s written demand, pay to the Agent for the account of the relevant Finance Party such further amount in the Currency of Account as is sufficient to satisfy in full the amount due and that further amount shall be due to the Agent on behalf of the relevant Finance Party as a separate debt under this Agreement.

8.5 Increased costs (subject to Clause 8.6 (Exceptions to increased costs)) If, by reason of the introduction of any law, or any change in any law, or any change in the interpretation or administration of any law, or compliance with any request or requirement from any central bank or any fiscal, monetary or other authority occurring after the date of this Agreement:

8.5.1 a Finance Party (or the holding company of a Finance Party) shall be subject to any Tax with respect to payment of all or any part of the Indebtedness (other than Tax on overall net income); or

8.5.2 the basis of Taxation of payments to a Finance Party in respect of all or any part of the Indebtedness shall be changed; or

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8.5.3 any reserve requirements shall be imposed, modified or deemed applicable against assets held by or deposits in or for the account of or loans by any branch of a Finance Party; or

8.5.4 the manner in which a Finance Party allocates capital resources to its obligations under this Agreement or any ratio (whether cash, capital adequacy, liquidity or otherwise) which a Finance Party is required or requested to maintain shall be affected; or

8.5.5 there is imposed on a Finance Party (or on the holding company of a Finance Party) any other condition in relation to the Indebtedness or the Finance Documents;

and the result of any of the above shall be to increase the cost to a Finance Party (or to the holding company of a Finance Party) of that Finance Party making or maintaining its Commitment, or to cause a Finance Party to suffer (in its opinion) a material reduction in the rate of return on its overall capital below the level which it reasonably anticipated at the date of this Agreement and which it would have been able to achieve but for its entering into this Agreement and/or performing its obligations under this Agreement, then, subject to Clause 8.6 (Exceptions to increased costs), the Finance Party affected shall notify the Agent and the Borrowers shall from time to time pay to the Agent on demand for the account of that Finance Party the amount which shall compensate that Finance Party (or the relevant holding company) for such additional cost or reduced return. A certificate signed by an authorised signatory of that Finance Party setting out the amount of that payment and the basis of its calculation shall be submitted to the Borrowers and shall be conclusive evidence of such amount save for manifest error or on any question of law.

8.6 Exceptions to increased costs Clause 8.5 (Increased costs) does not apply to the extent any additional cost or reduced return referred to in that Clause is:

8.6.1 compensated for by a payment made under Clause 8.10 (Taxes); or

8.6.2 compensated for by a payment made under Clause 17.3 (Grossing-up);

8.6.3 compensated for by the payment of the Mandatory Cost; or

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8.11 Basel II In relation to the implementation or application of, or compliance with, the “International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (“Basel II”) or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, a Finance Party or any holding company of a Finance Party), if this gives rise to a change in the Risk Asset Weighting of a Finance Party’s actual or notional rate of return from the Loan then the amount of any reduction of the Finance Party’s rate of return from the Loan will be payable by the Borrower. The Agent shall consult with the Borrower in relation to the effect of the implementation of Basel II.

9 Fees

9.1 Commitment fee The Borrowers shall pay to the Agent (for the account of the Lenders in proportion to their Commitments) a fee computed at the rate of zero point two five (0.25%) per cent per annum calculated on the undrawn amount of the Loan payable quarterly in arrears from the date of this Agreement until the earlier of the Drawdown Date in respect of the final Drawing to occur and the Availability Termination Date, both dates inclusive. The accrued commitment fee is payable on the last day of each successive period of three months from the date of this Agreement and on the Availability Termination Date.

9.2 Arrangement fee The Borrowers shall pay to the Agent for the account of the Arrangers an arrangement fee in the amount and at the times agreed in a fee Letter.

9.3 Agency fee The Borrowers shall pay to the Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter.

9.4 Underwriting and structuring fee The Borrowers shall pay to the Agent (for its own account) an underwriting and structuring fee in the amount and at the times agreed in a Fee Letter.

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10 Security and Application of Moneys

10.1 Security Documents As security for the payment of the Indebtedness, the Borrowers shall execute and deliver to the Security Agent or cause to be executed and delivered to the Security Agent the following documents in such forms and containing such terms and conditions as the Security Agent shall require:

10.1.1 first priority deeds of assignment of the Building Contracts and the Refund Guarantees;

10.1.2 guarantees and indemnities from each of the Corporate Guarantors;

10.1.3 the guarantee and indemnity from the Personal Guarantor;

10.1.4 first priority pledges from the Pledgors of all the issued shares of each of the Borrowers;

10.1.5 second priority statutory mortgages over the Collateral Vessels together with collateral deeds of covenants;

10.1.6 second priority deeds of assignment of the Insurances, Earnings and Requisition Compensation of the Collateral Vessels;

10.1.7 second priority deeds of pledge or charge over the Earnings Accounts and all amounts from time to time standing to the credit of the Earnings Accounts; and

10.1.8 deeds of co-ordination in respect of the Collateral Vessels.

10.2 Earnings Accounts The Borrowers shall procure that the Collateral Owners shall maintain the Earnings Accounts with the Account Holder for the duration of the Facility Period free of Encumbrances and rights of set off other than those created by or under the Finance Documents and the applicable Collateral Loan Agreement.

10.3 Earnings The Borrowers shall procure that the Collateral Owners shall procure that all Earnings and any Requisition Compensation are credited to the relevant Earnings Account.

10.4 Borrowers’ obligations not affected If for any reason the amount standing to the credit of the Earnings Account is insufficient to repay any Vessel Loan or to make any payment of interest when due, the Borrowers’ obligation to repay that Vessel Loan or to make that payment of interest shall not be affected.

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10.5 Restriction on withdrawal During the Facility Period no sum may be withdrawn from the Earnings Accounts (except in accordance with the relevant Collateral Loan Agreement and this Clause 10) without the prior written consent of the Agent.

10.6 Access to information The Borrowers shall procure that the Collateral Owners agree that the Agent (and its nominees) may from time to time during the Facility Period review the records held by the Account Holder (whether in written or electronic form) in relation to the Earnings Accounts, and irrevocably waive any right of confidentiality which may exist in relation to those records.

10.7 Statements Without prejudice to the rights of the Agent under Clause 10.6 (Access to information), the Borrowers shall procure that the Collateral Owners will procure that the Account Holder provides to the Agent, no less frequently than each calendar month during the Facility Period, written statements of account showing all entries made to the credit and debit of each of the Earnings Accounts during the immediately preceding calendar month.

10.8 Application after acceleration From and after the giving of notice to the Borrowers by the Agent under Clause 13.2 (Acceleration), the Borrowers shall procure that the Collateral Owners shall procure that all sums from time to time standing to the credit of either of the Earnings Accounts are immediately transferred to the Agent for application in accordance with Clause 10.9 (General application of moneys) and the Borrowers shall procure that the Collateral Owners irrevocably authorise the Agent to instruct the Account Holder to make those transfers.

10.9 General application of moneys Each Borrower irrevocably authorises, and shall procure that each Collateral Owner irrevocably authorises, the Agent and the Security Agent, subject to Clause 10.10 (Application of moneys on sale or Total Loss), to apply all sums which either of them may receive:

10.9.1 pursuant to a sale or other disposition of its Vessel or a Collateral Vessel or any right, title or interest in its Vessel or a Collateral Vessel; or

10.9.2 by way of payment of any sum in respect of the Insurances, Earnings or Requisition Compensation of its Vessel or a Collateral Vessel; or

10.9.3 by way of transfer of any sum from either of the Earnings Accounts; or

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10.9.4 otherwise arising under or in connection with any Security Document,

in or towards satisfaction, or by way of retention on account, of the Indebtedness, in such manner as the Agent may determine.

10.10  Application of moneys on sale or Total Loss Each Borrower shall procure that each Collateral Owner irrevocably authorises the Agent and the Security Agent to apply all sums which either of them may receive pursuant to a sale by that Collateral Owner of its Collateral Vessel or a Total Loss of its Collateral Vessel in or towards satisfaction of the prepayment due and payable by virtue of that sale or Total Loss under Clause 6.3 (Mandatory prepayment on sale or Total Loss), but the Borrowers’ obligation to make that prepayment shall not be affected if those sums are insufficient to satisfy that obligation.

10.11  Additional security If at any time the aggregate of the Net Fair Market Value of the Collateral Vessels and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Agent (in the case of other charged assets), and determined by the Agent in its discretion (in all other cases)) for the time being provided to the Security Agent under this Clause 10.11 is less than ninety million Dollars ($90,000,000) the Borrowers shall, within thirty (30) days of the Agent’s request, at the Borrowers’ option:

10.11.1  pay to the Security Agent or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Security Agent as additional security for the payment of the Indebtedness; or

10.11.2  give to the Security Agent other additional security in amount and form acceptable to the Security Agent in its discretion; or

10.11.3  prepay the amount of the Indebtedness which will ensure that the aggregate of the market value of the Collateral Vessels (determined as stated above) and the value of any such additional security is not less than ninety million Dollars ($90,000,000).

Clauses 5.2 (Reborrowing) and 6.5 (Restrictions) shall apply, mutatis mutandis, to any prepayment made under this Clause 10.11 and the value of any additional security provided shall be determined as stated above.

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11 Representations

11.1 Representations The Borrowers make the representations and warranties set out in this Clause 11.1 to each Finance Party on the date of this Agreement.

11.1.1 Status Each Security Party (which is not an individual) is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation and has the power to own its assets and carry on its business as it is being conducted.

11.1.2 Binding obligations The obligations expressed to be assumed by each Security Party in each Finance Document to which it is a party are, subject to any general principles of law limiting its obligations which are specifically referred to in any legal opinion delivered pursuant to Clause 3 (Conditions of Utilisation), legal, valid, binding and enforceable obligations.

11.1.3 Non-conflict with other obligations The entry into and performance by each Security Party of, and the transactions contemplated by, the Finance Documents do not conflict with:

(a) any law or regulation applicable to that Security Party;

(b) the constitutional documents of that Security Party; or

(c) any document binding on that Security Party or any of its assets,

and in borrowing the Loan, the Borrowers are acting for their own account.

11.1.4 Power and authority Each Security Party 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 to which it is a party and the transactions contemplated by those Finance Documents.

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11.1.5 Validity and admissibility in evidence All consents, licences, approvals, authorisations, filings and registrations required or desirable:

(a) to enable each Security Party lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party or to enable each Finance Party to enforce and exercise all its rights under the Finance Documents; and

(b) to make the Finance Documents to which any Security Party is a party admissible in evidence in its jurisdiction of incorporation,

have been obtained or effected and are in full force and effect, with the exception only of the registrations referred to in Part II of Schedule 2 (Conditions subsequent).

11.1.6 Governing law and enforcement The choice of English law as the governing law of any Finance Document expressed to be governed by English law will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party, and any judgment obtained in England in relation to any such Finance Document will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party.

11.1.7 Deduction of Tax No Security Party is required under the law of its jurisdiction of incorporation to make any deduction for or on account of Tax from any payment it may make under any Finance Document.

11.1.8 No filing or stamp taxes Under the law of jurisdiction of incorporation of each relevant Security Party it is not necessary that the Finance Documents (other than the Security Documents) be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.

11.1.9 No default No Event of Default is continuing or might reasonably be expected to result From the advance of any Drawing.

11.1.10  No misleading information Any factual information provided by any Security Party to any Finance Party was true and accurate in all material respects as at the date it was provided.

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11.1.11  Pari passu ranking The payment obligations of each Security Party under the Finance Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

11.1.12  No proceedings pending or threatened No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency have been started or (to the best of the Borrowers’ knowledge threatened) which, if adversely determined, might reasonably be expected to have a materially adverse effect on the business, assets, financial condition or credit worthiness of any Security Party.

11.1.13  Disclosure of material facts The Borrowers are not aware of any material facts or circumstances which have not been disclosed to the Agent and which might, if disclosed, have adversely affected the decision of a person considering whether or not to make loan facilities of the nature contemplated by this Agreement available to the Borrowers.

11.1.14  No established place of business in the UK or US No Security Party has an established place of business in the United Kingdom or the United States of America.

11.1.15  Completeness of Relevant Documents The copies of any Relevant Documents provided or to be provided by the Borrowers to the Agent in accordance with Clause 3 (Conditions of Utilisation) are, or will be, true and accurate copies of the originals and represent, or will represent, the full agreement between the parties to those Relevant Documents in relation to the subject matter of those Relevant Documents and there are no commissions, rebates, premiums or other payments due or to become due in connection with the subject matter of those Relevant Documents other than in the ordinary course of business or as disclosed to, and approved in writing by, the Agent.

11.2 Repetition Each representation and warranty in Clause 11.1 (Representations) is deemed to be repeated by the Borrowers by reference to the facts and circumstances then existing on the date of each Drawdown Notice and the first day of each Interest Period.

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12 Undertakings and Covenants

The undertakings and covenants in this Clause 12 remain in force for the duration of the Facility Period.

12.1 Information Undertakings

12.1.1 Financial statements The Borrowers shall procure that:-

(a) the Group supplies to the Agent as soon as the same become available, but in any event within 180 days after every 31 December of each of its financial years, its combined annual audited Financial Statements for that financial year and within 120 days after every 31 December and 30 June of each of its financial half-years, its semi-annual unaudited Financial Statements and management accounts for that financial half-year;

(b) Grand supplies to the Agent as soon as the same become available, but in any event within 180 days after every 31 December of each of its financial years, its consolidated annual audited Financial Statements for that financial year and within 120 days after every 31 December and 30 June of each of its financial half-years, its semi-annual unaudited Financial Statements for that financial half-year;

(c) each Collateral Owner supplies to the Agent as soon as the same become available, but in any event within 180 days after every 31 December of each of its respective financial years, its respective annual audited Financial Statements for that financial year and within 120 days after every 31 December and 30 June of each of its financial half-years its respective semi-annual unaudited Financial Statements for that financial half-year,

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* in each case, (together with updated details of all off-balance sheet, time-charter hire commitments and annual cash flow information upon the Agent’s first request in writing), which shall each be accompanied by a Compliance Certificate, signed by one director of each of the Group, Grand, each Collateral Owner and each Borrower, setting out (in reasonable detail) computations as to compliance with Clause 12.2 (Financial covenants) as at the date at which those Financial Statements were drawn up.

12.1.2 Requirements as to Financial Statements Each set of Financial Statements delivered by the Group and the Corporate Guarantors under Clause 12.1.1 (Financial statements):

(a) shall be certified by a director of the relevant Borrower, the Group or the Corporate Guarantors (as the context may require) as fairly representing its financial condition as at the date as at which those Financial Statements were drown up; and

(b) shall be prepared using GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the relevant Original Financial Statements unless, in relation to any set of Financial Statements, the relevant Security Party notifies the Agent that there has been a change in GAAP, the accounting practices or reference periods and the relevant Security Party’s auditors deliver to the Agent:

(i) a description of any change necessary for those Financial Statements to reflect the GAAP, accounting practices and reference periods upon which the Original Financial Statements were prepared; and

(ii) sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Agent to make an accurate comparison between the financial position indicated in those Financial Statements and that indicated in the Original Financial Statements.

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12.1.3 Information: miscellaneous The Borrowers shall supply to the Agent and shall procure that each Corporate Guarantor shall supply to the Agent:

(a) all documents dispatched by the Borrower and each Corporate Guarantor to its shareholders (or any class of them) or its creditors generally at the same time as they are dispatched;

(b) promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Security Party, and which might, if adversely determined, have a materially adverse effect on the business, assets, financial condition or credit worthiness of that Security Party;

(c) promptly, such further information regarding the financial condition, business and operations of any Security Party as the Agent may reasonably request including, without limitation, cash flow analyses and details of the operating costs of any Collateral Vessel: and

(d) by not later than one year prior to the Delivery Date of a Vessel, the finalised business plan for that Vessel regarding the management of the Vessel by the Managers and the Vessel’s employment after its Delivery Date, in form and substance acceptable to the Agent in its discretion.

12.1.4 Notification of default Each Borrower shall:-

(a) notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence; and

(b) promptly upon a request by the Agent, 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).

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12.1.5 “Know your customer” checks If:

(a) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

(b) any change in the status of a Borrower after the date of this Agreement; or

(c) a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

obliges the Agent or any Lender (or, in the case of (c) above, my prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrowers shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender for itself (or, in the case of (c) above, on behalf of any prospective new Lender) in order for the Agent or that Lender (or, in the case of (c) above, any prospective new Lender) to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

12.2 Financial covenants The Borrowers shall procure that at all times:-

12.2.1 Group financial ratios the Group’s financial condition, as evidenced by the most recent Financial Statements, shall be such that, on a consolidated basis:

(a) the Group maintains Leverage which does not exceed 75%; and

(b) Minimum Net Worth is not lower than one hundred and fifty million Dollars ($150,000,000); and

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(c) throughout the Facility Period the companies whose vessels are managed by Cardiff maintain aggregate Minimum Liquidity in an amount in excess of thirty million Dollars ($30,000,000).

12.2.2 Grand’s financial ratios Grand’s financial condition as evidenced by the most recent Financial Statements shall be such that, on a consolidated basis:

(a) Grand maintains Leverage which does not exceed 75%; and

(b) Grand maintains a Minimum Net Worth, which is not lower than seventy five million Dollars ($75,000,000).

The financial covenants contained in this Clause 12.2 shall be tested semi-annually on the basis of the annual or semi-annual Financial Statements provided under Clause 12.1.1 and shall be confirmed in the relevant Compliance Certificate.

12.2.3 General undertakings

12.2.4 Authorisations The Borrowers shall promptly:

(a) obtain, comply with and do all that is necessary to maintain in full force and effect; and

(b) supply certified copies to the Agent of,

any consent, licence, approval or authorisation required under any law or regulation to enable each Security Party to perform its obligations under the Finance Documents to which it is a party and to ensure the legality, validity, enforceability or admissibility in evidence in the jurisdiction of incorporation of each relevant Security Party of any Finance Document.

12.2.5 Compliance with laws Each Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.

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12.2.6 Conduct of business Each Borrower shall carry on and conduct its business in a proper and efficient manner, file all requisite tax returns and pay all tax which becomes due and payable (except where contested in good faith).

12.2.7 Evidence of good standing The Borrowers will from time to time if requested by the Agent provide the Agent with evidence in form and substance satisfactory to the Agent that the Security Parties and all corporate shareholders of any Security Party remain in good standing.

12.2.8 Borrowers’ ownership The Borrowers will procure that the Borrowers and the Corporate Guarantors each remain one hundred per centum (100%), directly or indirectly, beneficially owned by the Personal Guarantor.

12.2.9 Subordination Each Borrower undertakes that all shareholder’s loans made to the Borrowers and the Collateral Owners and all claims of the Corporate Guarantors against the Borrowers and the Collateral Owners and any sums owed to the Managers are fully subordinated to the Indebtedness.

12.2.10  Negative pledge and no disposals Neither Borrower shall without the prior written consent of the Agent, and shall procure that none of the Corporate Guarantors (other than Cardiff) shall without the prior written consent of the Agent, create nor permit to subsist any Encumbrance or other third party rights over any of its present or future assets or undertaking nor dispose of any those assets or of all or part of that undertaking.

12.2.11  Merger Neither Borrower shall without the prior written consent of the Agent, and shall procure that none of the Corporate Guarantors shall without the prior written consent of the Agent, enter into any amalgamation, demerger, merger or corporate reconstruction.

12.2.12  Change of business Neither Borrower shall without the prior written . consent of the Agent, and shall procure that none of the Corporate Guarantors shall without the prior written consent of the Agent, make any substantial change to the general nature of its or their business from that carried on at the date of this Agreement.

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12.2.13  No other business Neither Borrower shall without the prior written consent of the Agent, and shall procure that none of the Corporate Guarantors (other than Cardiff) shall without the prior written consent of the Agent, engage in any business other than the ownership of its Vessel.

12.2.14  No place of business in UK or US Neither Borrower shall and no Corporate Guarantor shall have an established place of business in the United Kingdom or the United States of America at any time during the Facility Period.

12.2.15  No borrowings Neither Borrower shall without the prior written consent of the Agent, and shall procure that none of the Corporate Guarantors shall without the prior written consent of the Agent, borrow any money (except for the Loan, the Collateral Loan Indebtedness and unsecured Financial Indebtedness subordinated to the Loan) nor incur any obligations under leases.

12.2.16  No substantial liabilities Except in the ordinary course of business, neither Borrower shall without the prior written consent of the Agent, and shall procure that none of the Corporate Guarantors shall without the prior written consent of the Agent, incur any liability to any third party which is in the Agent’s opinion of a substantial nature.

12.2.17  No loans or other financial commitments Neither Borrower shall without the prior written consent of the Agent make, and shall procure that none of the Corporate Guarantors shall without the prior written consent of the Agent make, any loan nor enter into any guarantee or indemnity or otherwise voluntarily assume any actual or contingent liability in respect of any obligation of any other person except for loans made in the ordinary course of business in connection with the chartering, operation or repair of a Vessel.

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12.2.18  No dividends The Borrowers shall not, and shall procure that the Collateral Owners and Grand shall not, without the prior written consent of the Agent, pay any dividends or other distributions of a revenue or capital nature, or make any payments of principal or interest on debt to any member of the Group or to any other related entities or persons other than the Collateral Loan Indebtedness.

12.2.19  No change in ownership or control of a Borrower Neither Borrower shall, and shall procure that no Corporate Guarantor shall, permit any change in its beneficial ownership and control from that advised to the Agent at the date of this Agreement.

12.2.20  Inspection of records Each Borrower will, and will procure that each Corporate Guarantor will, permit the inspection of its financial records and accounts from time to time by the Agent or its nominee.

12.2.21  No change in Relevant Documents The Borrowers shall procure that, without the prior written consent of the Agent, there shall be no termination of, alteration to, or waiver of any term of, any of the Relevant Documents which are not Finance Documents.

