8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

November 14, 2011 (November 10, 2011)

Date of report (Date of earliest event reported)

ISLAND BREEZE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-53452	27-1742696
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

211 Benigno Blvd, Suite 201, Bellmawr, New Jersey	08031
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code:	(856) 931-1505

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01               ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT;

Item 3.02               UNREGISTERED SALES OF EQUITY SECURITIES

On November 10, 2011, we and our wholly owned Cayman Island subsidiary, Island Breeze International (“International”), entered into a securities purchase agreement (the “SPA”) with an investor (the “Investor”).  Pursuant to the SPA, we and International issued to Investor a promissory note (the “Note”) in the principal amount of $2,750,000 which, if fully funded, will represent $2,500,000 in cash and a non refundable 9% original issue discount (“OID”) of $250,000.  Pursuant to this financing, we can request advances be made to us by the Investor from time to time.  The initial advance at closing was $724,580.38 (inclusive of the OID).  Subsequent advances will be used primary to pay for refurbishment of Island Breeze.  The Note is due and payable on November 9, 2012 and is secured by a mortgage on Island Breeze, a vessel owned by International.

In connection with this loan, we issued to Investor 2,083,333 shares of our common stock (the “Shares”).  We have the right to purchase, for $0.001 per share, a percentage of these Shares determined by the percentage of the Note which is funded by advances (the “Repurchase Right”).  Under the terms of the SPA, Investor has the right, commencing on the 22nd month anniversary of the closing (subject to acceleration in certain circumstances), to cause us and International to purchase the shares for cash at a purchase price per share of $0.10, subject to certain adjustments (the “Put”).  The mortgage will be released upon our satisfaction of the Note and until such time will secure our obligations under the Note, the Put, and other obligations set forth in the documents executed with respect to the transaction.

Item 8.01               OTHER EVENTS

Press Release relating to SPA executed on November 14, 2011.

Item 9.01               EXHIBITS

         (c) Exhibits

4.14	Form of Securities Purchase Agreement, between Island Breeze International, Inc., Island Breeze International and Investor dated, November 9, 2011, with respect to the Convertible Promissory Note in the amount of $2,750,000 issued by the Company on November 9, 2011.
4.15	Form of Convertible Promissory Note issued to Investor, in the principal amount of $2,750,000 dated, November 9, 2011.
4.16	Form of First Priority Naval Mortgage issued by Island Breeze International in favor of Investor dated, November 9, 2011.
99.1	Press Release issued November 10, 2011.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.

	ISLAND BREEZE INTERANTIONAL, INC.
Date: November  14,2011	By:	/s/ Steven G. Weismann
		Steven G. Weismann, Chief Financial Officer

EX-4.14

EXHIBIT 4.14

SECURITIES PURCHASE AGREEMENT

Dated as of November 9, 2011

by and among

ISLAND BREEZE INTERNATIONAL, INC.

ISLAND BREEZE INTERNATIONAL

and

_________________________________

TABLE OF CONTENTS

		Page
ARTICLE I	Advances	1
1.1	Advances.	1
1.2	Closing.	2
ARTICLE II	REPRESENTATIONS AND WARRANTIES	4
2.1	Representations and Warranties of the Companies.	4
2.2	Representations and Warranties of the Investor.	15
ARTICLE III	COVENANTS	15
3.1	Equity Put Right.	15
3.2	Securities Compliance.	16
3.3	Registration and Listing.	16
3.4	Compliance with Laws.	16
3.5	[Reserved]	16
3.6	Reporting Requirements.	16
3.7	Other Agreements.	17
3.8	Use of Proceeds.	17
3.9	Repurchase Right	17
3.10	Reporting Status.	18
3.11	Pledge of Securities.	18
3.12	Compliance with Transaction Documents.	18
3.13	Amendments.	18
3.14	Distributions.	18
3.15	Prohibition on Liens.	19
3.16	Prohibition on Indebtedness.	19
3.17	Compliance with Transaction Documents.	20
3.18	Transactions with Affiliates.	20
3.19	No Merger or Sale of Assets.	20
3.20	Payment of Taxes, Etc.	21
3.21	Corporate Existence.	21
3.22	Maintenance of Assets.	21
3.23	No Investments.	21
3.24	Opinions.	21
3.25	[Reserved].	22
3.26	Registration Rights.	22
3.27	Notices of Certain Events.	23
3.28	Inspection.	23
3.29	Material Contracts.	23
3.30	Maritime Covenants.	23
3.31	Marine Environmental Law Compliance.	25
3.32	Marine Insurance	26