12.2.22  No transactions The Borrowers shall not, and shall procure that each Corporate Guarantor shall not, enter into any transactions with any other member of the Group or any other associated company without the prior written consent of the Agent, unless it is reasonably incurred in the normal course of its business.

12.2.23  No security interest Each Borrower shall not, and shall procure that each Corporate Guarantor shall not, create any form of security interest or quasi security interest over any of its assets or revenue without the prior written consent of the Agent unless it is reasonably incurred in the normal course of their respective businesses.

12.2.24  Evidence of funding The Borrowers shall provide to the Agent evidence, in a form and substance acceptable to the Agent in its discretion, (comprising, inter alia, a commitment letter executed by a financial institution acceptable to the Agent in its sole discretion) that, at least three (3) months prior to the date any installment is due and payable pursuant to a Building Contract, sufficient committed funds, together with any required

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equity contribution, are available to cover the amount of such instalment in full, together with evidence that such committed funding is, or will be in place up to and including the Final Maturity Date of the Vessel in question.

12.3 Collateral Vessel undertakings

12.3.1 No sale of Collateral Vessel The Borrowers shall procure that no Collateral Owner shall sell or otherwise dispose of its Collateral Vessel or any shares in its Collateral Vessel nor agree to do so without the prior written consent of the Agent.

12.3.2 No chartering after Event of Default Following the occurrence and during the continuation of an Event of Default the Borrowers shall procure that no Collateral Owner shall without the prior written consent of the Agent let its Collateral Vessel on charter or renew or extend any charter or other contract of employment of its Collateral Vessel (nor agree to do so).

12.3.3 No change in management Each Borrower shall procure that each Collateral Owner shall procure that, without the prior written consent of the Agent, there shall be no termination of, alteration to, or waiver of any term of, the Management Agreement in respect of its Collateral Vessel and no Collateral Owner shall without the prior written consent of the Agent permit the Managers to sub-contract or delegate the commercial or technical management of its Collateral Vessel to any third party.

12.3.4 Registration of Collateral Vessel Each Borrower shall procure that each Collateral Owner undertakes to maintain the registration of its Collateral Vessel under the flag stated in Clause 1.1 (Definitions and Interpretation) for the duration of the Facility Period unless the Agent agrees otherwise in writing.

12.3.5 Evidence of current COFR Each Borrower shall procure that each Collateral Owner will, if and for so long as its Collateral Vessel trades in the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990), obtain, retain and provide the Agent with a copy of, a valid Certificate of Financial Responsibility for its Collateral Vessel under that Act and will comply strictly with the requirements of that Act.

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12.3.6 ISM Code compliance Each Borrower shall procure that each Collateral Owner will:

(a) procure that its Collateral Vessel remains for the duration of the Facility Period subject to a SMS;

(b) maintain a valid and current SMC for its Collateral Vessel throughout the Facility Period and provide a copy to the Agent;

(c) procure that the ISM Company maintains a valid and current DOC throughout the Facility Period and provide a copy to the Agent; and

(d) immediately notify the Agent in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the SMC of its Collateral Vessel or of the DOC of the ISM Company.

12.3.7 ISPS Code compliance Each Borrower shall procure that each Collateral Owner will:

12.3.8 for the duration of the Facility Period comply with the ISPS Code in relation to its Collateral Vessel and procure that its Collateral Vessel and the ISPS Company comply with the ISPS Code;

12.3.9 maintain a valid and current ISSC for its Collateral Vessel throughout the Facility Period and provide a copy to the Agent; and

12.3.10  immediately notify the Agent in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC of its Collateral Vessel.

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12.3.11  Annex VI compliance Each Borrower shall procure that each Collateral Owner will:

12.3.12  for the duration of the Facility Period comply with Annex VI in relation to its Collateral Vessel and procure that its Collateral Vessel’s master and crew are familiar with, and that its Collateral Vessel complies with, Annex VI;

12.3.13  maintain a valid and current IAPPC for its Collateral Vessel throughout the Facility Period and provide a copy to the Agent; and

12.3.14  immediately notify the Agent in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the IAPPC of its Collateral Vessel.

13 Events of Default

13.1 Events of Default Each of the events or circumstances set out in this Clause 13.1 is an Event of Default.

13.1.1 Non-payment The Borrowers do not pay on the due date any amount payable by them under a Finance Document at the place at and in the currency in which it is expressed to be payable.

13.1.2 Other obligations A Security Party or any other person (except a Finance Party) does not comply with any provision of any of the Relevant Documents to which that Security Party or person is a party (other than as referred to in Clause 13.1.1 (Non-payment)).

No Event of Default under this Clause 13.1.2 will occur if the failure to comply is capable of remedy and is remedied within ten (10) Business Days of the Agent giving notice to the Borrowers or the Borrowers becoming aware of the failure to comply.

13.1.3 Misrepresentation Any representation, warranty or statement made or deemed to be repeated by a Security Party in any Finance Document or any other document delivered by or on behalf of a Security Party under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be repeated.

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13.1.4 Cross default Any Financial Indebtedness of a Security Party:

(a) is not paid when due or within any originally applicable grace period; or

(b) is declared to be, or otherwise becomes, due and payable before its specified maturity as a result of an event of default (however described); or

(c) is capable of being declared by a creditor to be due and payable before its specified maturity as a result of such an event.

13.1.5 Insolvency

(a) A Security Party is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its Financial Indebtedness.

(b) The value of the assets of a Security Party is less than its liabilities (taking into account contingent and prospective liabilities).

(c) A moratorium is declared in respect of any Financial Indebtedness of a Security Party.

13.1.6 Insolvency proceedings Any corporate action, legal proceedings or other procedure or step is taken for:

(a) the suspension of payments, a moratorium of any Financial Indebtedness, winding-up, dissolution, administration, bankruptcy or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of a Security Party;

(b) a composition, compromise, assignment or arrangement with any creditor of a Security Party;

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(c) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, or trustee or other similar officer in respect of any Security Party or any of its assets; or

(d) enforcement of any Encumbrance over any assets of a Security Party,

or any analogous procedure or step is taken in any jurisdiction.

13.1.7  Creditors’ process Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of a Security Party.

13.1.8  Change in ownership or control of a Security Party There is any change in the beneficial ownership or control of a Security Party from that advised to the Agent by the Borrowers at the date of this Agreement.

13.1.9  Repudiation A Security Party or any other person (except a Finance Party) repudiates any of the Relevant Documents to which that Security Party or person is a party or evidences an intention to do so.

13.1.10  Impossibility or illegality Any event occurs which would, or would with the passage of time, render performance of any of the Relevant Documents by a Security Party or any other party to any such document impossible, unlawful or unenforceable by a Finance Party or a Security Party.

13.1.11  Conditions subsequent Any of the conditions referred to in Clause 3.4 (Conditions subsequent) is not satisfied within the time reasonably required by the Agent.

13.1.12  Revocation or modification of authorisation Any consent, licence, approval, authorisation, filing, registration or other requirement of any governmental, judicial or other public body or authority which is now, or which at any time during the Facility Period becomes, necessary to enable a Security Party or any other person (except a Finance Party) to comply with any of its obligations under any of the Relevant Documents is not obtained, is revoked, suspended, withdrawn or withheld, or is modified in a manner which the Agent considers is, or may be, prejudicial to the interests of a Finance Party, or ceases to remain in full force and effect.

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13.1.13  Curtailment of business A Security Party ceases, or threatens to cease, to carry on all or a substantial part of its business or, as a result of intervention by or under the authority of any government, the business of a Security Party is wholly or partially curtailed or suspended, or all or a substantial part of the assets or undertaking of a Security Party is seized, nationalised, expropriated or compulsorily acquired.

13.1.14  Reduction of capital A Security Party reduces its authorised or issued or subscribed capital.

13.1.15  Builder and Refund Guarantor If, before the Delivery Date, any of the circumstances set out in Clause 13.1.5 or 13.1.6 occurs in relation to the Builder or the Refund Guarantor.

13.1.16  No issue of a Refund Guarantee If the Borrowers do not deliver or cause to be delivered to the Agent a Refund Guarantee which is to the Agent’s satisfaction.

13.1.17  Building Contract and Refund Guarantees If at any time during the Facility Period the Building Contract or any of the Refund Guarantees is terminated, revoked, cancelled or repudiated or otherwise ceases to remain in full force and effect;

13.1.18  Loss of Collateral Vessel A Collateral Vessel suffers a Total Loss or is otherwise destroyed, abandoned, confiscated, forfeited or condemned as prize, or a similar event occurs in relation to any other vessel which may from time to time be mortgaged to the Security Agent as security for the payment of all or any part of the Indebtedness, except that a Total Loss, or event similar to a Total Loss in relation to any other vessel, shall not be an Event of Default if:

(a) that Collateral Vessel or other vessel is insured in accordance with the Security Documents; and

(b) no insurer has refused to meet or has disputed the claim for Total Loss and it is not apparent to the Agent in its discretion that any such refusal or dispute is likely to occur; and

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(c) payment of all insurance proceeds in respect of the Total Loss is made in full to the Security Agent within one hundred and twenty (120) days of the occurrence of the casualty giving rise to the Total Loss in question or such longer period as the Agent may in its discretion agree; or

(d) the Borrower has procured that another vessel has been mortgaged to the Security Agent and such mortgage and security is in form and substance acceptable to the Agent, in its discretion.

13.1.19  Challenge to registration The registration of a Collateral Vessel or a Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of a Mortgage is contested.

13.1.20  War The country of registration of a Collateral Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Agent in its discretion considers that, as a result, the security conferred by any of the Security Documents is materially prejudiced.

13.1.21  Notice of termination A Corporate Guarantor or the Personal Guarantor gives notice to the Security Agent to determine his obligations under the relevant Guarantee.

13.1.22  Death of Personal Guarantor The Personal Guarantor dies or becomes of unsound mind and the Borrowers do not procure that, within twenty one (21) days of being required to do so by the Agent, the Security Agent is provided with a replacement guarantee and indemnity and/or other additional security for the payment of the Indebtedness in form and substance acceptable to the Security Agent.

13.1.23  Material adverse change Any event or series of events occurs which, in the opinion of the Agent, is likely to have a materially adverse effect on the business, assets, financial condition or credit worthiness of a Security Party.

13.2 Acceleration If an Event of Default is continuing the Agent may by notice to the Borrowers cancel any part of the Maximum Loan Amount not then advanced and:

13.2.1  declare that the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents are immediately due and payable, whereupon they shall become immediately due and payable; and/or

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13.2.2  declare that the Loan is payable on demand, whereupon it shall immediately become payable on demand by the Agent.

14 Assignment and Sub-Participation

14.1 Lenders’ rights A Lender may with the Agent’s prior written consent assign any of its rights under this Agreement or transfer by novation any of its rights and obligations under this Agreement to any other branch of that Lender or to any other bank or financial institution, and may grant sub-participations in all or any part of its Commitment.

14.2 Borrowers’ co-operation The Borrowers will co-operate fully with a Lender in connection with any assignment, transfer or sub-participation by that Lender; will execute and procure the execution of such documents as that Lender may require in that connection; and irrevocably authorise any Finance Party to disclose to any proposed assignee, transferee or sub-participant (whether before or after any assignment, transfer or sub-participation and whether or not any assignment, transfer or sub-participation shall take place) all information relating to the Security Parties, the Loan, the Relevant Documents, the Vessels and the Collateral Vessels which any Finance Party may in its discretion consider necessary or desirable.

14.3 Rights of assignee Any assignee of a Lender shall (unless limited by the express terms of the assignment) take the full benefit of every provision of the Finance Documents benefitting that Lender PROVIDED THAT an assignment will only be effective on notification by the Agent to that Lender and the assignee that the Agent is satisfied it has complied with all necessary “Know your customer” or other similar checks under all applicable laws and regulations in relation to the assignment to the assignee.

14.4 Transfer Certificates If a Lender wishes to transfer any of its rights and obligations under or pursuant to this Agreement, it may do so by delivering to the Agent a duly completed Transfer Certificate, in which event on the Transfer Date:

14.4.1  to the extent that that Lender seeks to transfer its rights and obligations, the Borrowers (on the one hand) and that Lender (on the other) shall be released from all further obligations towards the other;

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14.4.2  the Borrowers (on the one hand) and the transferee (on the other) shall assume obligations towards the other identical to those released pursuant to Clause 14.4.1; and

14.4.3  the Agent, each of the Lenders and the transferee shall have the same rights and obligations between themselves as they would have had if the transferee had been an original party to this Agreement as a Lender

PROVIDED THAT the Agent shall only be obliged to execute a Transfer Certificate once:

(a) it is satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the transfer to the transferee; and

(b) the transferee has paid to the Agent for its own account a transfer fee of one thousand Dollars ($ 1,000).

The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, send to the Borrowers a copy of that Transfer Certificate,

14.5 Finance Documents Unless otherwise expressly provided in any Finance Document or otherwise expressly agreed between a Lender and any proposed transferee and notified by that Lender to the Agent on or before the relevant Transfer Date, there shall automatically be assigned to the transferee with any transfer of a Lender’s rights and obligations under or pursuant to this Agreement the rights of that Lender under or pursuant to the Finance Documents (other than this Agreement) which relate to the portion of that Lender’s rights and obligations transferred by the relevant Transfer Certificate.

14.6 No assignment or transfer by the Borrowers No Borrower may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

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15 The Agent, the Security Agent and the Lenders

15.1 Appointment

15.1.1  Each Lender appoints the Agent to act as its agent under and in connection with the Finance Documents and each Lender and the Agent appoints the Security Agent to act as its security agent for the purpose of the Security Documents.

15.1.2  Each Lender authorises the Agent and each Lender and the Agent authorises the Security Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent or the Security Agent (as the case may be) under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

15.1.3  Except where the context otherwise requires, references in this Clause 15 to the “Agent” shall mean the Agent and the Security Agent individually and collectively.

15.2 Authority Each Lender irrevocably authorises the Agent (subject to Clauses 15.4 (Limitations on authority) and 15.18 (Instructions)):

15.2.1  to execute any Finance Document (other than this Agreement) on its behalf;

15.2.2  to collect, receive, release or pay any money on its behalf;

15.2.3  acting on the unanimous instructions from time to time of the Lenders to give or withhold any waivers, consents or approvals under or pursuant to any Finance Document; and

15.2.4  acting on the unanimous instructions from time to time of the Lenders to exercise, or refrain from exercising, any rights, powers, authorities or discretions under or pursuant to any Finance Document.

The Agent shall have no duties or responsibilities as agent or as security agent other than those expressly conferred on it by the Finance Documents and shall not be obliged to act on any instructions from the Lenders or the Majority Lenders if to do so would, in the opinion of the Agent, be contrary to any provision of the Finance Documents or to any law, or would expose the Agent to any actual or potential liability to any third party.

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15.3 Trust The Security Agent agrees and declares, and each of the other Finance Parties acknowledges, that, subject to the terms and conditions of this Clause 15.3, the Security Agent holds the Trust Property on trust for the Finance Parties absolutely. Each of the other Finance Parties agrees that the obligations, rights and benefits vested in the Security Agent shall be performed and exercised in accordance with this Clause 15.3. The Security Agent shall have the benefit of all of the provisions of this Agreement benefiting it in its capacity as security agent for the Finance Parties, and all the powers and discretions conferred on trustees by the Trustee Act 1925 (to the extent not inconsistent with this Agreement). In addition:

15.3.1  the Security Agent and any attorney, agent or delegate of the Security Agent may indemnify itself or himself out of the Trust Property against all liabilities, costs, fees, damages, charges, losses and expenses sustained or incurred by it or him in relation to the taking or holding of any of the Trust Property or in connection with the exercise or purported exercise of the rights, trusts, powers and discretions vested in the Security Agent or any other such person by or pursuant to the Security Documents or in respect of anything else done or omitted to be done in any way relating to the Security Documents;

15.3.2  the other Finance Parties acknowledge that the Security Agent shall be under no obligation to insure any property nor to require any other person to insure any property and shall not be responsible for any loss which may be suffered by any person as a result of the lack or insufficiency of any insurance; and

15.3.3  the Finance Parties agree that the perpetuity period applicable to the trusts declared by this Agreement shall be the period of eighty years from the date of this Agreement.

The provisions of Part I of the Trustee Act 2000 shall not apply to the Security Agent or the Trust Property.

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15.4 Limitations on authority Except with the prior written consent of all the Lenders, the Agent shall not be entitled to:

15.4.1 release or vary any security given for the Borrowers’ obligations under this Agreement; nor

15.4.2 waive the payment of any sum of money payable by any Security Party under the Finance Documents; nor

15.4.3 change the meaning of the expressions “Majority Lenders” or “Margin”; nor

15.4.4 approve the identity of the Personal Guarantor; nor

15.4.5 exercise, or refrain from exercising, any right, power, authority or discretion, or give or withhold any consent, the exercise or giving of which is, by the terms of this Agreement, expressly reserved to the Lenders; nor

15.4.6 extend the due date for the payment of any sum of money payable by any Security Party under any Finance Document; nor

15.4.7 take or refrain from taking any step if the effect of such action or inaction may lead to the increase of the obligations of a Lender under any Finance Document; nor

15.4.8 agree to change the currency in which any sum is payable under any Finance Document (other than in accordance with the terms of the relevant Finance Document); nor

15.4.9 agree to amend this Clause 15.4.

15.5 Liability Neither the Agent nor any of its directors, officers, employees or agents shall be liable to the Lenders for anything done or omitted to be done by the Agent under or in connection with any of the Relevant Documents unless as a result of the Agent’s gross negligence or wilful misconduct.

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15.6 Acknowledgement Each Lender acknowledges that:

15.6.1 it has not relied on any representation made by the Agent or any of the Agent’s directors, officers, employees or agents or by any other person acting or purporting to act on behalf of the Agent to induce it to enter into any Finance Document;

15.6.2 it has made and will continue to make without reliance on the Agent, and based on such documents and other evidence as it considers appropriate, its own independent investigation of the financial condition and affairs of the Security Parties in connection with the making and continuation of the Loan;

15.6.3 it has made its own appraisal of the creditworthiness of the Security Parties; and

15.6.4 the Agent shall not have any duty or responsibility at any time to provide it with any credit or other information relating to any Security Party unless that information is received by the Agent pursuant to the express terms of a Finance Document.

Each Lender agrees that it will not assert nor seek to assert against any director, officer, employee or agent of the Agent or against any other person acting or purporting to act on behalf of the Agent any claim which it might have against them in respect of any of the matters referred to in this Clause 15.6.

15.7 Limitations on responsibility The Agent shall have no responsibility to any Security Party or to any Lender on account of:

15.7.1 the failure of a Lender or of any Security Party to perform any of its obligations under a Finance Document; nor

15.7.2 the financial condition of any Security Party; nor

15.7.3 the completeness or accuracy of any statements, representations or warranties made in or pursuant to any Finance Document, or in or pursuant to any document delivered pursuant to or in connection with any Finance Document; nor

15.7.4 the negotiation, execution, effectiveness, genuineness, validity, enforceability, admissibility in evidence or sufficiency of any Finance Document or of any document executed or delivered pursuant to or in connection with any Finance Document.

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15.8 The Agent’s rights The Agent may:

15.8.1 assume that all representations or warranties made or deemed repeated by any Security Party in or pursuant to any Finance Document are true and complete, unless, in its capacity as the Agent, it has acquired actual knowledge to the contrary;

15.8.2 assume that no Default has occurred unless, in its capacity as the Agent, it has acquired actual knowledge to the contrary;

15.8.3 rely on any document or notice believed by it to be genuine;

15.8.4 rely as to legal or other professional matters on opinions and statements of any legal or other professional advisers selected or approved by it;

15.8.5 rely as to any factual matters which might reasonably be expected to be within the knowledge of any Security Party on a certificate signed by or on behalf of that Security Party; and

15.8.6 refrain from exercising any right, power, discretion or remedy unless and until instructed to exercise that right, power, discretion or remedy and as to the manner of its exercise by the Lenders (or, where applicable, by the Majority Lenders) and unless and until the Agent has received from the Lenders any payment which the Agent may require on account of, or any security which the Agent may require for, any costs, claims, expenses (including legal and other professional fees) and liabilities which it considers it may incur or sustain in complying with those instructions.

15.9 The Agent’s duties The Agent shall:

15.9.1 if requested in writing to do so by a Lender, make enquiry and advise the Lenders as to the performance or observance of any of the provisions of any Finance Document by any Security Party or as to the existence of an Event of Default; and

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15.9.2 inform the Lenders promptly of any Event of Default of which the Agent has actual knowledge.

15.10  No deemed knowledge The Agent shall not be deemed to have actual knowledge of the falsehood or incompleteness of any representation or warranty made or deemed repeated by any Security Party or actual knowledge of the occurrence of any Default unless a Lender or a Security Party shall have given written notice thereof to the Agent in its capacity as the Agent. Any information acquired by the Agent other than specifically in its capacity as the Agent shall not be deemed to be information acquired by the Agent in its capacity as the Agent.

15.11  Other business The Agent may, without any liability to account to the Lenders, generally engage in any kind of banking or trust business with a Security Party or with a Security Party’s Subsidiaries or associated companies or with a Lender as if it were not the Agent.

15.12  Indemnity The Lenders shall, promptly on the Agent’s request, reimburse the Agent in their respective Proportionate Shares, for, and keep the Agent fully indemnified in respect of all liabilities, damages, costs and claims sustained or incurred by the Agent in connection with the Finance Documents, or the performance of its duties and obligations, or the exercise of its rights, powers, discretions or remedies under or pursuant to any Finance Document, to the extent not paid by the Security Parties and not arising solely from the Agent’s gross negligence or wilful misconduct.

15.13  Employment of agents In performing its duties and exercising its rights, powers, discretions and remedies under or pursuant to the Finance Documents, the Agent shall be entitled to employ and pay agents to do anything which the Agent is empowered to do under or pursuant to the Finance Documents (including the receipt of money and documents and the payment of money) and to act or refrain from taking action in reliance on the opinion of, or advice or information obtained from, any lawyer, banker, broker, accountant, valuer or any other person believed by the Agent in good faith to be competent to give such opinion, advice or information.

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15.14  Distribution of payments The Agent shall pay promptly to the order of each Lender that Lender’s Proportionate Share of every sum of money received by the Agent pursuant to the Finance Documents (with the exception of any amounts payable pursuant to Clause 9 (Fees) and/or any Fee Letter and any amounts which, by the terms of the Finance Documents, are paid to the Agent for the account of the Agent alone or specifically for the account of one or more Lenders) and until so paid such amount shall be held by the Agent on trust absolutely for that Lender.

15.15  Reimbursement The Agent shall have no liability to pay any sum to a Lender until it has itself received payment of that sum. If, however, the Agent does pay any sum to a Lender on account of any amount prospectively due to that Lender pursuant to Clause 15.14 (Distribution of payments) before it has itself received payment of that amount, and the Agent does not in fact receive payment within five (5) Business Days after the date on which that payment was required to be made by the terms of the finance Documents, that Lender will, on demand by the Agent, refund to the Agent an amount equal to the amount received by it, together with an amount sufficient to reimburse the Agent for any amount which the Agent may certify that it has been required to pay by way of interest on money borrowed to fund the amount in question during the period beginning on the date on which that amount was required to be paid by the terms of the Finance Documents and ending on the date on which the Agent receives reimbursement.

15.16  Redistribution of payments Unless otherwise agreed between the Lenders and the Agent, if at any time a Lender receives or recovers by way of set-off, the exercise of any lien or otherwise from any Security Party, an amount greater than that Lender’s Proportionate Share of any sum due from that Security Party to the Lenders under the Finance Documents (the amount of the excess being referred to in this Clause 15.16 and in Clause 15.17 (Rescission of Excess Amount) as the “Excess Amount”) then:

15.16.1  that Lender shall promptly notify the Agent (which shall promptly notify each other Lender);

15.16.2  that Lender shall pay to the Agent an amount equal to the Excess Amount within ten (10) days of its receipt or recovery of the Excess Amount; and

15.16.3  the Agent shall treat that payment as if it were a payment by the Security Party in question on account of the sum due from that Security Party to the Lenders and shall account to the Lenders in respect of the Excess Amount in accordance with the provisions of this Clause 15.16.

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However, if a Lender has commenced any legal proceedings to recover sums owing to it under the Finance Documents and, as a result of, or in connection with, those proceedings has received an Excess Amount, the Agent shall not distribute any of that Excess Amount to any other Lender which had been notified of the proceedings and had the legal right to, but did not, join those proceedings or commence and diligently prosecute separate proceedings to enforce its rights in the same or another court.

15.17  Rescission of Excess Amount If all or any part of any Excess Amount is rescinded or must otherwise be restored to any Security Party or to any other third party, the Lenders which have received any part of that Excess Amount by way of distribution from the Agent pursuant to Clause 15.16 (Redistribution of payments) shall repay to the Agent for the account of the Lender which originally received or recovered the Excess Amount, the amount which shall be necessary to ensure that the Lenders share rateably in accordance with their Proportionate Shares in the amount of the receipt or payment retained, together with interest on that amount at a rate equivalent to that (if any) paid by the Lender receiving or recovering the Excess Amount to the person to whom that Lender is liable to make payment in respect of such amount, and Clause 15.16.3 (Redistribution of payments) shall apply only to the retained amount.

15.18  Instructions Where the Agent is authorised or directed to act or refrain from acting in accordance with the instructions of the Lenders or of the Majority Lenders each of the Lenders shall provide the Agent with instructions within three (3) Business Days of the Agent’s request (which request may be made orally or in writing). If a Lender does not provide the Agent with instructions within that period, that Lender shall be bound by the decision of the Agent. Nothing in this Clause 15.18 shall limit the right of the Agent to take, or refrain from taking, any action without obtaining the instructions of the Lenders or the Majority Lenders if the Agent in its discretion considers it necessary or appropriate to take, or refrain from taking, such action in order to preserve the rights of the Lenders under or in connection with the Finance Documents. In that event, the Agent will notify the Lenders of the action taken by it as soon as reasonably practicable, and the Lenders agree to ratify any action taken by the Agent pursuant to this Clause 15.18.

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15.19  Payments All amounts payable to a Lender under this Clause 15 shall be paid to such account at such bank as that Lender may from time to time direct in writing to the Agent.

15.20  “Know your customer” checks Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

15.21  Resignation Subject to a successor being appointed in accordance with this Clause 15.21, the Agent may resign as agent and/or security agent at any time without assigning any reason by giving to the Borrowers and the Lenders notice of its intention to do so, in which event the following shall apply:

15.21.1  the Lenders may within thirty (30) days after the date of the Agent’s notice appoint a successor to act as agent and/or security agent or, if they fail to do so, the Agent may appoint any other bank or financial institution as its successor;

15.21.2  the resignation of the Agent shall take effect simultaneously with the appointment of its successor on written notice of that appointment being given to the Borrowers and the Lenders;

15.21.3  the Agent shall thereupon be discharged from all further obligations as agent and/or security agent but shall remain entitled to the benefit of the provisions of this Clause 15; and

15.21.4  the Agent’s successor and each of the other parties to this Agreement shall have the same rights and obligations amongst themselves as they would have had if that successor had been a party to this Agreement.

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15.22  No fiduciary relationship Except as provided in Clauses 15.3 (Trust) and 15.14 (Distribution of payments), the Agent shall not have any fiduciary relationship with or be deemed to be a trustee of or for any other person and nothing contained in any Finance Document shall constitute a partnership between any two or more Lenders or between the Agent and any other person.

16 Set-Off

16.1 Set-off A Finance Party may set off any matured obligation due from the Borrowers under any Finance Document (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to any Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, that Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

17 Payments

17.1 Payments Each amount payable by a Borrower under a Finance Document shall be paid to such account at such bank as the Agent may from time to time direct to the Borrowers in the Currency of Account and in such funds as are customary at the time for settlement of transactions in the relevant currency in the place of payment. Payment shall be deemed to have been received by the Agent on the date on which the Agent receives authenticated advice of receipt, unless that advice is received by the Agent on a day other than a Business Day or at a time of day (whether on a Business Day or not) when the Agent in its discretion considers that it is impossible or impracticable for the Agent to utilise the amount received for value that same day, in which event the payment in question shall be deemed to have been received by the Agent on the Business Day next following the date of receipt of advice by the Agent.

17.2 No deductions or withholdings Each payment (whether of principal or interest or otherwise) to be made by a Borrower under a Finance Document shall, subject only to Clause 17.3 (Grossing-up), be made free and clear of and without deduction for or on account of any Taxes or other deductions, withholdings, restrictions, conditions or counterclaims of any nature.

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17.3 Grossing-up If at any time any law requires (or is interpreted to require) a Borrower to make any deduction or withholding from any payment, or to change the rate or manner in which any required deduction or withholding is made, the Borrowers will promptly notify the Agent and, simultaneously with that payment, will pay to the Agent whatever additional amount (after taking into account any additional Taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after the deduction or withholding, the relevant Finance Parties receive a net sum equal to the sum which they would have received had no deduction or withholding been made.

17.4 Evidence of deductions If at any time a Borrower is required by law to make any deduction or withholding from any payment to be made by it under a Finance Document, that Borrower will pay the amount required to be deducted or withheld to the relevant authority within the time allowed under the applicable law and will, no later than thirty (30) days after making that payment, deliver to the Agent an original receipt issued by the relevant authority, or other evidence acceptable to the Agent, evidencing the payment to that authority of all amounts required to be deducted or withheld.

17.5 Adjustment of due dates If any payment or transfer of funds to be made under a Finance Document, other than a payment of interest on the Loan, shall be due on a day which is not a Business Day, that payment shall be made on the next succeeding Business Day (unless the next succeeding Business Day falls in the next calendar month in which event the payment shall be made on the next preceding Business Day). Any such variation of time shall be taken into account in computing any interest in respect of that payment.

17.6 Control Account The Agent shall open and maintain on its books a control account in the names of the Borrowers showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement. The Borrowers’ obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 17.6 and those entries will, in the absence of manifest error, be conclusive and binding.

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18 Notices

18.1 Communications in writing Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter.

18.2 Addresses The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party to this Agreement for any communication or document to be made or delivered under or in connection with this Agreement are:

18.2.1 in the case of the Borrowers, c/o Cardiff Marine Inc., Athens Shipmanagement Office of 80 Kifissias Avenue, 151 25 Amaroussion, Greece (fax no: +300 210 809 0585) marked for the attention of the General Manager;

18.2.2 in the case of each Lender, those appearing opposite its name in Schedule 1 (The Lenders, the Arrangers and the Commitments);

18.2.3 in the case of the Agent, to the Agent at its address at the head of this Agreement (fax no: +49 69 97 7688) marked for the attention of Loan Administration Department, together with a copy to DVB Bank AG, Greek Representative Office (fax no: +30 210 429 1284); and

18.2.4 in the case of the Security Agent, to the Security Agent at its address at the head of this Agreement (fax no: +49 69 97 7688) marked for the attention of Loan Administration Department, together with a copy to DVB Bank AG, Greek Representative Office (fax no: +30 210 429 1284); and

18.2.5 in the case of each Arranger, those appearing opposite its name in Schedule 1 (The Lenders, the Arrangers and the Commitments).

or any substitute address, fax number, department or officer as any party may notify to the Agent (or the Agent may notify to the other parties, if a change is made by the Agent) by not less than five (5) Business Days’ notice.

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18.3 Delivery Any communication or document made or delivered by one party to this Agreement to another under or in connection with this Agreement will only be effective:

18.3.1 if by way of fax, when received in legible form; or

18.3.2 if by way of letter, when it is actually received;

and, if a particular department or officer is specified as part of its address details provided under Clause 18.2 (Addresses), if addressed to that department or officer.

Any communication or document to be made or delivered to any one party will be effective only when actually received by that party.

All notices from or to the Borrowers shall be sent through the Agent.

18.4 Notification of address and fax number Promptly upon receipt of notification of an address, fax number or change of address, pursuant to Clause 18.2 (Addresses) or changing its own address or fax number, the Agent shall notify the other parties to this Agreement.

18.5 English language Any notice given under or in connection with this Agreement must be in English. All other documents provided under or in connection with this Agreement must be:

18.5.1 in English; or

18.5.2 if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

19 Partial Invalidity

If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

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20 Remedies and Waivers

No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under a Finance Document shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

21 Joint and several liability

21.1 Nature of liability The representations, warranties, covenants, obligations and undertakings of the Borrowers contained in this Agreement shall be joint and several so that each Borrower shall be jointly and severally liable with all the Borrowers for all of the same and such liability shall not in any way be discharged, impaired or otherwise affected by:

21.1.1 any forbearance (whether as to payment or otherwise) or any time or other indulgence granted to any other Borrower or any other Security Party under or in connection with any Finance Document;

21.1.2 any amendment, variation, novation or replacement of any other Finance Document;

21.1.3 any failure of any Finance Document to be legal valid binding and enforceable in relation to any other Borrower or any other Security Party for any reason;

21.1.4 the winding-up or dissolution of any other Borrower or any other Security Party;

21.1.5 the release (whether in whole or in part) of, or the entering into of any compromise or composition with, any other Borrower or any other Security Party; or

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21.1.6 any other act, omission, thing or circumstance which would or might, but for this provision, operate to discharge, impair or otherwise affect such liability.

21.2 No rights as surety Until the Indebtedness has been unconditionally and irrevocably paid and discharged in full, each Borrower agrees that it shall not, by virtue of any payment made under this Agreement on account of the Indebtedness or by virtue of any enforcement by a Finance Party of its rights under this Agreement or by virtue of any relationship between, or transaction involving, the relevant Borrower and any other Borrower or any other Security Party:

21.2.1 exercise any rights of subrogation in relation to any rights, security or moneys held or received or receivable by a Finance Party or any other person; or

21.2.2 exercise any right of contribution from any other Borrower or any other Security Party under any Finance Document; or

21.2.3 exercise any right of set-off or counterclaim against any other Borrower or any other Security Party; or

21.2.4 receive, claim or have the benefit of any payment, distribution, security or indemnity from any other Borrower or any other Security Party; or

21.2.5 unless so directed by the Agent (when the relevant Borrower will prove in accordance with such directions), claim as a creditor of any other Borrower or any other Security Party in competition with any Finance party

and each Borrower shall hold in trust for the Finance Parties and forthwith pay or transfer (as appropriate) to the Agent any such payment (including an amount equal to any such set-off), distribution or benefit of such security, indemnity or claim in fact received by it.

22 Miscellaneous

22.1 No oral variations No variation or amendment of a Finance Document shall be valid unless in writing and signed on behalf of all the Finance Parties.

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22.2 Further Assurance If any provision of a Finance Document shall be invalid or unenforceable in whole or in part by reason of any present or future law or any decision of any court, or if the documents at any time held by or on behalf of the Finance Parties or any of them are considered by the Lenders for any reason insufficient to carry out the terms of this Agreement, then from time to time the Borrowers will promptly, on demand by the Agent, execute or procure the execution of such further documents as in the opinion of the Lenders are necessary to provide adequate security for the repayment of the Indebtedness.

22.3 Rescission of payments etc. Any discharge, release or reassignment by a Finance Party of any of the security constituted by, or my of the obligations of a Security Party contained in, a Finance Document shall be (and be deemed always to have been) void if any act (including, without limitation, any payment) as a result of which such discharge, release or reassignment was given or made is subsequently wholly or partially rescinded or avoided by operation of any law.

22.4 Certificates Any certificate or statement signed by an authorised signatory of the Agent purporting to show the amount of the Indebtedness (or any part of the Indebtedness) or any other amount referred to in any Finance Document shall, save for manifest error or on any question of law, be conclusive evidence as against the Borrowers of that amount.

22.5 Counterparts This Agreement may be executed in any number of counterparts each of which shall be original but which shall together constitute the same instrument.

22.6 Contracts (Rights of Third Parties) Act 1999 A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

23 Law and Jurisdiction

23.1 Governing law This Agreement shall in all respects be governed by and interpreted in accordance with English law.

23.2 Jurisdiction For the exclusive benefit of the Finance Parties, the parties to this Agreement irrevocably agree that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that any proceedings may be brought in those courts.

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23.3 Alternative jurisdictions Nothing contained in this Clause 23 shall limit the right of the Finance Parties to commence any proceedings against the Borrowers in any other court of competent jurisdiction nor shall the commencement of any proceedings against the Borrowers in one or more jurisdictions preclude the commencement of any proceedings in any other jurisdiction, whether concurrently or not.

23.4 Waiver of objections Each Borrower irrevocably waives any objection which it may now or in the future have to the laying of the venue of any proceedings in any court referred to in this Clause 23, and any claim that those proceedings have been brought in an inconvenient or inappropriate forum, and irrevocably agrees that a judgment in any proceedings commenced in any such court shall be conclusive and binding on it and may be enforced in the courts of any other jurisdiction.

23.5 Service of process Without prejudice to any other mode of service allowed under any relevant law, each Borrower:

23.5.1 irrevocably appoints Messrs Ince & Co. of International House, 1 St. Katharine’s Way, London E1W 1UN, England (Attention: Mr. Michael Volikas) as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and

23.5.2 agrees that failure by a process agent to notify any Borrower of the process will not invalidate the proceedings concerned.

24 Confidentiality

This Agreement and the terms and conditions hereof are and shall remain strictly private and confidential to the Lenders and the Borrowers and their legal advisers and will not be voluntarily disclosed to any other person without the consent of each of the Lenders and the Borrowers.

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SCHEDULE 1: The Lenders, the Arrangers and the Commitments

The Lenders	The Commitments
DVB BANK AG Friedrich-Ebert-Anlage 2-14	100%
D60325 Frankfurt am Main
Federal Republic of Germany

Fax No.: +49 69 97 504 7688

Attention: Loans Administration Department

With copy to:

95 Akti Miaouli

Piraeus 185 38

Greece

Fax No,:+30 210 429 1284

Attention: Greek Representative Office

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SCHEDULE 2: Conditions Precedent and Subsequent

Part I: Conditions precedent

1 Security Parties

(a) Constitutional Documents Copies of the constitutional documents of each Security Party together with such other evidence as the Agent may reasonably require that each Security Party is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party.

(b) Certificates of good standing A certificate of good standing in respect of each Security Party (if such a certificate can be obtained).

(c) Board resolutions A copy of a resolution of the board of directors of each Security Party:

(i) approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and resolving that it execute those Relevant Documents; and

(ii) authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or despatched under those documents) on its behalf.

(d) Specimen signatures A specimen of the signature of each person authorised by the resolutions referred to in paragraph (c) above.

(e) Shareholder resolutions A copy of a resolution signed by all the holders of the issued shares in each Security Party, approving the terms of, and the transactions contemplated by, the Relevant Documents to which that Security Party is a party.

(f) Officer’s certificates A certificate of a duly authorised officer of each Security Party certifying that each copy document relating to it specified in this Part I of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement and setting out the names of the directors, officers and shareholders of that Security Party and the proportion of shares held by each shareholder.

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(g) Evidence of registration Where such registration is required or permitted under the laws of the relevant jurisdiction, evidence that the names of the directors, officers and shareholders of each Security Party are duly registered in the companies registry or other registry in the country of incorporation of that Security Party.

(h) Powers of attorney The notarially attested and legalised power of attorney of each Security Party under which any documents are to be executed or transactions undertaken by that Security Party.

(i) Capital structure, equity and debt finance Evidence, in form and substance satisfactory to the Agent, of the capital structure of the Group and that the Personal Guarantor has, in the opinion of the Agent, sufficient equity and debt finance commitments from other sources in order to fulfil the Borrowers’ obligations under the Building Contracts.

2 Security and related documents

(a) Vessel documents Photocopies, certified as true, accurate and complete by a director or the secretary or the legal advisers of the Borrower, of:

(i) the Building Contract in form and substance satisfactory to the Agent;

(ii) the Management Agreement in form and substance satisfactory to the Agent;

(iii) such documents as the Agent may reasonably require to evidence the nomination of the Borrower as purchaser of the Vessel pursuant to the Building Contract in form and substance satisfactory to the Agent;

(iv) the Refund Guarantee in respect of the relevant First Instalment and Second Instalment due to the Builder under the Building Contract in form and substance satisfactory to the Agent; and

(v) the invoice issued by the Builder and countersigned by the Vessel’s classification society evidencing the obligation of the Borrower to pay the relevant Instalment to the Builder under the Building Contract on a date no later than the proposed Drawdown Date of the Drawing in question.

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(b) Collateral Vessel documents Photocopies, certified as true, accurate and complete by a director or the secretary or the legal advisers of each Collateral Owner, of:

(i) any charterparty or other contract of employment of its Collateral Vessel which will be in force on the Drawdown Date;

(ii) the Management Agreement in respect of its Collateral Vessel;

(iii) its Collateral Vessel’s current Safety Construction, Safety Equipment, Safety Radio and Load Line Certificates;

(iv) its Collateral Vessel’s current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;

(v) its Collateral Vessel’s current SMC;

(vi) the ISM Company’s current DOC;

(vii) its Collateral Vessel’s current ISSC;

(viii) its Collateral Vessel’s current IAPPC;

(ix) its Collateral Vessel’s current Tonnage Certificate;

(x) that Collateral Owner’s current Carrier Initiative Agreement with the United States’ Customs Service;

in each case together with all addenda, amendments or supplements.

(c) Evidence of Collateral Owner’s title Evidence that on the Drawdown Date (i) each Collateral Vessel will be at least provisionally registered under the flag stated in Clause 1.l (Definitions and Interpretation) in the ownership of the relevant Collateral Owner and (ii) each Mortgage will be capable of being registered against the relevant Collateral Vessel with second priority.

(d) Evidence of insurance Evidence that each Collateral Vessel is insured in the manner required by the Security Documents and that letters of undertaking will be issued in the manner required by the Security Documents, together with (if required by the Lender) the written approval of the Insurances by an insurance adviser appointed by the Lender.

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(e) Evidence of Funding Confirmation from the Agent that Clause 12.2.24 has been complied with for the instalment in question.

(f) Equity Portion Evidence satisfactory to the Agent that any Equity Portion has been paid to the Agent one day prior to the Drawdown Date for remittance to the Builder with the relevant portion of the Loan and that it is fully subordinated to the Loan.

(g) Confirmation of class A Certificate of Confirmation of Class for hull and machinery confirming that each Collateral Vessel is classed with the highest class applicable to vessels of her type with Lloyd’s Register or such other classification society as may be acceptable to the Lender free of any recommendations or qualifications affecting class, unless otherwise agreed by the Agent in writing. The Agent shall require to be notified of the class and the classification society of each Vessel at least fifteen (15) days prior to each Drawdown Date.

(h) Instruction to classification society A letter of instruction from each Collateral Owner to its Collateral Vessel’s classification society.

(i) Survey report A report by a surveyor instructed by the Lender to inspect the Collateral Vessels confirming that the condition of each Collateral Vessel is in all respects acceptable to the Lender.

(j) Valuation A valuation of each Collateral Vessel certifying the Net Fair Market Value for each Collated Vessel, assessed on the relevant Drawdown Date.

(k) Mortgagees’ Insurances Evidence of the Lender being covered under the Mortgagees’ Insurances for an amount of not less than one hundred and twenty per cent (120%) of the Loan and at the expense of the Borrower.