TABLE OF CONTENTS

(continued)

		Page
ARTICLE IV	CERTIFICATE LEGEND	26
4.1	Legend.	26
ARTICLE V	INDEMNIFICATION	27
5.1	General Indemnity.	27
5.2	Indemnification Procedure.	28
ARTICLE VI	MISCELLANEOUS	28
6.1	Certain Defined Terms	28
6.2	Fees and Expenses.	31
6.3	Specific Performance; Consent to Jurisdiction; Venue.	31
6.4	Entire Agreement; Amendment.	32
6.5	Notices.	32
6.6	Waivers.	33
6.7	Headings.	33
6.8	Successors and Assigns.	33
6.9	No Third Party Beneficiaries.	33
6.10	Governing Law.	33
6.11	Survival.	33
6.12	Publicity.	34
6.13	Counterparts.	34
6.14	Severability.	34
6.15	Further Assurances.	34

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT, dated as of November 9, 2011 (this “Agreement”), is by and among ISLAND BREEZE INTERNATIONAL, INC., a Delaware corporation (“Island”), and ISLAND BREEZE INTERNATIONAL, a Cayman Islands exempt company (the “Shipowner”), (together with Island, the “Companies” and each individually referred to as a “Company”) and __________________________ (the “Investor”).

The parties hereto agree as follows:

ARTICLE I

ADVANCES

1.1Advances.

(a)Advances. Subject to and in reliance upon the terms, conditions, representations and warranties contained in this Agreement, the Investor shall make advances to the Companies in one or more advances (the “Advances”) for uses expressly permitted under Section 3.8 hereof; provided, however, that in no event shall (a) the aggregate principal balance of all Advances exceed $2,750,000 (“Advance Limit”), (b) the Investor remit to the Companies more than $2,500,000 pursuant to this Agreement, (c) the Companies request more than two Advances per calendar month, (d) any Advance be made during the 60 day period prior to the Maturity Date and (e) any Advance be made if an Event of Default has occurred and is continuing.  The Companies may not re-borrow any Advance after such Advance has been repaid.

(b)Procedures.  The Companies shall request an Advance (other than the Initial Advance) by delivering to the Investor a written notice (by facsimile or an electronic format acceptable to the Investor) (an “Advance Request”) to the Investor specifying (i) the amount of the requested Advance, (ii) a detailed list of uses for the Advance, including identifying specific expenses and payees and (iii) the proposed date of funding of the Advance (which shall be a Business Day).  Each Advance Request shall be in substantially the form attached hereto as Exhibit A, shall be delivered to the Investor together with copies of all invoices and other supporting documentation indicating payments due within 14 days of such Advance Request (“Supporting Documentation”).  Within three (3) Business Days following its receipt of an Advance Request with all Supporting Documentation, the Investor may approve the Advance, request from the Companies additional Supporting Documentation or, if it determines in good faith that the proposed use of proceeds is not consistent with or permitted by Section 3.8, decline to make such Advance.  In the event the Investor requests additional Supporting Documentation, the Investor shall make the determination set forth in the immediately prior sentence or request further Supporting Documentation as soon as commercially reasonably practical thereafter.  In the event the Investor approves the Advance, Investor shall within two (2) Business Days of such approval remit the amount of the Advance less the an unconditional, non-refundable original issue discount equal to nine percent (9%) of the amount of the Advance in immediately available funds to the Companies, provided, however, that to the extent a payment to any single vendor or payee or related vendors or payees, is $100,000 or greater, the Investor shall make payment directly to such vendor or payee out of the Advance.

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(c)Promissory Note.  All Advances made by the Investor shall be evidenced by a promissory note executed by the Companies in favor of the Investor substantially in the form attached hereto as Exhibit B (the “Note”)

1.2Closing.