(l) Security Documents The Security Documents, together with all other documents required by any of them, including, without limitation, the Account Holder’s confirmation and all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients.

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(m) Mandates Such duly signed forms of mandate, and/or other evidence of the opening of the Earnings Accounts, as the Lender may require.

(n) Managers’ confirmation The written confirmation of the Managers that, throughout the Facility Period unless otherwise agreed by the Lender, they will remain the commercial and technical managers of each Collateral Vessel and that they will not, without the prior written consent of the Lender, sub-contract or delegate the commercial or technical management of any Collateral Vessel to any third party and confirming in terms acceptable to the Lender that, following the occurrence of an Event of Default, all claims of the Managers against any Collateral Owner shall be subordinated to the claims of the Lender under the Finance Documents.

(o) No disputes The written confirmation of the Borrower that there is no dispute under any of the Relevant Documents as between the parties to any such document.

3 Legal opinions

(a) If a Security Party is incorporated in a jurisdiction other than England and Wales or if any Finance Document is governed by the laws of a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lenders in each relevant jurisdiction, substantially in the form or forms provided to the Agent prior to signing this Agreement or confirmation satisfactory to the Agent that such an opinion will be given.

4 Other documents and evidence

(a) Drawdown Notice A duly completed Drawdown Notice.

(b) Process agent Evidence that any process agent referred to in Clause 23.5 (Service of process) and any process agent appointed under any other Finance Document has accepted its appointment.

(c) Other authorisations A copy of any other consent, licence, approval, authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the entry into and performance of the transactions contemplated by any of the Relevant Documents or for the validity and enforceability of any of the Relevant Documents.

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(d) Financial statements Copies of the Original Financial Statements of each Corporate Guarantor and the Group.

(e) Fees Evidence that the fees, costs and expenses then due from the Borrowers under Clause 8 (Indemnities) and Clause 9 (Fees) have been paid or will be paid by the relevant Drawdown Date.

(f) “Know your customer” documents Such documentation and other evidence as is reasonably requested by the Agent in order for the Lenders to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Finance Documents.

Part II: Conditions subsequent

1 Evidence of Collateral Owners’ title Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the flag stated in Clause 1.1 (Definitions and Interpretation) confirming that (a) each Collateral Vessel is permanently registered under that flag in the ownership of the relevant Collateral Owner, (b) each Mortgage has been registered with second priority against the relevant Collateral Vessel and (c) there are no further Encumbrances registered against any Collateral Vessel other than the first priority mortgage in favour of HSH, under the relevant Collateral Loan Agreement.

2 Letters of undertaking Letters of undertaking in respect of the Insurances as required by the Security Documents together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Lender.

3 Acknowledgements of notices Acknowledgements of all notices of assignment and/or charge given pursuant to the Security Documents.

4 Legal opinions Such of the legal opinions specified in Part I of this Schedule 2 as have not already been provided to the Lender.

5 Companies Act registrations If applicable, evidence that the prescribed particulars of the Security Documents have been delivered to the relevant Registrar of Companies within the statutory time limit.

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6 Master’s receipt If applicable, the master’s receipt for the Mortgage.

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SCHEDULE 3: Calculation of Mandatory Cost

1 The Mandatory Cost is an addition to the interest rate to compensate the Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority for, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2 On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the Loan) and will be expressed as a percentage rate per annum.

3 The Additional Cost Rate for any Lender lending from an office in the .euro-zone will be the percentage notified by that Lender to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in the relevant Vessel Loan) of complying with the minimum reserve requirements of the European Central Bank as a result of participating in the relevant Vessel Loan from that office.

4 The Additional Cost Rate for any Lender lending from an office in the United Kingdom will be calculated by the Agent as follows:

(a) where the relevant Vessel Loan is denominated in sterling:

BY + S(Y - Z) + F x 0.01 per cent per annum

100 - (B + S)

(b) where the relevant Vessel Loan is denominated in any currency other than sterling:

F x 0.01 per cent per annum

300

where:

B is the percentage of eligible liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements;

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Y is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the relevant Vessel Loan is an overdue amount, the additional rate of interest specified in Clause 7.9 (Default interest)) payable for the relevant Interest Period on the relevant Vessel Loan;

S is the percentage (if any) of eligible liabilities which that Lender is required from time to time to maintain as interest bearing special deposits with the Bank of England;

Z is the interest rate per annum payable by the Bank of England to that Lender on special deposits; and

F is the charge payable by that Lender to the Financial Services Authority under paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations or the equivalent provisions in any replacement regulations (with, for this purpose, the figure: for the minimum amount in paragraph 2.02b or such equivalent provision deemed to be zero), expressed in pounds per £1 million of the fee base of that Lender.

5 For the purpose of this Schedule:

(a) “eligible liabilities” and “special deposits” have the meanings given to them at the time of application of the formula by the Bank of England;

(b) “fee base” has the meaning given to it in the Fees Regulations;

(c) “Fees Regulations” means the regulations governing periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits.

6 In the application of the formula B, Y, S and Z are included in the formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY is calculated as 0.5. x 15. Each rate calculated in accordance with the formula is, if necessary, rounded upward to four decimal places.

7 If a Lender does not supply the information required by the Agent to determine its Additional Cost Rate when requested to do so, the applicable Mandatory Cost shall be determined on the basis of the information supplied by the remaining Lenders.

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8 If a change in circumstances has rendered, or will render, the formula inappropriate, the Agent shall notify the Borrowers of the manner in which the Mandatory Cost will subsequently be calculated. The manner of calculation so notified by the Agent shall, in the absence of manifest error, be binding on the Borrowers.

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SCHEDULE 4: Form of Drawdown Notice

To:	DVB BANK AG
From:	DRILLSHIP HYDRA OWNERS INC.
	DRILLSHIP PAROS OWNERS INC.

2007

Dear Sirs

Drawdown Notice

We refer to the Loan Agreement dated                 2007 made between, amongst others, ourselves and yourselves (the “Agreement”).

Words and phrases defined in the Agreement have the same meaning when used in this Drawdown Notice.

Pursuant to Clause 4.1 of the Agreement, we irrevocably request that you advance to us a Drawing in the sum of [                        ] of the Vessel Loan in respect of Hull no. [            ] on                         200  , which is a Business Day, by paying the amount of the Drawing in accordance with the provisions of the relevant Building Contract [in] [towards] payment of the [        ] Instalment.

We confirm that we have credited with you in full the relevant Equity Portion and we warrant that the representations and warranties contained in Clause 11.1 of the Agreement are true and correct at the date of this Drawdown Notice and will be true and correct on             200  , that no Default has occurred and is continuing, and that no Default will result from the advance of the Drawing requested in this Drawdown Notice.

[We select the period of [        ] months as the first Interest Period.]

Yours faithfully

For and on behalf of

DRILLSHIP HYDRA OWNERS INC.

DRILLSHIP PAROS OWNERS INC.

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SCHEDULE 5: Form of Transfer Certificate

To: DVB BANK AG

TRANSFER CERTIFICATE

This transfer certificate relates to a secured loan facility agreement (as from time to time amended, varied, supplemented or novated the “Loan Agreement”) dated                 2007, on the terms and subject to the conditions of which a secured loan facility of up to $230,000,000 was made available to Drillship Hydra Owners Inc. and Drillship Paros Owners Inc. on a joint and several basis, by a syndicate of banks on whose behalf you act as agent and security agent.

1 Terms defined in the Loan Agreement shall, unless otherwise expressly indicated, have the same meaning when used in this certificate. The terms “Transferor” and “Transferee” are defined in the schedule to this certificate.

2 The Transferor:

2.1 confirms that the details in the Schedule under the heading “Transferor’s Commitment” accurately summarise its Commitment; and

2.2 requests the Transferee to accept by way of novation the transfer to the Transferee of the amount of the Transferor’s Commitment specified in the Schedule, by counter-signing and delivering this certificate to the Agent at its address for communications specified in the Loan Agreement.

3 The Transferee requests the Agent to accept this certificate as being delivered to the Agent pursuant to and for the purposes of clause 14.4 of the Loan Agreement so as to take effect in accordance with the terms of that clause on the Transfer Date specified in the Schedule.

4 The Agent confirms its acceptance of this certificate for the purposes of clause 14.4 of the Loan Agreement.

5 The Transferee confirms that:

5.1 it has received a copy of the Loan Agreement together with all other information which it has required in connection with this transaction:

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5.2 it has not relied and will not in the future rely on the Transferor or any other party to the Loan Agreement to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information; and

5.3 it has not relied and will not in the future rely on the Transferor or any other party to the Loan Agreement to keep under review on its behalf the financial condition. creditworthiness, condition, affairs, status or nature of any Security Party.

6 Execution of this certificate by the Transferee constitutes its representation and warranty to the Transferor and to all other parties to the Loan Agreement that it has the power to become a party to the Loan Agreement as a Lender on the terms of the Loan Agreement and has taken all steps to authorise execution and delivery of this certificate.

7 The Transferee undertakes with the Transferor and each of the other parties to the Loan Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Loan Agreement will be assumed by it after delivery of this certificate to the Agent and the satisfaction of any conditions subject to which this certificate is expressed to take effect.

8 The Transferor makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any document relating to any Finance Document, and assumes no responsibility for the financial condition of any Finance Party or for the performance and observance by any Security Party of any of its obligations under any Finance Document or any document relating to any Finance Document and any conditions and warranties implied by law are expressly excluded.

9 The Transferee acknowledges that nothing in this certificate or in the Loan Agreement shall oblige the Transferor to:

9.1 accept a re-transfer from the Transferee of the whole or any part of the rights, benefits and/or obligations transferred pursuant to this certificate; or

9.2 support any losses directly or indirectly sustained or incurred by the Transferee for any reason including, without limitation, the non-performance by any party to any Finance Document of any obligations under any Finance Document.

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10 The address and fax number of the Transferee for the purposes of clause 18 of the Loan Agreement are set out in the Schedule.

11 This certificate may be executed in any number of counterparts each of which shall be original but which shall together constitute the same instrument.

12 This certificate shall be governed by and interpreted in accordance with English law.

THE SCHEDULE

1 Transferor:

2 Transferee:

3 Transfer Date (not earlier that the fifth Business Day after the date of delivery of the Transfer Certificate to the Agent):

4 Transferor’s Commitment:

5 Amount transferred:

6 Transferee’s address and fax number for the purposes of clause 18 of the Loan Agreement:

[name of Transferor]	[name of Transferee]
By:	By:
Date:	Date:

DVB BANK AG as Agent

By:

Date:

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SCHEDULE 6: Form of Compliance Certificate

To:	DVB BANK AG
From:	GRAND INVESTMENT HOLDING LTD.
	CARDIFF MARINE INC.
	DRILLSHIP HYDRA OWNERS INC.
	DRILLSHIP PAROS OWNERS INC.
	OIL TRANSPORT INVESTMENTS LIMITED
	INNOVATIVE INVESTMENTS LIMITED
	AMBASSADOR SHIPPING CORPORATION

Dated:

Dear Sirs

Drillship Hydra Owners Inc. and Drillship Paros Owners Inc – Loan Agreement dated [    ] 2007 (the “Agreement”)

We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

We confirm that:

1. the Group’s Leverage does not exceed 75%, as required by Clause 12. 2.1 (a);

2. the Group’s Minimum Net Worth is not lower than one hundred and fifty million Dollars ($150,000,000) as required by Clause 12.2.1. (b);

3. Cardiff’s Minimum Liquidity is in excess of $30,000,000, as required by Clause 12.2.1 (c);

4. Grand’s Leverage does not exceed 75%, as required by Clause 12.2.2 (a);

5. Grand’s Minimum Net Worth is not lower than $75,000,000, as required by Clause 12.2.2 (b);

6. Clause 10.13 is being complied with.

We confirm that no Default is continuing*.

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Signed:
	Director of [GRAND INVESTMENT HOLDING LTD.] [CARDIFF MARINE INC.] [DRILLSHIP HYDRA OWNERS INC.] [DRILLSHIP PAROS OWNERS INC.] [OIL TRANSPORT INVESTMENTS LIMITED] [INNOVATIVE INVESTMENTS LIMITED] [AMBASSADOR SHIPPING CORPORATION]

* If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

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IN WITNESS of which the parties to this Agreement have executed this Agreement the day and year first before written.

SIGNED by EUGENIA PAPAPONTIKOU	)
duly authorised for and on behalf	)	/s/ Eugenia Papapontikou
of DRILLSHIP HYDRA OWNERS INC.	)

SIGNED by EUGENIA PAPAPONTIKOU	)
duly authorised for and on behalf	)	/s/ Eugenia Papapontikou
of DRILLSHIP HYDRA OWNERS INC.	)

SIGNED by ALEXANDROS DAMIANIDIS	)
duly authorised for and on behalf	)	/s/ Alexandros Damianidis
of DVB BANK AG (as a Lender)	)

SIGNED by ALEXANDROS DAMIANIDIS	)
duly authorised for and on behalf	)	/s/ Alexandros Damianidis
of DVB BANK AG (as an Arranger)	)

SIGNED by ALEXANDROS DAMIANIDIS	)
duly authorised for and on behalf	)	/s/ Alexandros Damianidis
of DVB BANK AG (as a Agent)	)

SIGNED by ALEXANDROS DAMIANIDIS	)
duly authorised for and on behalf	)	/s/ Alexandros Damianidis
of DVB BANK AG	)
(as the Security Agent)	)

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EX-4.66

Exhibit 4.66

DATED 10 January 2008

DRILLSHIP HYDRA OWNERS INC.

DRILLSHIP PAROS OWNERS INC.

(as Borrowers)

- and -

DVB BANK AG

and others

(as Lenders)

- and -

DVB BANK AG

and others

(as Arrangers)

- and -

DVB BANK AG

(as Underwriter and Agent)

- and -

DVB BANK AG

(as Security Agent)

FIRST SUPPLEMENTAL AGREEMENT TO SECURED

LOAN FACILITY AGREEMENT DATED 10 SEPTEMBER 2007

STEPHENSON HARWOOD

One, St. Paul’s Churchyard

London EC4M 8SH

Tel: 020 7329 4422

Fax: 020 7329 7100

Ref: 21.036

CONTENTS

		Page
1	Interpretation	2
2	Conditions	7
3	Representations and Warranties	11
4	Amendments to Original Loan Agreement	11
5	Confirmation and Undertaking	14
6	Security	14
8	Fees and expenses	14
9	Communications, Law and Jurisdiction	15
10	Miscellaneous	15
Schedule 1		16
	The Lenders	16

FIRST SUPPLEMENTAL AGREEMENT

Dated: 10 January 2008

BETWEEN:

(1) DRILLSHIP HYDRA OWNERS INC (“Drillship Hydra”) and DRILLSHIP PAROS OWNERS INC (“Drillship Paros”), each a company incorporated under the laws of the Marshall Islands with its registered office at c/o The Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960; and (together the “Borrowers” and each a “Borrower”) jointly and severally; and

(2) the banks listed in Schedule 1 (The Lenders, the Arrangers and the Commitments), each acting through its office at the address indicated against its name in Schedule 1 (together the “Lenders” and each a “Lender”); and

(3) the arrangers listed in Schedule 1 (The Lenders, the Arrangers and the Commitments), each acting through its office at the address indicated against its name in Schedule 1 (together the “Arrangers” and each an “Arranger”); and

(4) DVB BANK AG, acting as agent through its office at Friedrich-Ebert-Anlage 2-14, D60325, Frankfurt am Main, Federal Republic of Germany (in that capacity the “Agent”); and

(5) DVB BANK AG, acting as underwriter and security agent through its office at Friedrich-Ebert-Anlage 2-14, D60325, Frankfurt am Main, Federal Republic of Germany (in that capacity the “Security Agent”).

SUPPLEMENTAL TO a secured loan agreement dated 10 September 2007 (the “Original Loan Agreement”) made between the Borrower, the Lenders, the Agent, the Arrangers and the Security Agent on the terms and subject to the conditions of which each of the Lenders agreed to advance to the Borrower its respective Commitment of an aggregate amount not exceeding and two hundred and thirty million Dollars ($230,000,000) (the “Loan”).

WHEREAS:

(A) The Borrowers, the Corporate Guarantors, the Personal Guarantor, the Pledgors, the New Collateral Owners, the Lenders, the Agent, and the Security Agent have agreed that the New Collateral Owners provide additional security as additional guarantors in favour of the Security Agent, to guarantee the repayment of the Indebtedness.

(B) The outstanding balance of the Loan on the date of this First Supplemental Agreement is two hundred and thirty million Dollars ($230,000,000) (the “Outstanding Loan”).

IT IS AGREED THAT:

1 Interpretation

1.1 In this Supplemental Agreement:-

“Additional Security Documents” means this Supplemental Agreement, the Deeds of Confirmation, the New Guarantees, the New Mortgages and the New Assignments.

“Deeds of Confirmation” means the deeds of confirmation of the Corporate Guarantors, the Personal Guarantor and the Pledgors each in favour of the Agent, in such form and containing such terms and conditions as the Agent shall require.

“Effective Date” means the date on which the Agent confirms to the Borrowers that all of the conditions referred to in Clause 2.1 have been satisfied, which confirmation the Agent shall be under no obligation to give if a Default shall have occurred.

“Erato” means Erato Owning Company Limited of the Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Erato Assignment” means the second priority deed of assignment of the Insurances, Earnings and Requisition Compensation of the Erato Vessel to be executed in favour of the Security Agent by Erato in such form and containing such conditions as the Finance Parties shall require.

“Erato Guarantee” means the guarantee and indemnity to be executed in favour of the Security Agent by Erato in such form and containing such conditions as the Finance Parties shall require.

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“Erato Mortgage” means the second preferred mortgage in respect of the Erato Vessel to be executed in favour of the Security Agent by Erato in such form and containing such conditions as the Finance Parties shall require.

“Erato Vessel” means the Panamanian flag vessel “GLOBAL VICTORY” and everything now or in the future belonging to her on board and ashore, currently registered in the ownership of Erato.

“Finance Parties” means the Lenders, the Arrangers the Agent and the Security Agent.

“Iris” means Iris Owning Company Limited of the Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960

“Iris Assignment” means the second priority deed of assignment of the Insurances, Earnings and Requisition Compensation of the Iris Vessel to be executed in favour of the Security Agent by Iris in such form and containing such conditions as the Finance Parties shall require.

“Iris Guarantee” means the guarantee and indemnity to be executed in favour of the Security Agent by Iris in such form and containing such conditions as the Finance Parties shall require.

“Iris Mortgage” means the second preferred mortgage in respect of the Iris Vessel to be executed in favour of the Security Agent by Iris in such form and containing such conditions as the Finance Parties shall require.

“Iris Vessel” means the Panamanian flag vessel “PACIFIC CHAMP” and everything now or in the future belonging to her on board and ashore, currently registered in the ownership of Iris.

“Mentor” Mentor Owning Company Limited of the Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Mentor Assignment” means the second priority deed of assignment of the Insurances, Earnings and Requisition Compensation of the Mentor Vessel to be executed in favour of the Security Agent by Mentor in such form and containing such conditions as the Finance Parties shall require.

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“Mentor Guarantee” means the guarantee and indemnity to be executed in favour of the Security Agent by Mentor in such form and containing such conditions as the Finance Parties shall require.

“Mentor Mortgage” means the second preferred mortgage in respect of the Mentor Vessel to be executed in favour of the Security Agent by Mentor in such form and containing such conditions as the Finance Parties shall require.

“Mentor Vessel” means the Panamanian flag vessel “PACIFIC ROYAL” and everything now or in the future belonging to her on board and ashore, currently registered in the ownership of Mentor.

“Muses” means Muses Owning Company Limited of the Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Muses Assignment” means the second priority deed of assignment of the Insurances, Earnings and Requisition Compensation of the Muses Vessel to be executed in favour of the Security Agent by Muses in such form and containing such conditions as the Finance Parties shall require.

“Muses Guarantee” means the guarantee and indemnity to be executed in favour of the Security Agent by Muses in such form and containing such conditions as the Finance Parties shall require.

“Muses Mortgage” means the second priority mortgage together with a collateral deed of covenants in respect of the Muses Vessel to be executed in favour of the Security Agent by Muses in such form and containing such conditions as the Finance Parties shall require.

“Muses Vessel” means the Maltese flag vessel “ORIENTAL GREEN” and everything now or in the future belonging to her on board and ashore, currently registered in the ownership of Muses.

4

“Nereids” means Nereids Owning Company Limited of the Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Nereids Assignment” means the second priority deed of assignment of the Insurances, Earnings and Requisition Compensation of the Nereids Vessel to be executed in favour of the Security Agent by Nereids in such form and containing such conditions as the Finance Parties shall require.

“Nereids Guarantee” means the guarantee and indemnity to be executed in favour of the Security Agent by Nereids in such form and containing such conditions as the Finance Parties shall require.

“Nereids Mortgage” means the second priority statutory mortgage together with a collateral deed of covenants in respect of the Nereids Vessel to be executed in favour of the Security Agent by Nereids in such form and containing such conditions as the Finance Parties shall require.

“Nereids Vessel” means the Maltese flag vessel “UNIVERSAL BRAVE” and everything now or in the future belonging to her on board and ashore, currently registered in the ownership of Nereids.

“New Assignments” means the Oceanids Assignment, the Muses Assignment, the Nereids Assignment, the Erato Assignment, the mentor Assignment and the Iris Assignment.

“New Collateral Owners” means Oceanids, Muses, Nereids, Erato, Mentor and Iris, and “New Collateral Owner” means any one of them.

“New Collateral Vessels” means the Oceanids Vessel, the Muses Vessel, the Nereids Vessel, the Erato Vessel, the Mentor Vessel and the Iris Vessel and “New Collateral Vessel” means any one of them.

“New Guarantees” means the Oceanids Guarantee, the Muses Guarantee, the Nereids Guarantee, the Erato Guarantee, the Mentor Guarantee and the Iris Guarantee.

“New Mortgages” the Oceanids Mortgage, the Muses Mortgage, the Nereids Mortgage, the Erato Mortgage, the Mentor Mortgage and the Iris Mortgage.

5

“Oceanids” means Oceanids Owning Company Limited of the Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960.

“Oceanids Assignment” means the second priority deed of assignment of the Insurances, Earnings and Requisition Compensation of the Oceanids Vessel to be executed in favour of the Security Agent by Oceanids in such form and containing such conditions as the Finance Parties shall require.

“Oceanids Guarantee” means the guarantee and indemnity to be executed in favour of the Security Agent by Oceanids in such form and containing such conditions as the Finance Parties shall require.

“Oceanids Mortgage” means the second priority statutory mortgage together with a collateral deed of covenants in respect of the Oceanids Vessel to be executed in favour of the Security Agent by Oceanids in such form and containing such conditions as the Finance Parties shall require.

“Oceanids Vessel” means the Maltese flag vessel “UNIVERSAL PRIME” and everything now or in the future belonging to them on board and ashore, currently registered in the ownership of Oceanids.

“Supplemental Agreement” means this first supplemental agreement made between the Borrowers, the Lenders, the Agent, the Arrangers, and the Security Agent including its Schedule(s).

1.2 All words and expressions defined in the Original Loan Agreement shall have the same meaning when used in this Supplemental Agreement unless the context otherwise requires, and clause 1.2 of the Original Loan Agreement shall apply to the interpretation of this Supplemental Agreement as if it were set out in full.

1.3 All obligations, representations, warranties, covenants and undertakings of the Borrowers under or pursuant to this Supplemental Agreement shall, unless otherwise expressly provided, be entered into, made or given by them jointly and severally.

6

2 Conditions

2.1 As conditions for the agreement of the Finance Parties to the requests specified in Recital (B) above and for the effectiveness of Clause 4, the Borrowers shall deliver or cause to be delivered to or to the order of the Agent the following documents and evidence:

2.1.1 Constitutional Documents Copies of the constitutional documents of each New Collateral Owner together with such other evidence as the Agent may reasonably require that each New Collateral Owner is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Additional Security Documents to which it is or is to become a party.

2.1.2 Certificates of good standing A certificate of good standing in respect of each New Collateral Owner (if such a certificate can be obtained).

2.1.3 Board resolutions A copy of a resolution of the board of directors of each New Collateral Owner:

2.1.3.1  approving the terms of, and the transactions contemplated by, the Additional Security Documents to which it is a party and resolving that it execute those Additional Security Documents; and

2.1.3.2  authorising a specified person or persons to execute those Additional Security Documents (and all documents and notices to be signed and/or despatched under those documents) on its behalf.

2.1.4 Specimen signatures A specimen of the signature of each person authorised by the resolutions referred to in paragraph 2.1.3.2 above.

2.1.5 Shareholder resolutions A copy of a resolution signed by all the holders of the issued shares in each New Collateral Owner, approving the terms of, and the transactions contemplated by, the Additional Security Documents to which that New Collateral Owner is a party.

2.1.6 Officer’s certificates A certificate of a duly authorised officer of each New Collateral Owner certifying that each copy document relating to it specified in this Clause 2 is correct, complete and in full force and effect as

7

at a date no earlier than the date of this Supplemental Agreement and setting out the names of the directors, officers and shareholders of that New Collateral Owner and the proportion of shares held by each shareholder.

2.1.7 Evidence of registration Where such registration is required or permitted under the laws of the relevant jurisdiction, evidence that the names of the directors, officers and shareholders of each New Collateral Owner are duly registered in the companies registry or other registry in the country of incorporation of that New Collateral Owner.

2.1.8 Powers of attorney The notarially attested and legalised power of attorney of each New Collateral Owner under which any documents are to be executed or transactions undertaken by that New Collateral Owner.

2.1.9 New Collateral Vessel documents Photocopies, certified as true (where feasible), accurate and complete by a director or the secretary or the legal advisers of each New Collateral Owner, of:

(a) any charterparty or other contract of employment of its New Collateral Vessel which will be in force on the Effective Date;

(b) the Management Agreement in respect of its New Collateral Vessel;

(c) its New Collateral Vessel’s current Safety Construction, Safety Equipment, Safety Radio and Load Line Certificates;

(d) its New Collateral Vessel’s current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;

(e) its New Collateral Vessel’s current SMC;

(f) the ISM Company’s current DOC;

(g) its New Collateral Vessel’s current ISSC;

(h) its New Collateral Vessel’s current IAPPC;

(i) its New Collateral Vessel’s current Tonnage Certificate;

8

(j) (if applicable) that New Collateral Owner’s current Carrier Initiative Agreement with the United States’ Customs Service;

in each case together with all addenda, amendments or supplements.

2.1.10 Evidence of New Collateral Owner’s title Evidence that on the date of this Supplemental Agreement (i) each New Collateral Vessel will be at least provisionally registered under the flag stated in Clause 1.1 in the ownership of the relevant New Collateral Owner and (ii) each New Mortgage will be capable of being registered against the relevant New Collateral Vessel with second priority.

2.1.11 Evidence of insurance Evidence that each New Collateral Vessel is insured in the manner required by the Additional Security Documents and that letters of undertaking will be issued in the manner required by the Additional Security Documents, together with (if required by the Agent) the written approval of the Insurances by an insurance adviser appointed by the Agent.

2.1.12 Confirmation of class A certificate of confirmation of class for hull and machinery confirming that each New Collateral Vessel is classed with the highest class applicable to vessels of her type with Lloyd’s Register or such other classification society as may be acceptable to the Agent free of any recommendations or qualifications affecting class, unless otherwise agreed by the Agent in writing.

2.1.13 Instruction to classification society A letter of instruction from each New Collateral Owner to its New Collateral Vessel’s classification society.

2.1.14 Survey report A report by a surveyor instructed by the Agent to inspect the New Collateral Vessels confirming that the condition of each New Collateral Vessel is in all respects acceptable to the Agent.

2.1.15 Valuation A valuation of each New Collateral Vessel certifying the Net Fair Market Value for each New Collateral Vessel.

2.1.16 Mortgagees’ Insurances Evidence of the Agent being covered under the Mortgagees’ Insurances for an amount of not less than one hundred and twenty per cent (120%) of the Loan and at the expense of the Borrower.

9

2.1.17 Additional Security Documents The Additional Security Documents, together with all other documents required by any of them, including, without limitation all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients.

2.1.18 Managers’ confirmation The written confirmation of the Managers that, throughout the Facility Period unless otherwise agreed by the Agent, they will remain the commercial and technical managers of each New Collateral Vessel and that they will not, without the prior written consent of the Agent, sub-contract or delegate the commercial or technical management of any New Collateral Vessel to any third party and confirming in terms acceptable to the Agent that, following the occurrence of an Event of Default, all claims of the Managers against any New Collateral Owner shall be subordinated to the claims of the Agent under the Additional Security Documents.

2.1.19 No disputes The written confirmation of the Borrowers that there is no dispute under any of the Additional Security Documents as between the parties to any such document.

2.1.20 Legal opinions If a New Collateral Owner is incorporated in a jurisdiction other than England and Wales or if any Additional Security Document is governed by the laws of a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Agent in each relevant jurisdiction, substantially in the form or forms provided to the Agent prior to signing this Agreement or confirmation satisfactory to the Agent that such an opinion will be given.

2.1.21 Process agent Evidence that any process agent referred to in Clause 23.5 of the Original Loan Agreement has accepted its appointment in respect of the Additional Security Documents.

2.1.22 Other authorisations A copy of any other consent, licence, approval, authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the entry into and performance of the transactions contemplated by any of the Additional Security Documents or for the validity and enforceability of any of the Additional Security Documents.

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2.1.23 Financial statements Copies of the Original Financial Statements of each New Collateral Owner.

2.1.24 “Know your customer” documents Such documentation and other evidence as is reasonably requested by the Agent in order for the Lenders to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Additional Security Documents.

2.2 All documents and evidence delivered to the Agent pursuant to this Clause shall:

2.2.1 be in form and substance acceptable to the Agent;

2.2.2 be accompanied, if required by the Agent, by translations into the English language, certified in a manner acceptable to the Agent; and

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

3 Representations and Warranties

Each of the representations and warranties contained in clause 11 of the Original Loan Agreement shall be deemed repeated by the Borrowers at the date of this Supplemental Agreement and at the Effective Date, by reference to the facts and circumstances then pertaining, as if references to the Finance Documents included this Supplemental Agreement and the other Additional Security Documents.

4 Amendments to Original Loan Agreement

With effect from that Effective Date, the Original Loan Agreement shall be read and construed as follows:-

4.1 the definitions contained in Clause 1.1 were inserted to clause 1.1 of this Supplemental Agreement in alphabetical order;

11

4.2 the definition of “Assignments” set out in clause 1.1 of the Original Loan Agreement were amended to include the New Assignments;

4.3 the definition of “Collateral Owners” set out in clause 1.1 of the Original Loan Agreement were amended to include the New Collateral Owners; and

4.4 the definition of “Collateral Vessels” set out in clause 1.1 of the Original Loan Agreement were amended to include the New Collateral Vessels;

4.5 the definition of “Corporate Guarantees “ set out in clause 1.1 of the Original Loan Agreement were amended to include the New Guarantees;

4.6 the definition of “Mortgages” set out in clause 1.1 of the Original Loan Agreement were amended to include the New Mortgages;

4.7 the definition of “Security Documents” set out in clause 1.1 of the Original Loan Agreement were amended to include the Additional Security Documents;

4.8 the definition of “Net Fair Market Value” set out in clause 1.1 of the Original Loan Agreement were deleted and the following substituted thereof :-

“Net Fair Market Value” means, in respect of a Collateral Vessel, the value of such Collateral Vessel based on the average of two (2) valuations for that Collateral Vessel prima facie determined by two (2) reputable, independent and first class firms of shipbrokers appointed by and reporting to the Agent on the basis of a charter-free sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing seller and a willing buyer, less the Collateral Loan Indebtedness applicable to that Collateral Vessel.

4.9 clause 10.11 of the Original Loan Agreement were deleted and the following substituted thereof: -

“10.10  Additional security If at any time the aggregate of the Net Fair Market Value of the Collateral Vessels and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Agent (in the case of other charged assets), and determined by the Agent in its discretion (in all other cases)) for the time being provided to the Security Agent under this Clause 10.11 is less than two hundred million Dollars ($200,000,000) the Borrowers shall, within thirty (30) days of the Agent’s request, at the Borrowers’ option:

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10.11.1  pay to the Security Agent or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Security Agent as additional security for the payment of the Indebtedness; or

10.11.2  give to the Security Agent other additional security in amount and form acceptable to the Security Agent in its discretion; or

10.11.3  prepay the amount of the Indebtedness which will ensure that the aggregate of the market value of the Collateral Vessels (determined as stated above) and the value of any such additional security is not less than two hundred million Dollars ($200,000,000).

Clauses 5.2 (Reborrowing) and 6.5 (Restrictions) shall apply, mutatis mutandis, to any prepayment made under this Clause 10.11 and the value of any additional security provided shall be determined as stated above.

4.10 a new clause 15.23 were inserted in the Original loan Agreement as follows:-

“15.23  Upon the occurrence of a Default under this Agreement and provided that the Lenders jointly decide and agree to enforce any Mortgage (other than any New Mortgage) and jointly agree that it would be necessary to buy out the position of HSH under any Collateral Original Loan Agreement in order to enforce such Mortgage (other than any New Mortgage), then DVB Bank AG (“DVB”) acting singly shall buy out the position of HSH under that Collateral Original Loan Agreement at par. It is mutually agreed that no other Lender (other than DVB) shall be required to participate in such buy out.”

All other terms and conditions of the Original Loan Agreement shall remain unaltered and in full force and effect.

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5 Confirmation and Undertaking

5.1 Each of the Security Parties confirms that all of its respective obligations under or pursuant to each of the Security Documents to which it is a party remain in full force and effect, despite the amendments to the Original Loan Agreement made in this Supplemental Agreement, as if all references in any of the Security Documents to the Original Loan Agreement were references to the Original Loan Agreement as amended and supplemented by this Supplemental Agreement.

5.2 The definition of any term defined in any of the Security Documents shall, to the extent necessary, be modified to reflect the amendments to the Original Loan Agreement made in or pursuant to this Supplemental Agreement.

6 Security

The definition of any term defined in any of the Security Documents including the Original Original Loan Agreement shall to the extent necessary be modified to reflect the amendments to the Original Original Loan Agreement made in or pursuant to this Supplemental Agreement.

7 Further Assurance

The Borrowers hereby covenant that from time to time at the request of the Agent they will execute and deliver to the Agent and/or the Security Agent or procure the execution and delivery to the Agent of all such documents as the Lenders shall deem necessary or desirable in its absolute discretion for giving full effect to this Supplemental Agreement and for perfecting and protecting the value or of enforcing any rights or securities granted to the Finance Parties under or pursuant to the Original Loan Agreement and this Supplemental Agreement.

8 Fees and expenses

8.1 The Borrowers undertake to indemnify the Agent and the Lenders on demand in respect of all costs, charges and expenses (together with value added tax or any similar tax thereon and including without limitation the fees and expenses of legal advisers) incurred by the Agent and/or any Lender in connection with the negotiation, preparation, printing, execution and registration of this Supplemental Agreement, and the completion of the transactions therein contemplated (whether or not any of the Additional Security Documents are actually executed or registered).

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8.2 The Borrowers undertake to indemnify the Agent and/or any Lender on demand against any and all stamp, registration and similar Taxes which may be payable in the United Kingdom and/or any other jurisdiction in connection with the entry into, performance and enforcement of this Supplemental Agreement.

9 Communications, Law and Jurisdiction

The provisions of clauses 18 and 23 of the Original Loan Agreement shall apply to this Supplemental Agreement as if they were set out in full and as if references to the Original Loan Agreement were references to this Supplemental Agreement and references to the Borrower were references to the Security Parties.

10 Miscellaneous

Clauses 22.1, 22.5 and 22.6 of the Original Loan Agreement shall (mutatis mutandis) apply to this Supplemental Agreement.

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Schedule 1

The Lenders	The Commitments
DVB BANK AG Friedrich-Ebert-Anlage 2-14 D60325 Frankfurt am Main Federal Republic of Germany	50%
Fax No.: +49 69 97 504 7688 Attention: Loans Administration Department
With copy to:
95 Akti Miaouli Piraeus 185 38 Greece
Fax No.: +30 210 429 1284 Attention: Greek Representative Office
NORDDEUTSCHE LANDESBANK GIROZENTRALE Friedrichswall 10 D-30159 Hannover Federal Republic of Germany	50%
Fax No.: +49 [            ] Attention: [                ]

16

IN WITNESS of which the parties to this Supplemental Agreement have executed this Supplemental Agreement as a deed the day and year first before written.

SIGNED and DELIVERED as	)
a DEED by	)
DRILLSHIP HYDRA OWNERS INC.	)
acting by	)	/s/ Maria Demetriadou
MARIA DEMETRIADOU	)
its duly authorised	)
attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS
/s/ Stephenson Harwood
STEPHENSON HARWOOD

SIGNED and DELIVERED as	)
a DEED by	)
DRILLSHIP PAROS OWNERS INC.	)
acting by	)	/s/ Maria Demetriadou
MARIA DEMETRIADOU	)
its duly authorised	)
attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS
/s/ Stephenson Harwood
STEPHENSON HARWOOD

SIGNED and DELIVERED as	)
a DEED by	)
DVD BANK AG (as a Lender)	)
acting by	)	/s/ Alexandros Damianidis
ALEXANDROS DAMIANIDIS	)
its duly authorised	)
attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS
/s/ Stephenson Harwood
STEPHENSON HARWOOD

17

SIGNED AND DELIVERED as	)
a DEED by	)
DVD BANK AG (as arranger)	)
acting by	)	/s/ Alexandros Damianidis
ALEXANDROS DAMIANIDIS	)
its duly authorised	)
attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS	)
/s/ Stephenson Harwood
STEPHENSON HARWOOD

SIGNED AND DELIVERED as	)
a DEED by	)
DVD BANK AG (as agent)	)
acting by	)	/s/ Alexandros Damianidis
ALEXANDROS DAMIANIDIS	)
its duly authorised	)
attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS	)
/s/ Stephenson Harwood
STEPHENSON HARWOOD

SIGNED AND DELIVERED as	)
a DEED by	)
DVD BANK AG (as security agent)	)
acting by	)	/s/ Alexandros Damianidis
ALEXANDROS DAMIANIDIS	)
its duly authorised	)
attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS	)
/s/ Stephenson Harwood
STEPHENSON HARWOOD

SIGNED AND DELIVERED as	)
a DEED by	)
NORDDEUTSCHE LANDESBANK	)
GIROZENTRALE (as lender)	)
acting by	)	/s/ Alexandros Damianidis
ALEXANDROS DAMIANIDIS	)
its duly authorised	)
attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS	)
/s/ Stephenson Harwood
STEPHENSON HARWOOD

18

EX-4.67

Exhibit 4.67

F21.054

DATED                    2009

DRILLSHIP HYDRA OWNERS INC.

DRILLSHIP PAROS OWNERS INC.

(as Borrowers)

- and -

DVB BANK SE

NORDDEUTSCHE LANDESBANK GIROZENTRALE

and others

(as Lenders)

- and -

DVB BANK SE

and others

(as Arrangers)

- and -

DVB BANK SE

(as Underwriter and Agent)

- and -

DVB BANK SE

(as Security Agent)

SECOND SUPPLEMENTAL AGREEMENT TO A SECURED

LOAN FACILITY AGREEMENT DATED 10 SEPTEMBER 2007 AS AMENDED AND

SUPPLEMENTED BY A FIRST SUPPLEMENTAL AGREEMENT DATED 10 JANUARY

2008

STEPHENSON HARWOOD

One, St. Paul’s Churchyard

London EC4M 8SH

Tel: +44(0)20 7329 4422

Fax: +44(0)20 7329 7100

Ref: F21.054

CONTENTS

		Page
1	Interpretation	2
2	Conditions	3
3	Representations and Warranties	5
4	Amendments to Loan Agreement	5
5	Confirmation and Undertaking	9
6	Security	9
8	Fees and expenses	10
9	Communications, Law and Jurisdiction	10
10	Miscellaneous	10

SECOND SUPPLEMENTAL AGREEMENT

Dated:                                         2009

BETWEEN:

(1) DRILLSHIP HYDRA OWNERS INC (“Drillship Hydra”) and DRILLSHIP PAROS OWNERS INC (“Drillship Paros”), each a company incorporated under the laws of the Marshall Islands with its registered office at c/o The Trust Company of the Marshall Islands Inc., The Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands M.H. 96960 (together the “Borrowers” and each a “Borrower”) jointly and severally; and

(2) the banks listed in Schedule 1 of the Original Loan Agreement (The Lenders, the Arrangers and the Commitments), each acting through its office at the address indicated against its name in Schedule 1 of the Original Loan Agreement (together the “Lenders” and each a “Lender”); and

(3) the arrangers listed in Schedule 1 of the Original Loan Agreement (The Lenders, the Arrangers and the Commitments), each acting through its office at the address indicated against its name in Schedule 1 of the Original Loan Agreement (together the “Arrangers” and each an “Arranger”); and

(4) DVB BANK SE (as universal successor in title of DVB BANK AG), acting as agent through its branch at Platz der Republik 6, D-60325 Frankfurt am Main, Federal Republic of Germany (in that capacity the “Agent”); and

(5) DVB BANK SE (as universal successor in title of DVB BANK AG), acting as underwriter and security agent through its office at Platz der Republik 6, D-60325 Frankfurt am Main, Federal Republic of Germany (in that capacity the “Security Agent”).

SUPPLEMENTAL TO a secured loan agreement dated 10 September 2007 as amended and supplemented by a first supplemental agreement dated 10 January 2008 (together, the “Original Loan Agreement”) each made between the Borrowers, the Lenders, the Agent, the Arrangers and the Security Agent on the terms and subject to the conditions of which each of the Lenders agreed to advance to the Borrowers its respective Commitment of an aggregate amount not exceeding two hundred and thirty million Dollars ($230,000,000) (the “Loan”).

WHEREAS:

(A) The Borrowers have requested and the Finance Parties have agreed to release Cardiff from its Corporate Guarantee and replace it with the New Guarantee.

(B) The Borrowers and the Finance Parties have agreed that additional security shall be provided for the sole benefit of the Finance Parties to secure the Borrowers’ obligations to the Finance Parties under the Original Loan Agreement.

IT IS AGREED THAT:

1 Interpretation

1.1 In this Second Supplemental Agreement:

“Additional Security Documents” means this Second Supplemental Agreement, the Deeds of Confirmation and the New Guarantee.

“Effective Date” means the date on which the Borrowers have become Subsidiaries of Dryships and the Agent confirms to the Borrowers that all of the conditions referred to in Clause 2.1 have been satisfied, which confirmation the Agent shall be under no obligation to give if an Event of Default shall have occurred.

“Deeds of Confirmation” means the deeds of confirmation of the Corporate Guarantors, the Personal Guarantor and the Pledgors each in favour of the Security Agent, in such form and containing such terms and conditions as the Agent shall require.

“Dryships” means Dryships Inc., a company incorporated under the laws of the Marshall Islands with its registered office at The Trust Company Complex, Ajeltake Island, P.O. Box 1405, Majuro, Marshall Islands.

“New Guarantee” means the guarantee and indemnity to be executed in favour of the Security Agent by DryShips in such form and containing such terms and conditions as the Agent shall require.