(a)The Closing under this Agreement shall take place immediately upon the execution of this Agreement by the parties hereto and the satisfaction of the conditions contained herein (as determined by the Investor) or on such other date as may be agreed upon in writing by the parties hereto (the “Closing Date”).  The Closing shall take place at the offices of the Investor, 152 West 57th Street, 4th Floor, New York, NY 10:00 a.m. New York time.

(b)Subject to the terms and conditions hereof and the closing deliveries set forth in Section 1.2(c) and (d) hereof, at the Closing (i) the Companies shall issue to the Investor the Note, (ii)  the Investor shall make an initial Advance in the aggregate principal amount of $724,580.38 (the “Initial Advance”), and (iii) Island shall issue to the Investor Two Million Eighty Three Thousand Three Hundred Thirty Three (2,083,333) shares (the “Shares” and together with the Note, the “Securities”) of Class A Common Stock, par value $0.001 per share, of Island (the “Common Stock”).

(c)At the Closing, the Investor shall deliver to the Company:

(i)the Initial Advance, less an unconditional, non-refundable original issue discount of $65,212.02;

(ii)the Transaction Documents to which the Investor is a party, duly executed by the Investor.

(d)At the Closing, the Companies shall deliver to the Investor:

(i)the Note and the Shares;

(ii)each of the Transaction Documents, duly executed by each Company that is a party thereto;

(iii)a secretary’s certificate of each of the Companies, dated as of the Closing, as to (i) the resolutions adopted by the Board of Directors, or comparable management body, approving the transactions contemplated hereby, (ii) the Certificate of Incorporation or comparable charter documents, as applicable, (iii) the Bylaws or comparable charter documents, as applicable, each as in effect at the Closing, and (iv) the authority and incumbency of the officers of such Company executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith;

(iv)payment of the fees and expenses described in Section 6.2 of this Agreement;

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(v)evidence of filing of all UCC and similar financing statements in form and substance satisfactory to the Investor at the appropriate offices to create a valid and perfected security interest in the Collateral;

(vi)with respect to the Panamanian-flag vessel named ISLAND BREEZE, with patente number 35375-PEXT and I.M.O. No. 6708252 (the “Vessel”), a copy of the Vessel’s Panamanian Provisional Registration of Navigation Certificate (Provisional Navigation Patente), which shall be valid and unexpired, and a copy of a certificate of ownership and encumbrance, dated as of the Closing Date, issued by the Panamanian registry showing the Vessel to be free and clear of all recorded Liens;

(vii)evidence of the filing and recording of the Mortgage with the Mercantile (Marine) Section of the Public Registry of Panama;

(viii)a certificate dated as of the Closing Date of an authorized officer of the Shipowner certifying that the Vessel is free and clear of all recorded and unrecorded Liens;

(ix)a copy of the confirmation of laid-up status issued by the Hellenic Register of Shipping, dated October 4, 2011;

(x)[Reserved];

(xi)a copy of, or a certificate as to coverage under, each of the insurance policies required by the Mortgage, each of which shall be endorsed or otherwise amended to include the loss payable or mortgagee endorsement (as applicable) as required by the Assignment of Insurances and shall name the Investor as additional insured, in form and substance reasonably satisfactory to the Investor;

(xii)(1) written advice from marine insurance brokers reasonably acceptable to the Investor confirming the placement of the insurances covering the Vessel; (2) written confirmation from such brokers that they have received no notice of the assignment (except to the Investor) of the insurances or any claim with respect to the Vessel; (3) an opinion of such brokers to the effect that such insurance complies with the applicable provisions of the Mortgage; and (4) an agreement by such brokers, in form and substance satisfactory to the Investor, whereunder the insurances of the Vessel, and claims thereunder, will not be affected by non-payment of premiums on any other insurances;

(xiii)a favorable written opinion of Eaton & Van Winkle, Delaware counsel to the Companies, dated as of the Closing Date, addressed to the Investor in the form set forth in Exhibit C;

(xiv)a favorable written opinion of Maples & Calder, Cayman Islands counsel to the Shipowner, dated as of the Closing Date, addressed to the Investor in the form set forth in Exhibit D and such other matters relating to the Mortgage as the Investor shall reasonably request; and

(xv)a favorable written opinion of Arias, Fabrega & Fabrega, Panamanian counsel to the Investor, dated as of the Closing Date, addressed to the Investor and covering the matters set forth in Exhibit E and such other matters relating to the Mortgage as the Investor shall reasonably request.