2

1.2 In this Second Supplemental Agreement “Security Parties” means the Borrowers and Dryships.

1.3 All words and expressions defined in the Original Loan Agreement shall have the same meaning when used in this Second Supplemental Agreement unless the context otherwise requires, and clause 1.2 of the Original Loan Agreement shall apply to the interpretation of this Second Supplemental Agreement as if it were set out in full.

1.4 All obligations, representations, warranties, covenants and undertakings of the Borrowers under or pursuant to this Second Supplemental Agreement shall, unless otherwise expressly provided, be entered into, made or given by them jointly and severally.

2 Conditions

2.1 As conditions for the agreement of the Finance Parties to the requests specified in Recital (A) above and for the effectiveness of Clause 4, the Borrowers shall deliver or cause to be delivered to or to the order of the Agent the following documents and evidence:

2.1.1 a certificate from a duly authorised officer of each Corporate Guarantor and each Pledgor confirming that none of the documents delivered to the Agent pursuant to Clauses 3.1 and 3.3 of the Loan Agreement have been amended or modified in any way since the date of their delivery to the Agent, or copies, certified by a duly authorised officer of the Corporate Guarantor or Pledgor in question as true, complete, accurate and neither amended nor revoked, of any which have been amended or modified;

2.1.2 if not already provided to the Agent to its satisfaction, certified true copies of the constitutional documents of each Security Party together with such other evidence as the Agent may reasonably require each Security Party is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party;

3

2.1.3 the original resolution of the directors and a resolution of the shareholders of each Security Party (other than Dryships) (together, where appropriate, with signed waivers of notice of any directors’ or shareholders’ meetings) approving, and authorising or ratifying the execution of this Second Supplemental Agreement, the New Guarantee and any other documents to be executed by each Security Party pursuant to this Second Supplemental Agreement;

2.1.4 a notarially attested and legalised power of attorney of each Security Party under which this Second Supplemental Agreement, the New Guarantee and any other documents required pursuant to them are to be executed by that Security Party;

2.1.5 certificates of good standing in respect of the Security Parties;

2.1.6 a letter from Ince Process Agents, of International House, 1 St. Katharine’s Way, London E1W 1AY, United Kingdom, c/o Mr M. Volikas, accepting their appointment by each of the Security Parties as agent for service of Proceedings pursuant to this Second Supplemental Agreement and the New Guarantee;

2.1.7 copies of the Original Financial Statements of Dryships;

2.1.8 such documentation and other evidence as is reasonably requested by the Agent in order for the Lenders to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Additional Security Documents; and

2.1.9 the Additional Security Documents duly executed.

2.2 All documents and evidence delivered to the Agent pursuant to this Clause shall:

2.2.1 be in form and substance acceptable to the Agent;

2.2.2 be accompanied, if required by the Agent, by translations into the English language, certified in a manner acceptable to the Agent; and

4

2.2.3 if required by the Agent, be provided as set out below :-

2.2.3.1 with the signature(s) notarially attested in the case of Clauses 2.1.1 and 2.1.3;

2.2.3.2 certified as true and complete in the case of Clause 2.1.5; and

2.2.3.3 certified in the manner provided in clause 12.1.2 of the Original Loan Agreement in the case of Clause 2.1.7;

in each case in a manner acceptable to the Agent.

3 Representations and Warranties

Each of the representations and warranties contained in clause 11 of the Original Loan Agreement shall be deemed repeated by the Borrowers at the date of this Second Supplemental Agreement and at the Effective Date, by reference to the facts and circumstances then pertaining, as if references to the Finance Documents included this Second Supplemental Agreement and the other Additional Security Documents.

4 Amendments to Loan Agreement

With effect from the Effective Date, the Original Loan Agreement shall be read and construed as if:-

4.1 the definition of “Corporate Guarantees” set out in clause 1.1 of the Original Loan Agreement was amended to include the New Guarantee and exclude the Corporate Guarantee executed by Cardiff;

4.2 the definition of “Corporate Guarantors” set out in clause 1.1 of the Original Loan Agreement was amended to include Dryships and to exclude Cardiff;

4.3 the definition of “Group” set out in clause 1.1 of the Original Loan Agreement was deleted and replaced as follows:

““Group” means all companies whose vessels are owned by Dryships or its Subsidiaries.”;

5

4.4 the following definitions were added in clause 1.1 of the Original Loan Agreement:-

““Collateral Loan Agreement C” means the loan agreement dated 24 July 2006 made between (a) Nord LB and others, as lenders, (b) Nord LB, as agent, (c) Nord LB, as security agent, (d) Nord LB, as swap bank and (e) the New Collateral Owners, as borrowers.

“Collateral Loan C Indebtedness” means the Secured Liabilities as such term is defined in the Collateral Loan Agreement C.

“Fleet Market Value” means the aggregate of the value of the Fleet Vessels based on the average of two valuations for each Fleet Vessel prima facie determined by two reputable, independent and first class firms of shipbrokers appointed by and reporting to the Agent on the basis of a charter-free sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing seller and a willing buyer.

“Fleet Vessels” means any vessel (including, but not limited to, the Vessels) from time to time owned more than fifty per cent (50%) by any member of the Group.

“Interest Coverage Ratio” means earnings before interest, tax, depreciation and amortisation over interest expense less interest income, as each such term is defined in the applicable Financial Statements for the Group.

“Market Adjusted Equity Ratio” means the ratio of Minimum Net Worth to Value Adjusted Total Assets.

“Market Value Adjusted Net Worth” means Value Adjusted Total Assets less Value Adjusted Total Liabilities.

“Primelead” means Primelead Shareholder Inc. (to be renamed Ocean Rig UDW Inc.) a company incorporated under the laws of the Marshall Islands with its registered office at The Trust Company Complex, Ajeltake Island, Majuro, Marshall Islands.

“Total Liabilities” means, the aggregate of the total liabilities of the Group, including any aggregate net negative mark-to-market for any currency or interest rate swaps entered into by the Group, (as determined on a consolidated basis), as each such term is defined in the applicable Financial Statements for the Group.

“Value Adjusted Equity” means Value Adjusted Total Assets minus Total Liabilities.

6

“Value Adjusted Total Liabilities” means the amount which is equal to the Total Liabilities of the Group, as adjusted to reflect any contingent liabilities of the Group which the Agent reasonably considers should be taken into account, as each such term is defined in the applicable Financial Statements for the Group.

“Value Adjusted Total Assets” means the aggregate at any time on a consolidated basis of the Fleet Market Value and the Group’s assets, as each such term is defined in the applicable Financial Statements for the Group.”;

4.5 the definition of “Collateral Loan Indebtedness” set out in clause 1.1 of the Original Loan Agreement was deleted and the following substituted thereof;

““Collateral Loan Indebtedness” means the aggregate of Collateral Loan A Indebtedness, Collateral Loan B Indebtedness and Collateral Loan C Indebtedness.”;

4.6 the definition of “Security Documents” set out in clause 1.1 of the Original Loan Agreement was amended to include the Additional Security Documents;

4.7 the following new clause 12.2.3 was added in the Original Loan Agreement:-

12.2.3 Dryships’ financial ratios the Group’s financial condition as evidenced by the most recent Financial Statements shall be such that, on a consolidated basis:

(a) the Group maintains a Market Adjusted Equity Ratio not lower than 0.3:1 for each financial year during the Facility Period; and

(b) the Group maintains an Interest Coverage Ratio of not lower than 3:1; and

(c) the Group maintains a Market Value Adjusted Net Worth, which is not lower than five hundred million Dollars ($500,000,000).”;

4.8 clause 12.2.8 (Borrowers’ ownership) of the Original Loan Agreement was deleted and the following substituted thereof:-

“12.2.8 Borrowers’ ownership The Borrowers will procure that, for as long as Primelead remains a Subsidiary of Dryships, the Borrowers each remain seventy per centum (70%), directly or indirectly, beneficially owned by Dryships.”;

7

4.9 the following new clause 12.2.9 was added in the Original Loan Agreement:-

“12.2.9  Corporate Guarantors’ ownership The Borrowers will procure that the Corporate Guarantors (other than Dryships) each remain one hundred per centum (100%), directly or indirectly, beneficially owned by the Personal Guarantor.

4.10 clause 12.2.10 (Negative pledge and no disposals) of the Original Loan Agreement were deleted and the following substituted thereof:-

“12.2.10  Negative pledge and no disposals Neither Borrower shall without the prior written consent of the Agent, and shall procure that none of the Corporate Guarantors (other than Dryships) shall without the prior written consent of the Agent, create nor permit to subsist any Encumbrance or other third party rights over any of its present or future assets or undertaking nor dispose of any those assets or of all or part of that undertaking.”;

4.11 clause 12.2.13 (No other Business) of the Original Loan Agreement was deleted and the following substituted thereof:-

“12.2.13  No other business Neither Borrower shall without the prior written consent of the Agent, and shall procure that none of the Corporate Guarantors (other than Dryships) shall without the prior written consent of the Agent, engage in any business other than the ownership of its Vessel.”;

4.12 clause 12.2.16 (No substantial liabilities) of the Original Loan Agreement was deleted and the following substituted thereof:-

“12.2.16  No substantial liabilities Except in the ordinary course of business, neither Borrower shall without the prior written consent of the Agent, and shall procure that none of the Corporate Guarantors (other than Dryships) shall without the prior written consent of the Agent, incur any liability to any third party which is in the Agent’s opinion of a substantial nature.”;

8

4.13 clause 12.2.19 (No change in ownership or control of a Borrower) of the Original Loan Agreement was deleted and the following substituted thereof:-

“12.2.19  No change in ownership or control of a Borrower Neither Borrower shall, and shall procure that no Corporate Guarantor (other than Dryships) shall, permit any change in its beneficial ownership and control from that advised to the Agent at the date of this Agreement, other than any change of beneficial ownership and control of the Borrowers from Dryships to Primelead, and any subsequent change of ownership and control of Primelead”; and

4.14 Schedule 6 of the Original Loan Agreement was deleted and replaced by Schedule 1 of this Second Supplemental Agreement.

All other terms and conditions of the Original Loan Agreement shall remain unaltered and in full force and effect.

5 Confirmation and Undertaking

5.1 Each of the Security Parties confirms that all of its respective obligations under or pursuant to each of the Security Documents to which it is a party remain in full force and effect, despite the amendments to the Original Loan Agreement made in this Second Supplemental Agreement, as if all references in any of the Security Documents to the Original Loan Agreement (however described) were references to the Original Loan Agreement as amended and supplemented by this Second Supplemental Agreement.

5.2 The definition of any term defined in any of the Security Documents shall, to the extent necessary, be modified to reflect the amendments to the Original Loan Agreement made in this Second Supplemental Agreement.

6 Security

The definition of any term defined in any of the Security Documents including the Original Loan Agreement shall to the extent necessary be modified to reflect the amendments to the Original Loan Agreement made in or pursuant to this Second Supplemental Agreement.

9

7 Further Assurance

The Borrowers hereby covenant that from time to time at the request of the Agent they will execute and deliver to the Agent and/or the Security Agent or procure the execution and delivery to the Agent of all such documents as the Lenders shall deem necessary or desirable in its absolute discretion for giving full effect to this Second Supplemental Agreement and for perfecting and protecting the value or of enforcing any rights or securities granted to the Finance Parties under or pursuant to the Original Loan Agreement and this Second Supplemental Agreement.

8 Fees and expenses

8.1 The Borrowers undertake to indemnify the Agent and the Lenders on demand in respect of all costs, charges and expenses (together with value added tax or any similar tax thereon and including without limitation the fees and expenses of legal advisers) incurred by the Agent and/or any Lender in connection with the negotiation, preparation, printing, execution and registration of this Second Supplemental Agreement, and the completion of the transactions therein contemplated (whether or not any of the Additional Security Documents are actually executed or registered).

8.2 The Borrowers undertake to indemnify the Agent and/or any Lender on demand against any and all stamp, registration and similar Taxes which may be payable in the United Kingdom and/or any other jurisdiction in connection with the entry into, performance and enforcement of this Second Supplemental Agreement.

9 Notices, Law and Jurisdiction

The provisions of clauses 18 and 23 of the Original Loan Agreement shall apply to this Second Supplemental Agreement as if they were set out in full and as if references to the Original Loan Agreement were references to this Second Supplemental Agreement and references to the Borrowers were references to the Security Parties.

10 Miscellaneous

Clauses 22.1, 22.5 and 22.6 of the Original Loan Agreement shall (mutatis mutandis) apply to this Second Supplemental Agreement.

10

SCHEDULE 1: Form of Compliance Certificate

To:	DVB BANK SE
From:	GRAND INVESTMENT HOLDING LTD. DRILLSHIP HYDRA OWNERS INC. DRILLSHIP PAROS OWNERS INC. OIL TRANSPORT INVESTMENTS LIMITED INNOVATIVE INVESTMENTS LIMITED AMBASSADOR SHIPPING CORPORATION OCEANIDS OWNING COMPANY LIMITED NEREIDS OWNING COMPANY LIMITED MUSES OWNING COMPANY LIMITED ERATO OWNING COMPANY LIMITED MENTOR OWNING COMPANY LIMITED IRIS OWNING COMPANY LIMITED DRYSHIPS INC.

Dated:

Dear Sirs

Drillship Hydra Owners Inc. and Drillship Paros Owners Inc. – Loan Agreement dated 10 September 2007 as amended and supplemented by a first supplemental agreement dated 10 January 2008 and as further amended and supplemented by a second supplemental agreement dated [            ] (the “Agreement”)

We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

We confirm that:

1. Grand’s Leverage does not exceed 75%, as required by Clause 12.2.2 (a);

2. Grand’s Minimum Net Worth is not lower than $75,000,000, as required by Clause 12.2.2 (b);

3. the Group maintains a Market Adjusted Equity Ratio (calculated in the manner set out in the Appendix) not lower than 0.3:1 for each financial year during the Facility Period; and

11

4. the Group maintains an Interest Coverage Ratio (calculated in the manner set out in the Appendix) of not lower than 3:1;

5. the Group maintains a Market Value Adjusted Net Worth (calculated in the manner set out in the Appendix), which is not lower than five hundred million Dollars ($500,000,000); and

6. Clause 10.11 is being complied with.

We confirm that no Default is continuing*.

Signed:

Director Of [DRYSHIPS INC] [GRAND INVESTMENT HOLDING LTD.] [DRILLSHIP HYDRA OWNERS INC.] [DRILLSHIP PAROS OWNERS INC.] [OIL TRANSPORT INVESTMENTS LIMITED] [INNOVATIVE INVESTMENTS LIMITED] [AMBASSADOR SHIPPING CORPORATION] [OCEANIDS OWNING COMPANY LIMITED] [NEREIDS OWNING COMPANY LIMITED] [MUSES OWNING COMPANY LIMITED] [ERATO OWNING COMPANY LIMITED] [MENTOR OWNING COMPANY LIMITED] [IRIS OWNING COMPANY LIMITED]

* If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

12

APPENDIX TO COMPLIANCE CERTIFICATE

Covenant analysis as of [                ]:
1) Market Adjusted Equity Ratio
Minimum Net Worth calculation for 12 months ended [                ]
Charter free market value of total assets:	[                ]
less total liabilities:	[                ]
Minimum Net Worth:	[                ]
Value Adjusted Total Assets calculation for 12 months ended [                ]
Fleet Market Value:	[                ]
Group’s assets:	[                ]
Value Adjusted Total Assets:	[                ]
Market Adjusted Equity Ratio:	[                ]
Minimum required:	0.3:1
Covenant met:	[yes]
2) Interest Coverage Ratio
EBITDA calculation for 12 months ended [                ]
earnings	[                ]
less interest	[                ]
less tax	[                ]
less depreciation	[                ]
less amortisation	[                ]
over	[                ]
interest expense	[                ]
less interest income	[                ]
Interest Coverage Ratio
Minimum required	3:1
Covenant met	[yes]
3) Market Value Adjusted Net Worth
Value Adjusted Total Assets calculation for 12 months ended [                ]
Fleet Market Value	[                ]
Group’s other assets	[                ]

13

Value Adjusted Total Assets	[                ]
Value Adjusted Total Liabilities calculation for 12 months ended [                ]
Total Liabilities	[                ]
(as adjusted to reflect any contingent liabilities of the Group)
Value Adjusted Total Assets	[                ]
Minimum required	500,000,000
Covenant met	[yes]
DETAILED EBITDA CALCULATIONS
EBITDA calculations for 12 months
Ended [                ]

	3 months ended	3 months ended	12 months ended
	[                ]	[                ]	[                ]
earnings	[                ]	[                ]	[                ]
less interest	[                ]	[                ]	[                ]
less tax	[                ]	[                ]	[                ]
less depreciation	[                ]	[                ]	[                ]
less amortisation	[                ]	[                ]	[                ]
EBITDA	[                ]	[                ]	[                ]

14

IN WITNESS of which the parties to this Second Supplemental Agreement have executed this Second Supplemental Agreement as a deed the day and year first before written.

SIGNED and DELIVERED as	)
a DEED by	)
DRILLSHIP HYDRA OWNERS INC.	)
acting by	)
/s/ Eugenia Papapontikou	)
EUGENIA PAPAPONTIKOU	)
its duly authorised attorney-in-fact	)
in the presence of	)
CONSTANTINO KARACHALIOS	)

SIGNED and DELIVERED as	)
a DEED by	)
DRILLSHIP HYDRA OWNERS INC.	)
acting by	)
/s/ Stephenson Harwood	)
STEPHENSON HARWOOD	)
its duly authorised attorney-in-fact	)
in the presence of	)
CONSTANTINO KARACHALIOS	)

SIGNED and DELIVERED as	)
a DEED by	)
DVB BANK SE (as a lender)	)
acting by	)
/s/ Dimitrios Beis	)
DIMITRIOS BEIS	)
its duly authorised attorney-in-fact	)
in the presence of	)
CONSTANTINO KARACHALIOS	)

15

SIGNED and DELIVERED as	)
a DEED by	)
DVB BANK SE (as arranger)	)
acting by	)
DIMITRIOS BEIS	)	/s/ Dimitrios Beis
its duly authorised attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS
/s/ Stephenson Harwood
STEPHENSON HARWOOD
SIGNED and DELIVERED as	)
a DEED by	)
DVB BANK SE (as agent)	)
acting by	)
DIMITRIOS BEIS	)	/s/ Dimitrios Beis
its duly authorised attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS
/s/ Stephenson Harwood
STEPHENSON HARWOOD
SIGNED and DELIVERED as	)
a DEED by	)
DVB BANK SE (as arranger)	)
acting by	)
DIMITRIOS BEIS	)	/s/ Dimitrios Beis
its duly authorised attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS
/s/ Stephenson Harwood
STEPHENSON HARWOOD
SIGNED and DELIVERED as	)
a DEED by	)
NORDDEUTSCHE LANDESBANK	)
GIROZENTRALE (as lender)	)
acting by	)
DIMITRIOS BEIS	)	/s/ Dimitrios Beis
its duly authorised attorney-in-fact	)
in the presence of:	)
CONSTANTINOS KARACHALIOS
/s/ Stephenson Harwood
STEPHENSON HARWOOD

16

EX-4.69

Exhibit 4.69

Date 13 May 2009

PRIMELEAD HOLDING INC.

as Borrower

-and-

THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1

as Lenders

-and-

NORDEA BANK FINLAND PLC, LONDON BRANCH

as Agent and Security Trustee

AGENCY AND TRUST DEED

relating to a US$300,000,000 term loan facility

Watson, Farley & Williams

London

INDEX

Clause		Page
1	INTERPRETATION	1
2	THE AGENT	2
3	THE SECURITY TRUSTEE	3
4	LIMITATIONS ON THE RESPONSIBILITIES OF, AND INDEMNITIES FOR, THE AGENT AND THE SECURITY TRUSTEE	5
5	APPOINTMENT OF A NEW SERVICING BANK	9
6	SHARING	10
7	SUPPLEMENTAL	12
8	LAW AND JURISDICTION	12
SCHEDULE 1 LIST OF LENDERS		14
EXECUTION PAGES		15

THIS DEED is made on 13 May 2009

BETWEEN

(1) PRIMELEAD HOLDING INC., a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 (the “Borrower”);

(2) THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as Lenders;

(3) NORDEA BANK FINLAND PLC, LONDON BRANCH as Agent; and

(4) NORDEA BANK FINLAND PLC, LONDON BRANCH, as Security Trustee.

BACKGROUND

This Deed is supplemental to an agreement dated the same date as this Deed and made between (i) the Borrower, (ii) the Lenders, (iii) Nordea Bank Finland Plc, London Branch and DnB NOR Bank ASA, London Branch as Lead Arrangers, (iv) the Agent and (v) the Security Trustee, which provides for a term loan facility of up to US$300,000,000.

IT IS AGREED as follows:

1 INTERPRETATION

1.1 Defined expressions. Words and expressions defined in the Loan Agreement shall have the same meanings when used in this Deed unless the context otherwise requires.

1.2 Definitions. In this Deed, unless the contrary intention appears:

“Loan Agreement” means the loan agreement referred to in Recital A; and

“Servicing Banks” means the Agent and the Security Trustee.

1.3 General interpretation.

(a) In this Deed:

(i) references to, or to a provision of, a Finance Document or any other document are references to it as amended or supplemented, whether before the date of this Deed or otherwise;

(ii) references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Deed or otherwise; and

(iii) words denoting the singular number shall include the plural and vice versa; and

(b) Clauses 1.1 to 1.3 apply unless the contrary intention appears.

2 THE AGENT

2.1 Appointment of Agent. Each Lender appoints the Agent to act as its agent under and in connection with the Loan Agreement and the other Finance Documents.

2.2 Authorisation of Agent. Each Lender authorises the Agent to exercise those rights, powers and discretions which are expressly given to the Agent by this Deed and the other Finance Documents, together with any other reasonably incidental rights, powers and discretions.

2.3 Agent not a trustee; limitation of obligations. The relationship between the Agent and each Lender is that of agent and principal only; and the Agent shall not, in its capacity as Agent, be regarded as a trustee for the Lenders (or any of them) of any moneys which are paid to, or held by, the Agent under or in connection with any Pertinent Documents.

2.4 Absence of express authorisation. In connection with the exercise of any right, power or discretion or any other matter not expressly provided for in the Finance Documents:

(a) the Agent shall act, and shall be protected in acting, in accordance with any written instructions which it receives from the Majority Lenders;

(b) such instructions given by the Majority Lenders shall be binding on all the Lenders; and

(c) if the Agent has received no such instructions, the Agent shall be fully entitled, but shall have no obligation, to act in such manner as it considers to be in the best interests of all the Lenders or the Lender or Lenders concerned.

2.5 Limitation on obligation of Agent to request instructions. The Agent shall not have any obligation to request the Lenders to give it any instructions or to make any determination unless the Agent is specifically asked to do so by a Lender or Lenders having Contributions exceeding 10 per cent. of the Loans or (if the Loans have not been made) Commitments exceeding 10 per cent. of the Total Commitments.

2.6 Ratification of unauthorised action of Agent. Any action which the Agent takes or purports to take on behalf of the Lenders, the Majority Lenders or any Lender at a time when it had not been authorised to do so shall, if subsequently ratified, be as valid as regards every Creditor Party as if the Agent had been expressly authorised in advance.

2.7 Reliance on action of Agent. The Borrower and each Security Party:

(a) shall be entitled to assume that the Majority Lenders, or, as the case may be, all of the Lenders have or has duly given any instruction or authorisation which, under any provision of a Finance Document, is required in relation to any action which the Agent has taken or is about to take; and

(b) shall not be entitled to require any evidence that such an instruction or authorisation has been given.

2.8 Supply of copy documents. The Agent shall promptly send to each Lender upon the request and at the cost of that Lender, a copy of any document received by it under clauses 9 and 11 of the Loan Agreement (but the Agent shall not be obliged to check their accuracy or completeness).

2

2.9 Lender communications. Each Lender shall promptly forward to the Agent a copy of any communication which that Lender sends to, or receives from, the Borrower or any Security Party in connection with any Pertinent Matter.

3 THE SECURITY TRUSTEE

3.1 Definition of “Trust Property”. In this Clause, “Trust Property” means:

(a) all Security Interests and all rights granted to, or held or exercisable by, the Security Trustee under or by virtue of the Finance Documents, except rights intended for the sole benefit or protection of the Security Trustee;

(b) all moneys or other assets which are received or recovered by or on behalf of the Security Trustee under or by virtue of any Security Interest or right covered by paragraph (a), including any moneys or other assets which are received or recovered by it as a result of the enforcement or exercise by it of such a Security Interest or right; and

(c) all moneys or other assets which may accrue in respect of, or be derived from, any moneys or other assets covered by paragraph (b);

except any moneys or other assets which the Security Trustee has transferred to the Agent or (being entitled to do so) has retained in accordance with the following provisions of this Clause 3.

3.2 Holding and dealing with Trust Property. The Security Trustee shall:

(a) hold the Trust Property on trust for the Creditor Parties in accordance with their respective entitlements under the Finance Documents; and

(b) deal with the Trust Property;

in accordance with this Clause 3 and the other provisions of the Finance Documents.

3.3 Absence of express authorisation. In connection with the exercise of any right, power or discretion or any other matter not expressly provided for in the Finance Documents:

(a) the Security Trustee shall act, and shall be protected in acting, in accordance with any written instructions which it receives from the Agent or, if the Security Trustee is the same legal entity as the Agent, in accordance with any written instructions which it receives from the Majority Lenders;

(b) any such instructions given by the Agent or (as the case may be) the Majority Lenders will be binding on all the Lenders; and

(c) if the Security Trustee has received no such instructions, the Security Trustee shall be fully entitled, but shall have no obligation, to act in such manner as it considers to be in the best interests of all the Lenders or the Lender or Lenders concerned.

3.4 Limitation on obligation of Security Trustee to request instructions. The Security Trustee shall not have any obligation to request the Agent or the Majority Lenders to give it any instructions or to make any determination.

3

3.5 Ratification of unauthorised action of Security Trustee. Any action which the Security Trustee takes or purports to take at a time when it had not been authorised to do so shall, if subsequently ratified, be as valid as regards every Creditor Party as if the Security Trustee had been expressly authorised in advance.

3.6 Supply of copy documents. The Security Trustee shall promptly send to the Agent or, if the Security Trustee is the same legal entity as the Agent, to each Lender a copy of any document which the Security Trustee receives under or in connection with any Finance Document and which it considers of sufficient importance to be material to the Creditor Parties generally.

3.7 Application of receipts. Except as expressly stated to the contrary in any Finance Document, any moneys which the Security Trustee receives or recovers and which are Trust Property shall (without prejudice to the rights of the Security Trustee under any Finance Document to credit any moneys received or recovered by it to any suspense account) be transferred to the Agent for application in accordance with clause 15 of the Loan Agreement.

3.8 Deductions from receipts. Before transferring any moneys to the Agent under Clause 3.7, the Security Trustee may deduct any sum then due and payable under the Loan Agreement or any other Finance Document to the Security Trustee or any receiver, agent or other person appointed by it and retain that sum for itself or, as the case may require, pay it to the other person to whom it is then due and payable; for this purpose if the Security Trustee has become entitled to require a sum to be paid to it on demand, that sum shall be treated as due and payable, even if no demand has yet been served.

3.9 Agent and Security Trustee the same person. Where the same person is the Security Trustee and the Agent, it shall be sufficient compliance with Clause 3.7 for the moneys concerned to be credited to the account to which the Agent remits or credits the amounts which it receives from the Borrower under the Loan Agreement for distribution to the Lenders or any of them.

3.10 Additional statutory rights. In addition to its rights under or by virtue of this Deed and the other Finance Documents, the Security Trustee shall have all of the rights conferred on a trustee by the Trustee Act 1925, the Trustee Delegation Act 1999 and by the Trustee Act 2000 and by general law or otherwise, provided that:

(a) section 1 of the Trustee Act 2000 shall not apply to the duties of the Security Trustee in relation to the trusts constituted by this Deed and the other Finance Documents;

(b) where there are any inconsistencies between (i) the Trustee Acts 1925 and 2000 and (ii) the provisions of this Deed and any other Finance Document, the provisions of this Deed and any other Finance Document shall, to the extent allowed by law, prevail and, in the case of any inconsistency with the Trustee Act 2000, such provisions shall constitute a restriction or exclusion for the purposes of the Trustee Act 2000.

3.11 Release of Security Interests. At the end of the Security Period, the Security Trustee shall release, without any covenants for title or other recourse whatsoever, all the Security Interests created by the Finance Documents and re-assign to the Borrower any assets then comprised in those Security Interests, whereupon the Security Trustee shall be discharged from all liabilities and obligations which it has under this Deed and the other Finance Documents; in determining whether, for the purposes of this Clause 3, the Security Period has come to an end there shall be disregarded the liabilities of the Borrower in respect of the expenses of the Creditor Parties in connection with any such release or re-assignment.

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3.12 Perpetuity period. The trusts hereby constituted are governed by English law, and the applicable perpetuity period is 75 years commencing on the date of this Deed.

4 LIMITATIONS ON THE RESPONSIBILITIES OF, AND INDEMNITIES FOR, THE AGENT AND THE SECURITY TRUSTEE

4.1 No obligations beyond those expressly specified. No Servicing Bank shall, in respect of any Pertinent Matter, have, or be held to have assumed, any obligation to the Borrower, any Security Party, any Lender or the other Servicing Bank except:

(a) an obligation of honesty; and

(b) those specific obligations, if any, which are expressly imposed on that Servicing Bank in connection with that Pertinent Matter by the Pertinent Document concerned.

4.2 Limits on liability. Neither Servicing Bank shall be liable in respect of any claim, expense, liability or loss made or brought against or incurred by the Borrower, any Security Party, any Lender, or the other Servicing Bank in respect of any Pertinent Matter and which results from any cause whatsoever (regardless of whether the cause occurred before the date of this Deed or occurs on or after that date) unless the claim, expense, liability or loss is shown to have been directly and mainly caused by the dishonesty, gross negligence or the wilful misconduct of that Servicing Bank’s officers or employees; and neither the Borrower nor any Security Party nor any other Creditor Party shall bring in any country:

(a) any claim which is inconsistent with this Clause 4; or

(b) any claim against a current or former officer or employee of a Servicing Bank unless there is substantial and specific evidence establishing that, on a balance of probabilities, he was guilty of dishonesty or wilful misconduct.

4.3 No obligation to check or pass on information in certain areas. Without limiting the generality of Clause 4.1, neither Servicing Bank shall have any obligation to check or, except as expressly required by a Finance Document, to provide or pass onto the other Creditor Parties or any of them any information about:

(a) the financial position or the affairs of the Borrower, any Security Party or any other person; or

(b) the truth of any representation, warranty or statement made, or any information provided (whether before the date of this Deed or otherwise), by the Borrower, any Security Party or any other person which relates or might be relevant to a Pertinent Matter; or

(c) the title, value or condition of, or any other matter relating to, any asset referred to in any Pertinent Document; or

(d) whether any Event of Default or Potential Event of Default is imminent, has occurred or is continuing; or

(e) any other Pertinent Matter.

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4.4 Notification of an Event of Default. If the occurrence of an Event of Default is brought to the attention of the officers or employees of a Servicing Bank who are directly involved in the performance of the Servicing Bank’s functions under the Finance Documents, that Servicing Bank (in the case of the Security Trustee, through the Agent) shall, as soon as reasonably practicable, notify the other Creditor Parties that the Event of Default has occurred; but this obligation shall not arise if such information would not be of material importance (for example because the Event of Default is purely technical or the Lenders already know that it will occur).

4.5 No responsibility for legal or tax effectiveness or to disclose or explain risks. Without limiting the generality of Clause 4.1, neither Servicing Bank shall have an obligation to any other Creditor Party or other person referred to in Clause 4.1 to ensure that:

(a) any Pertinent Document or any right, obligation, liability or Security Interest created by a Pertinent Document is or remains valid, enforceable or effective or has or retains a particular priority or status;

(b) any Pertinent Document or Pertinent Matter satisfies any requirement, is covered by any exemption, or is treated in any particular way for any purpose connected with banking supervision, tax, subsidies or any other matter, or continues to do any of the foregoing;

(c) any Pertinent Document or Pertinent Matter is not affected by or does not create a particular risk of any kind or that any risk is insured or covered, reduced or hedged or otherwise dealt with; or

(d) any risk is disclosed or explained (whether by the Servicing Bank or any other person) to the Creditor Parties or to such of them as is or are exposed;

and “risk” includes an actual or potential adverse factor, whether having financial, legal or tax implications or implications of a different kind.

4.6 No liability for another party’s breach. Without limiting the generality of Clause 4.1, neither Servicing Bank shall have a liability to any other Creditor Party in respect of any breach (including a misrepresentation) by the Borrower, any Security Party, any other Creditor Party or any other person of any obligation arising under a Pertinent Document or relating to a Pertinent Matter.

4.7 Servicing Bank’s right to decline to act. Each Servicing Bank shall be absolutely entitled to decline to:

(a) commence, defend or continue as a party to any proceedings or to take or participate in any other action which it considers will or may expose it to any claim or loss unless it has first received security in such amount and on such terms as it may require; or

(b) commence, defend or continue as a party to any proceedings or to take or participate in any action which the Servicing Bank considers is or may be contrary to any Pertinent Document or contrary to or inconsistent with any legal obligation, whether arising under a law or regulation, a contract or otherwise, or the policy of any public authority which regulates or supervises any activity of the Servicing Bank or any other Creditor Party;

and, without limiting its generality, paragraph (b) entitles a Servicing Bank to refuse to disclose any information if it considers that the disclosure would or might be contrary to any obligation of confidentiality affecting it or another person. This Clause 4.7 overrides any obligation which the Servicing Bank would otherwise have.

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4.8 Advisers and delegation. Each Servicing Bank may:

(a) in relation to any Pertinent Matter, engage lawyers, accountants and other experts, and rely on their advice;

(b) perform all or any of its functions, including any pursuant to a trust, under or in connection with any Pertinent Document through any office or branch which it may from time to time select and notify to the other parties or through any kind of agent or sub-agent and, in particular, by power of attorney or otherwise delegate the exercise of any of its powers and discretions, including any pursuant to a trust, under and in connection with the Pertinent Documents to any person on such terms (as to duration, sub-delegation, remuneration, exoneration and otherwise) as it may consider appropriate.

4.9 Full freedom to enter into transactions. Notwithstanding any role of law or equity to the contrary, each Servicing Bank shall be absolutely entitled:

(a) to enter into and arrange banking, derivative, investment and/or other transactions of every kind with or affecting the Borrower or any Security Party or any other person who is party to, or referred to in, a Pertinent Document (including, but not limited to, any interest or currency swap or other transaction, whether related to this Deed or not, and acting as syndicate agent and/or security trustee for, and/or participating in, other facilities to the Borrower or any Security Party or any other person who is party to, or referred to in, a Pertinent Document); and

(b) to deal in and enter into and arrange transactions relating to:

(i) any securities issued or to be issued by the Borrower or any Security Party or any such other person; or

(ii) any options or other derivatives in connection with such securities;

(c) to provide advice or other services to the Borrower or any Security Party or any other person who is a party to, or referred to in, a Pertinent Document;

and, in particular, each Servicing Bank shall be absolutely entitled, in proposing, evaluating, negotiating, entering into and arranging all such transactions and in connection with all other matters covered by paragraphs (a) to (c), to use (subject only to insider dealing legislation) any information or opportunity, howsoever acquired by it, to pursue its own interests exclusively, to refrain from disclosing such dealings, transactions or other matters or any information acquired in connection with them and to retain for its sole benefit all profits and benefits derived from the dealings transactions or other matters.

4.10 Rights as Lender unaffected. In relation to its own participation in the Loans, if any, each Servicing Bank:

(a) shall have the same rights and powers in respect of Pertinent Matters as any Lender and may exercise those rights and powers as though it were not the Agent or (as the case may be) the Security Trustee; and

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(b) may vote and be counted towards the Majority Lenders and may be included in any consent required of all the Lenders even in relation to a matter which concerns it as Agent or as Security Trustee (other than a decision of the Lenders to commence proceedings against it in relation to a matter which arises out of this Deed or any of the other Finance Documents);

and, as regards such rights, powers and voting, each Servicing Bank shall be absolutely entitled to pursue its own interests exclusively.

4.11 Indemnification of Servicing Banks. The Lenders shall severally pro rata to their Contributions or, if the Loans have not been made, pro rata to their Commitments indemnify and hold harmless each Servicing Bank on demand against all claims, expenses, liabilities and losses made or brought against or incurred by that Servicing Bank in any country in relation to:

(a) any action taken, or omitted or neglected to be taken, under or in connection with this Deed or any of the other Pertinent Documents by that Servicing Bank;

(b) any other Pertinent Matter;

unless the claim, expense, liability or loss is shown to have been directly and mainly caused by the dishonesty or the wilful misconduct of that Servicing Bank’s officers or employees.

4.12 Interest. Any amount which either Servicing Bank demands under Clause 4.11 shall carry interest after the date on which the demand is served until actual payment (as well after as before judgment) in accordance with clause 7 of the Loan Agreement.

4.13 Lender’s liability. No Lender’s liability under Clause 4.11 is conditional on the other Lenders (or any of them) being or remaining liable under that Clause.

4.14 Saving of general law rights; protection cumulative. Nothing in this Clause 4 excludes or restricts any right or defence to which a Servicing Bank or a representative of a Servicing Bank would be entitled apart from this Clause 4. The protective provisions of this Clause 4 are cumulative.

4.15 Extended meaning of certain terms. References in this Clause 4 to a Servicing Bank include:

(a) references to it as it has been concerned before the date of this Deed or is, on or after that date, concerned, whether or not in its capacity as the Agent or the Security Trustee but not in its capacity as a Lender with the syndication or arranging of the Loans or of any other transaction referred to in or connected with a Pertinent Document, with anything relating to an Event of Default (or Potential Event of Default) or with any other Pertinent Matter; and

(b) references to any company which is or has at any time been treated for any purpose as belonging to the same group as that Servicing Bank and which has been concerned before the date of this Deed or is, on or after that date, concerned (otherwise than in its capacity as a Lender) with any matter falling within paragraph (a);

8

and, as regards Pertinent Matters arising before the signing of this Deed, references to the Lenders, the Borrower and the Security Parties include references to them in their capacities as persons having to decide whether or not to enter into the transactions to which the Pertinent Documents relate either at all or on the proposed terms of the Pertinent Documents.

4.16 Retrospective effect. This Clause 4 shall be deemed to have come into force on the date falling 1 month before the earliest document to have been written or sent by either Servicing Bank with reference to or in contemplation of this Deed or a financing such as provided for by the Loan Agreement and shall be read, looking forward, as if contained in an agreement signed on that date.

5 APPOINTMENT OF A NEW SERVICING BANK

5.1 Transfer to associates. Each Servicing Bank may at any time transfer its functions to an associated company, that is, a direct or indirect parent company of that Servicing Bank or a wholly-owned direct or indirect subsidiary of that Servicing Bank or of its direct or indirect parent company.

5.2 Notification of transfer. A transfer to an associated company shall be effected by a notice to the Borrower, the Security Parties, each of the Lenders and the other Servicing Bank signed by both the retiring Servicing Bank and its successor.

5.3 Effective date of transfer. The associated company’s appointment becomes effective on the date specified in the notice which shall be at least 7 days after the date on which it is served.

5.4 Resignation. A Servicing Bank which does not intend to transfer its functions to an associated company under Clauses 5.1 to 5.3 may at any time serve on the Lenders with copies to the Borrower, the Security Parties and the other Servicing Bank a notice of its intention to resign (a “Resignation Notice”) and in that event the following applies:

(a) a Resignation Notice is not irrevocable unless so expressed;

(b) a Resignation Notice only becomes effective when the appointment of the successor Servicing Bank becomes effective;

(c) if a Servicing Bank serves a Resignation Notice, the Majority Lenders have the right to nominate a reputable international bank or financial institution with an office in a major international financial centre as its successor;

(d) notwithstanding paragraph (c), the resigning Servicing Bank may nominate such a bank or institution with an office in a major international financial centre as its successor if the appointment of a successor Servicing Bank nominated or agreed to by the Majority Lenders has not become effective within 1 month after the date on which the resigning Servicing Bank served its Resignation Notice; and

(e) the successor Servicing Bank’s appointment becomes effective on the date on which the retiring Servicing Bank receives a notice in writing, addressed to the Borrower, the Security Parties, the Lenders and the other Servicing Bank signed by a senior officer of the successor Servicing Bank and unconditionally accepting the appointment or on any

9

later date (falling not more than 30 days after the date of the notice) which the notice specifies as the date on which the appointment will become unconditionally effective.

5.5 Effect of appointment of successor. On a successor Servicing Bank’s appointment becoming effective:

(a) it becomes bound to perform the obligations of the Agent or, as the case may be, the Security Trustee under the Finance Documents and entitled to all the powers and protections which the Finance Documents or the Majority Lenders confer on the Agent or, as the case may be, the Security Trustee; and

(b) except as stated in Clause 5.6 and 5.8 and except for a continuing duty of confidentiality, the resigning Servicing Bank is discharged from all its obligations under or in connection with the Finance Documents.

5.6 Transfer of records etc. After a successor Servicing Bank’s appointment becomes effective:

(a) the resigning Servicing Bank and (if necessary or desirable) the other Servicing Bank shall provide the successor Servicing Bank with any records (or print outs of any records held in computers), papers, computer programs or other material in its possession which relate solely to its functions as Agent or Security Trustee as the case may be; and

(b) the retiring Servicing Bank shall pay its successor a pro rata proportion of any agency fee which it may have received for any part of the period falling after the date when the successor’s appointment becomes effective.

5.7 Continued protection for resigning Servicing Bank. This Clause 5 and the other provisions of the Finance Documents shall remain in effect for the benefit and protection of a Servicing Bank which has resigned and its officers, employees and agents in relation to any claim or loss which may be brought against or incurred by it or them in connection with or as a result of any act, omission, breach, neglect or other occurrence or matter relating to or arising out of any Finance Document which took place before its resignation.

5.8 Costs of transfer. The resigning Servicing Bank shall bear its own costs, and the other parties’ proper and reasonable costs, incurred in negotiating and documenting the appointment of its successor and the transfer to its successor of the Security Interests held by it under the Finance Documents.

6 SHARING

6.1 General. This Clause 6 applies if a Lender (the “Sharing Bank”) receives or recovers any sum in respect of an amount due to it from the Borrower under any Finance Document otherwise than by distribution from the Agent in accordance with the terms of the Loan Agreement and this Deed.

6.2 Sharing of recoveries. Subject to Clauses 6.3 and 6.4:

(a) the Sharing Bank shall forthwith pay to the Agent an amount equal to the full sum so received or recovered;

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(b) as between the Borrower and the Sharing Bank, the Borrower shall remain indebted to the Sharing Bank under the Finance Documents in the amount paid by the Sharing Bank to the Agent as if the Sharing Bank had not received or recovered the sum mentioned above; and

(c) the Agent shall treat the amount so paid to it by the Sharing Bank as if it were a payment by the Borrower on account of amounts due from the Borrower under the Finance Documents for distribution to the Sharing Bank and each of the other Lenders in the proportions in which the Sharing Bank and the other Lenders would have been entitled to receive the amount had it been paid by the Borrower to the Agent in accordance with the Loan Agreement and this Deed.