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ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1Representations and Warranties of the Companies.

Each Company hereby represents and warrants to the Investor, as of the date hereof and the date of the Closing hereunder (except as set forth on the Schedule of Exceptions attached hereto with each numbered Schedule corresponding to the section number herein) or as explicitly disclosed in the Commission Documents, as follows:

(a)Organization, Good Standing and Power.  Each Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  No Company has any direct or indirect Subsidiaries (as defined in Section 2.1(g)) or owns securities of any kind in any other entity except as set forth on Schedule 2.1(g) hereto.  Each Company is duly qualified as a foreign corporation to do business and is in good standing in every other jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect.  For the purposes of this Agreement, “Material Adverse Effect” means any material adverse effect on the business, operations, properties (including the Collateral), prospects, or financial condition of any Company and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of any Company to perform any of its obligations under this Agreement or any of the Transaction Documents in any material respect.

(b)Authorization; Enforcement.  Each Company has the requisite corporate power and authority to enter into and perform this Agreement and the Note, and the Shipowner has the requisite corporate power and authority to enter into and perform the Mortgage (as defined below), the Assignment of Insurances made by the Shipowner in favor of the Investor dated as of the Closing Date (the “Assignment of Insurances”) and the Assignment of Earnings and Maritime Contracts made by the Shipowner in favor of the Investor dated as of the Closing Date (the “Assignment of Earnings and Maritime Contracts”, and together with this Agreement, the Note, the Mortgage, and the Assignment of Insurances, collectively, the “Transaction Documents”) and to issue and sell the Securities in accordance with the terms hereof.  The execution, delivery and performance of the Transaction Documents by each Company and the consummation by each Company of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and, except as set forth on Schedule 2.1(b), no further consent or authorization of any Company, its Board of Directors, stockholders or any other third party is required.  When executed and delivered by each Company, each of the Transaction Documents shall constitute a valid and binding obligation of each Company a party thereto, enforceable against each Company a party thereto in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.  In addition, when the Mortgage has been filed and recorded with the Mercantile (Marine) Section of the Public Registry of Panama, the Lien created by the Mortgage shall constitute a “first priority naval mortgage” under Chapters V and VI, Title IV of Law No. 55 of August 6, 2008, and all other applicable laws of the Republic of Panama, on all right, title and interest of the Shipowner in the whole of the Vessel, subject to no other Liens except Permitted Maritime Liens (as defined in the Mortgage).

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(c)Capitalization.  The authorized capital stock and the issued and outstanding shares of capital stock of each Company as of the Closing Date is set forth on Schedule 2.1(c)(i) hereto.  All of the outstanding shares of the Common Stock and any other outstanding security of each Company have been duly and validly authorized.  Except as set forth in this Agreement, or as set forth on Schedule 2.1(c)(ii) hereto, no shares of Common Stock or any other security of any Company are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of any Company.  Furthermore, except as set forth in this Agreement and as set forth on Schedule 2.1(c)(iii) hereto, there are no contracts, commitments, understandings, or arrangements by which any Company is or may become bound to issue additional shares of the capital stock of such Company or options, securities or rights convertible into shares of capital stock of such Company.  Except as provided on Schedule 2.1(c)(iv) hereto, no Company is a party to or bound by any agreement or understanding granting registration or anti-dilution rights to any person with respect to any of its equity or debt securities.  Except as set forth on Schedule 2.1(c)(v), no Company is a party to, and has no knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of any Company.

(d)Issuance of Securities.  The Note and the Shares have been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Note shall be validly issued and outstanding, free and clear of all liens, encumbrances and rights of refusal of any kind.  When the Shares are issued and paid for in accordance with the terms of this Agreement the Shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of refusal of any kind and the holders shall be entitled to all rights accorded to a holder of Common Stock.