6.3 Conditional reimbursement. Any payment made by the Sharing Bank or the Agent under Clause 6.2 shall (whether or not stated to be so subject) be subject to the condition that, if all or any part of the amount paid by the Sharing Bank to the Agent later has to be repaid by the Sharing Bank to the Borrower or any other person, whether under any insolvency law or otherwise, each of the Lenders (other than the Sharing Bank) to which the Agent distributed any part of the Sharing Bank’s payment shall repay to the Agent for remittance to the Sharing Bank the amount which the Agent distributed to that Lender, together with such amount (if any) as is necessary to reimburse the Sharing Bank the appropriate portion of any interest it was obliged to pay on the sum it repaid to the Borrower or other person concerned.

6.4 Exception to sharing. A Sharing Bank which has commenced or joined in any proceedings to recover sums due to it under any Finance Document and which receives or recovers an amount under a judgment in the proceedings or a settlement of them shall not have to share that amount with a Lender which has the legal right to, but does not, join in the proceedings or commence and diligently prosecute separate proceedings to recover the amounts due to it under the Finance Documents.

6.5 Notices of proceedings; receipt or recovery of amounts due. Without limiting the generality of Clause 2.9, a Lender shall promptly, and in any event within 5 Business Days, notify the Agent of:

(a) the commencement by that Lender of any proceedings which relate (wholly or in part) to any Finance Document or to any asset covered by a Security Interest created by a Finance Document;

(b) any judgment in, or settlement of, those proceedings;

(c) any other details about those proceedings which the Agent may request; and

(d) the receipt or recovery by that Lender of any sum in respect of an amount due to it by the Borrower under any Finance Document otherwise than through a distribution by the Agent;

and the Agent will promptly pass on that information to the other Lenders and the Security Trustee.

6.6 Set-off deemed to be recovery. For the purposes of this Clause 6, if a Lender:

(a) extinguishes a liability which it has to the Borrower in a certain sum; or

11

(b) reduces such a liability by a certain sum;

by exercising its rights under clause 23.1 of the Loan Agreement (or any such other right or remedy as is referred to in clause 23.2 of the Loan Agreement) in respect of an amount due to that Lender by the Borrower under a Finance Document, that Lender shall be deemed to have received that sum in respect of the amount due to it from the Borrower.

6.7 Asset transfer deemed to be recovery. If, in consideration of the transfer (by the Borrower or any other person) of an asset to a Lender or a person designated by a Lender:

(a) that Lender releases the Borrower from any of its liabilities to it under a Finance Document; or

(b) that Lender undertakes (with the Borrower or another person) not to sue the Borrower in respect of such a liability;

the Lender shall be deemed to have received, in respect of an amount due to it from the Borrower under the Loan Agreement, a sum equal to the value of the asset concerned.

6.8 Valuation of assets. For the purpose of Clause 6.7 the value of an asset is its open market net realisable value as determined by the Agent, and specified in a notice served by it on the Lender concerned, after consultation by the Agent with the other Lenders and such experts, if any, as the Lender may consider appropriate; and the Agent’s determination shall be conclusive.

6.9 Recovery from Security Party. This Clause 6 also applies to sums received or recovered from a Security Party or which would be deemed to be so received if the references in Clauses 6.5 and 6.6 to the Borrower were references to a Security Party.

7 SUPPLEMENTAL

7.1 Third party rights. A person who is not a party to this Deed has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Deed.

8 LAW AND JURISDICTION

8.1 English law. This Deed and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.

8.2 Exclusive English jurisdiction. Subject to Clause 8.3, the courts of England shall have exclusive jurisdiction to settle any Dispute.

8.3 Choice of forum for the exclusive benefit of the Servicing Banks. Clause 8.2 is for the exclusive benefit of the Servicing Banks, each of which reserves the rights:

(a) to commence proceedings in relation to any Dispute in the courts of any country other than England and which have or claim jurisdiction to that Dispute; or

(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

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Neither the Borrower nor any Lender shall commence any proceedings in any country other than England in relation to a Dispute.

8.4 Process agent. The Borrower irrevocably appoints Ince Process Agents Ltd. at its registered office for the time being, presently at 1 St Katherine’s Way, London E1W 1AY (att: Michael Volikas, Partner) to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this Deed.

8.5 Servicing Banks’ rights unaffected. Nothing in this Clause 8 shall exclude or limit any right which either Servicing Bank may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

8.6 Meaning of “proceedings”. In this Clause 8, “proceedings” means proceedings of any kind, including an application for a provisional or protective measure and a “Dispute” means any dispute arising out of or in connection with this Deed (including a dispute relating to the existence, validity or termination of this Deed) or any non-contractual obligation arising out of or in connection with this Deed.

THIS DEED has been executed by or on behalf of the parties and has, on the date stated at the beginning of this Deed, been delivered as a Deed.

13

SCHEDULE 1

LIST OF LENDERS

Lender	Lending Office
Nordea Bank Finland Plc, London Branch	8th Floor, City Place House, Basinghall Street, London EC2V 5NB
	Fax No: +44 2077 269188
DnB NOR Bank ASA, London Branch	20 St. Dunstan’s Hill, London, EC3R 8HY
	Fax No: +44 20 7726 9102
HSH Nordbank AG	Gerhart-Hauptmann Platz 50, 20095, Hamburg, Germany
	Fax No: +49 40 3333 34118

14

EXECUTION PAGES

BORROWER
EXECUTED AND DELIVERED	)	/s/ Alexandros Mylonas
AS A DEED	)
By PRIMELEAD HOLDING INC.	)
acting by Alexandros Mylonas	)
expressly authorised in	)
accordance with the laws	)
of the Marshall Islands by	)
virtue of a power of attorney	)
granted by PRIMELEAD HOLDINGS	)
INC. on 7 May 2009	)
such execution being	)
witnessed by:	)
Signature of witness:
/s/ Stelios Deverakis
Stelios Deverakis
LENDERS
EXECUTED AND DELIVERED	)
AS A DEED	)
by NORDEA BANK FINLAND PLC	)
LONDON BRANCH	)
acting by	)
expressly authorised in accordance with	)
the laws of Finland	)
by virtue of a power of attorney	)
granted on 14 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness
EXECUTED AND DELIVERED	)
AS A DEED	)
by DNB NOR BANK ASA	)
acting by	)
expressly authorised in accordance with	)
the laws of Norway	)
by virtue of a power of attorney	)
granted on 16 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness

15

EXECUTION PAGES

BORROWER
EXECUTED AND DELIVERED	)
AS A DEED	)
By PRIMELEAD HOLDING INC.	)
acting by	)
expressly authorised in	)
accordance with the laws	)
of the Marshall Islands by	)
virtue of a power of attorney	)
granted by PRIMELEAD HOLDINGS	)
INC. on 7 May 2009	)
such execution being	)
witnessed by:	)
Signature of witness:
LENDERS
EXECUTED AND DELIVERED	)
AS A DEED	)	/s/ Erica Lacombe
by NORDEA BANK FINLAND PLC	)
LONDON BRANCH	)
acting by Erica Lacombe	)
expressly authorised in accordance with	)
the laws of Finland	)
by virtue of a power of attorney	)
granted on 14 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness
/s/ Pat Skala
EXECUTED AND DELIVERED	)
AS A DEED	)	/s/ Erica Lacombe
by DNB NOR BANK ASA	)
acting by Erica Lacombe	)
expressly authorised in accordance with	)
the laws of Norway	)
by virtue of a power of attorney	)
granted on 16 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness
/s/ Pat Skala
PAT SKALA WATSON, FARLEY & WILLIAMS 2, DEFTERAS MERARCHIAS PIRAEUS 185 36 - GREECE

15

EXECUTED AND DELIVERED	)
AS A DEED	)	/s/ Erica Lacombe
by HSH NORDANK AG	)
acting by Erica Lacombe	)
expressly authorised in accordance with	)
the laws of Germany	)
by virtue of a power of attorney	)
granted on 30 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness
AGENT
EXECUTED AND DELIVERED	)
AS A DEED	)	/s/ Erica Lacombe
By NORDEA BANK FINLAND PLC	)
LONDON BRANCH	)
acting by Erica Lacombe	)
expressly authorised in accordance with	)
the laws of Finland	)
by virtue of a power of attorney	)
granted on 14 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness
SECURITY TRUSTEE
EXECUTED AND DELIVERED	)
AS A DEED	)
By NORDEA BANK FINLAND PLC	)	/s/ Erica Lacombe
LONDON BRANCH	)
acting by Erica Lacombe	)
expressly authorised in accordance with	)
the laws of Finland	)
by virtue of a power of attorney	)
granted on 14 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness
PAT SKALA WATSON, FARLEY & WILLIAMS 2, DEFTERAS MERARCHIAS PIRAEUS 185 36 - GREECE

16

EXECUTED AND DELIVERED	)
AS A DEED	)
by HSH NORDANK AG	)
acting by	)
expressly authorised in accordance with	)
the laws of Germany	)
by virtue of a power of attorney	)
granted on 30 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness
AGENT
EXECUTED AND DELIVERED	)
AS A DEED	)
By NORDEA BANK FINLAND PLC	)
LONDON BRANCH	)
acting by	)
expressly authorised in accordance with	)
the laws of Finland	)
by virtue of a power of attorney	)
granted on 14 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness
SECURITY TRUSTEE
EXECUTED AND DELIVERED	)
AS A DEED	)
By NORDEA BANK FINLAND PLC	)
LONDON BRANCH	)
acting by	)
expressly authorised in accordance with	)
the laws of Finland	)
by virtue of a power of attorney	)
granted on 14 April 2009	)
such execution being	)
witnessed by:	)
Signature of witness

16

EX-8.1

Exhibit 8.1

The Company’s consolidated subsidiaries as of December 31, 2009, are listed below:

	Ship-owning Companies with vessels in operation at December 31, 2009	Country of Incorporation	Vessel
1.	Malvina Shipping Company Limited	Malta	Coronado
2.	Arleta Navigation Company Limited	Malta	Xanadu
3.	Selma Shipping Company Limited	Malta	La Jolla
4.	Samsara Shipping Company Limited	Malta	Ocean Crystal
5.	Farat Shipping Company Limited	Malta	Toro
6.	Iguana Shipping Company Limited	Malta	Iguana
7.	Borsari Shipping Company Limited	Malta	Catalina
8.	Onil Shipping Company Limited)	Malta	Padre
9.	Fabiana Navigation Company Limited	Malta	Alameda
10.	Karmen Shipping Company Limited	Malta	Sonoma
11.	Thelma Shipping Company Limited	Malta	Manasota
12.	Celine Shipping Company Limited	Malta	Mendocino
13.	Lotis Traders Inc	Marshall Islands	Delray
14.	Tempo Marine Co.	Marshall Islands	Maganari
15.	Star Record Owning Company Limited	Marshall Islands	Ligari
16.	Argo Owning Company Limited	Marshall Islands	Redondo
17.	Rea Owning Company Limited	Marshall Islands	Ecola
18.	Gaia Owning Company Limited	Marshall Islands	Samsara
19.	Kronos Owning Company Limited	Marshall Islands	Primera
20.	Trojan Maritime Co.	Marshall Islands	Brisbane
21.	Dione Owning Company Limited	Marshall Islands	Marbella
22.	Phoebe Owning Company Limited	Marshall Islands	Majorca
23.	Uranus Owning Company Limited	Marshall Islands	Heinrich Oldendorff
24.	Selene Owning Company Limited	Marshall Islands	Bargara
25.	Tethys Owning Company Limited	Marshall Islands	Capitola
26.	Ioli Owning Company Limited	Marshall Islands	Paros I (ex Clipper Gemini)
27.	Iason Owning Company Limited	Marshall Islands	Oregon
28.	Orpheus Owning Company Limited	Marshall Islands	Avoca
29.	Team up Owning Company Limited	Marshall Islands	Saldanha
30.	Iokasti Owning Company Limited	Marshall Islands	Pachino (ex VOC Galaxy)
31.	Boone Star Owners Inc.	Marshall Islands	Samatan
32.	Norwalk Star Owners Inc.	Marshall Islands	Capri
33.	Ionian Traders Inc.	Marshall Islands	Positano
34.	NT LLC Investors Ltd.	Marshall Islands	Conquistador
35.	Dalian Star Owners Inc.	Marshall Islands	Mystic
36.	Aegean Traders Inc.	Marshall Islands	Sorrento
37.	Cretan Traders Inc.	Marshall Islands	Flecha
38.	Monteagle Shipping S.A.	Marshall Islands	Oliva
39.	Roscoe Marine Ltd.	Marshall Islands	Rapallo

	Ship-owning Companies with vessels sold/cancelled	Country of Incorporation	Vessel
40.	Iktinos Owning Company Limited	Marshall Islands	Hull SS058 (Cancelled- Oct. 2009)
41.	Kallikrates Owning Company Limited	Marshall Islands	Hull SS059(Cancelled- Oct. 2009)
42.	Faedon Shareholders Limited	Marshall Islands	Hull 2089(Liquidated –May 2009)
43.	Lansat Shipping Company Limited	Malta	Paragon (Sold-March 09)
44.	Thassos Traders Inc	Marshall Islands	Sidari (Cancelled Dec 08)
45.	Milos Traders Inc.	Marshall Islands	Petani (Cancelled Dec 08)
46.	Sifnos Traders Inc.	Marshall Islands	Hull 1568A(Cancelled Dec 08)
47.	Tinos Traders Inc .	Marshall Islands	Hull 1569A(Cancelled Dec 08)
48.	Annapolis Shipping Company .	Malta	Lacerta(Sold Dec 08)
49.	Tolan Shipping Company Limited.	Malta	Tonga (Sold-Nov 2008)
50.	Felicia Navigation Company Limited.	Malta	Solana (Sold - August 2008)
51.	Zatac Shipping Company Limited	Malta	Waikiki (Sold – July 2008)
52.	Atlas Owning Company Limited	Marshall Islands	Menorca (Sold-June 2008)
53.	Maternal Owning Company Limited)	Marshall Islands	Lanzarote (Sold-June 2008)
54.	Royerton Shipping Company Limited	Malta	Netadola (Sold- April 2008)
55.	Lancat Shipping Company Limited	Malta	Matira (Sold – February 2008)
56.	Paternal Owning Company Limited	Marshall Islands	Formentera (Sold – December 2007)
57.	Fago Shipping Company Limited	Malta	Lanikai (Sold –July 2007)
58.	Hydrogen Shipping Company Limited	Malta	Mostoles (Sold - July 2007)
59.	Madras Shipping Company Limited	Malta	Alona (Sold – June 2007)
60.	Seaventure Shipping Limited	Marshall Islands	Hille Oldendorff (Sold June 2007)
61.	Classical Owning Company Limited	Marshall Islands	Delray (Sold – May 2007)
62.	Oxygen Shipping Company Limited	Malta	Shibumi (Sold – April 2007)
63.	Human Owning Company Limited	Marshall Islands	Estepona (Sold – April 2007)
64.	Helium Shipping Company Limited	Malta	Striggla (Sold – January 2007)
65.	Blueberry Shipping Company Limited	Malta	Panormos (Sold – January 2007)
66.	Platan Shipping Company Limited	Malta	Daytona (Sold – January 2007)
67.	Silicon Shipping Company Limited	Malta	Flecha (Sold – December 2006)
68.	Callicles Challenge Inc.	Marshall Islands	Hull 1154 (Cancelled April 2009)
69.	Antiphon Challenge Inc.	Marshall Islands	Hull 1155 (Cancelled April 2009)
70.	Cratylus Challenge Inc.	Marshall Islands	Hull 1129 (Cancelled April 2009)
71.	Protagoras Challenge Inc.	Marshall Islands	Hull 1119 (Cancelled April 2009)
72.	Lycophron Challenge Inc.	Marshall Islands	Hull 1106 (Cancelled April 2009)
73.	Thrasymachus Challenge Inc.	Panama	Morgiana (Cancelled April 2009)
74.	Hippias Challenge Inc.	Liberia	Fernandina (Cancelled April 2009)
75.	Prodigus Challenge Inc.	Marshall Islands	Pompano (Cancelled April 2009)
76	Gorgias Challenge Inc.	Marshall Islands	Ventura (Cancelled April 2009)
77.	Kerkyra Traders Inc.	Marshall Islands	Maple Valley (Cancelled Jan. 2009)

	Ocean Rig subsidiaries	Country of Incorporation	Vessel
78.	Ocean Rig UDW Inc (formerly Primelead Shareholders Inc)	Marshall Islands	Holding Company
79.	Drillship Hydra Owners Inc	Marshall Islands	Drillship Hull 1837
80.	Drillship Paros Owners Inc.	Marshall Islands	Drillship Hull 1838
81.	Drillship Kithira Owners Inc.	Marshall Islands	Drillship Hull 1865
82.	Drillship Skopelos Owners Inc.	Marshall Islands	Drillship Hull 1866
83.	Ocean Rig AS	Norway
84.	Ocean Rig UK Ltd	UK
85.	Ocean Rig Ltd	UK
86.	Ocean Rig Ghana Ltd	Ghana
87	Ocean Rig USA AS	Norway
88.	Ocean Rig Canada Inc.	Canada
89.	Ocean Rig North Sea AS	Norway
90.	Ocean Rig 1 Inc.	Marshall Islands	Leiv Eiriksson
91.	Ocean Rig 2 Inc.	Marshall Islands	Eirik Raude
92.	Ocean Rig 1 Shareholders Inc.	Marshall Islands
93.	Ocean Rig 2 Shareholders Inc.	Marshall Islands
94.	Drill Rigs Holdings Inc.	Marshall Islands
95.	Drillships Investment Inc.	Marshall Islands
96.	Drillships Holding Inc.	Marshall Islands
97.	Kithira Shareholders Inc.	Marshall Islands
98.	Skopelos Shareholders Inc.	Marshall Islands
99.	Drillship Hydra Shareholders Inc.	Marshall Islands
100.	Drillship Paros Shareholders Inc.	Marshall Islands
101.	Ocean Rig Operations Inc.	Marshall Islands
102.	Primelead Limited	Cyprus
103.	Ocean Rig Black Sea Operations BV	The Netherlands
104.	Ocean Rig Drilling Services Cooperatief U.A	The Netherlands
105.	Ocean Rig Black Sea Cooperatief U.A	The Netherlands
106.	Ocean Rig Deep Water Drilling Ltd.	Nigeria

	Other companies	Country of Incorporation	Activity
107.	Wealth Management Inc.	Marshall Islands	Cash Manager
108.	Pounta Traders Inc.	Marshall Islands	Investment Company
109.	Sunlight Shipholding One Inc	Marshall Islands	Cash Manager
	Companies under liquidation	Country of Incorporation
110.	Ocean Rig ASA	Norway
111.	Ocean Rig Norway AS	Norway
112.	Ocean Rig 1 AS	Norway
113.	Ocean Rig 2 AS	Norway
114.	Primelead Holding Inc.	Marshall Islands

EX-12.1

Exhibit 12.1

CERTIFICATION

I, George Economou, certify that:

1. I have reviewed this annual report on Form 20-F of DryShips Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 9, 2010

/s/ George Economou

George Economou

Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATION

I, Ziad Nakhleh, certify that:

1. I have reviewed this annual report on Form 20-F of DryShips Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 9, 2010

/s/ Ziad Nakhleh

Ziad Nakhleh

Chief Financial Officer

EX-13.1

Exhibit 13.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this Annual Report of DryShips Inc. (the “Company”) on Form 20-F for the year ended December 31, 2009 as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, George Economou, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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

Date: April 9, 2010

/s/ George Economou

George Economou

Chief Executive Officer

EX-13.2

Exhibit 13.2

CHIEF EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this Annual Report of DryShips Inc. (the “Company”) on Form 20-F for the year ended December 31, 2009 as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Ziad Nakhleh, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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

Date: April 9, 2010

/s/ Ziad Nakhleh

Ziad Nakhleh

Chief Financial Officer

EX-15.1

Exhibit 15.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form F-3 /A No. 333-146540 and in the related Prospectus and Form F-3 No. 333-139204) of DryShips Inc. of our reports dated 7 April 2010, with respect to the consolidated financial statements of Ocean Rig UDW Inc. as of 31 December 2009 and for the year ended 31 December 2009, and the effectiveness of internal control over financial reporting of Ocean Rig UDW Inc., included in this Annual Report (Form 20-F) of DryShips Inc. for the year ended 31 December 2009.

We also consent to the incorporation by reference therein of our report dated 27 March 2009, with respect to the consolidated financial statements of Ocean Rig ASA as of 31 December 2008 and for the period 15 May 2008 to 31 December 2008, included in this Annual Report (Form 20-F) of DryShips Inc. for the year ended 31 December 2009.

/s/ Ernst & Young AS

Stavanger, Norway

9 April 2010

EX-15.2

Exhibit 15.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form F-3/A No. 333-146540 and in the related Prospectus and Form F-3 No. 333-139204) of DryShips Inc. of our report dated March 27, 2009, with respect to the consolidated financial statements of Ocean Rig ASA as of December 31, 2008 and for the period May 15, 2008 to December 31, 2008, included in this Annual Report (Form 20-F/A) of DryShips Inc. for the year ended December 31, 2008.

/s/ Ernst & Young AS

Stavanger, Norway

April 2, 2009

EX-15.3

Exhibit 15.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements No. 333-146540 on Form F-3 ASR and No. 333-139204 on Form F-3 of our reports dated April 7, 2010, relating to the consolidated financial statements and financial statement schedule of DryShips Inc. and subsidiaries (the “Company”), (which report expresses an unqualified opinion on those consolidated financial statements and financial statement schedule and includes an explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 20-F of the Company for the year ended December 31, 2009.

/s/ Deloitte

Deloitte.

Hadjipavlou Sofianos & Cambanis S.A.

Athens, Greece

April 9, 2010