(e)No Conflicts.  The execution, delivery and performance of the Transaction Documents by each Company, the performance by each Company of its obligations under the Note and the consummation by each Company of the transactions contemplated hereby and thereby, and the issuance of the Securities as contemplated hereby, do not and will not (i) violate or conflict with any provision of any Company’s Certificate of Incorporation (the “Certificate of Incorporation”) or Bylaws (the “Bylaws”), each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, instrument, bond, license, lease agreement, instrument or obligation to which any Company is a party or by which any Company or any of any Company’s properties or assets are bound (other than pursuant to the Transaction Documents), (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to any Company or by which any property or asset of any Company are bound or affected, or (iv) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property or asset of any Company under any agreement or any commitment to which any Company is a party or by which any Company is bound or by which any of their respective properties or assets are bound.  No Company is required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents or issue and sell the Securities in accordance with the terms hereof (other than any filings, consents and approvals which may be required to be made by any  Company under applicable state and federal securities laws, rules or regulations).  The business of each Company is not being conducted in violation of any laws, ordinances or regulations of any governmental entity.

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(f)Commission Documents, Financial Statements.  The Common Stock of Island is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Island has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and Exchange Commission (the “Commission”) pursuant to the reporting requirements of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the “Commission Documents”).  Each Commission Document complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and the Commission Documents do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial statements of Island included in the Commission Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto.  Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of Island and its Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

(g)Subsidiaries.  Schedule 2.1(g) hereto sets forth each Subsidiary of each Company, showing the jurisdiction of its incorporation or organization and showing the percentage of each person’s ownership of the outstanding stock or other interests of such Subsidiary.  For the purposes of this Agreement, “Subsidiary” shall mean any corporation or other entity of which at least 50% of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by a Company and/or any of its other Subsidiaries.  All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, and are fully paid and nonassessable.  Except as set forth on Schedule 2.1(g) hereto, there are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any Subsidiary for the purchase or acquisition of any shares of capital stock of any Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock.  No Company nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence except as set forth on Schedule 2.1(g) hereto.  No Subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of such Subsidiary.  Each subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdictions set forth on Schedule 2.1(g) and has the requisite corporate or other power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.

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(h)No Material Adverse Change.  Since June 30, 2011, no Company has experienced or suffered any Material Adverse Effect.

(i)No Undisclosed Liabilities.  Except as disclosed on Schedule 2.1(i) hereto, since June 30, 2011,no Company has incurred any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of such Company’s respective businesses or which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect.

(j)No Undisclosed Events or Circumstances.  Since June 30, 2011,except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has occurred or exists with respect to the Companies, or any of them, or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by any Company but which has not been so publicly announced or disclosed.

(k)Indebtedness.  Schedule 2.1(k) hereto sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of each Company or for which any Company has commitments.  For the purposes of this Agreement, “Indebtedness” shall mean, with respect to any Person, (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products, (c) all capital lease obligations that exceed $10,000 in the aggregate in any fiscal year, (d) all obligations or liabilities secured by a lien or encumbrance on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations for the deferred purchase price of assets, together with trade debt and other accounts payable that exceed $10,000 in the aggregate in any fiscal year, (f) all synthetic leases, (g) all obligations with respect to redeemable stock and redemption or repurchase obligations under any capital stock or other equity securities issued by such Person, (h) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account, (i) indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer to the extent such Person is liable therefore as a result of such Person’s ownership interest in such entity, except to the extent that the terms of such indebtedness expressly provide that such Person is not liable therefore or such Person has no liability therefore as a matter of law, (j) trade debt and accounts payable which remain unpaid more than sixty (60) days past the invoice date, and (k) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other Person; provided, however, Indebtedness shall not include endorsements for collection or deposit in the ordinary course of business.  No Company is in default with respect to any Indebtedness.  “Person” means any individual, sole proprietorship, joint venture, partnership, corporation, limited liability company, association, joint-stock company, unincorporated organization, cooperative, trust, estate, governmental entity or any other entity of any kind or nature whatsoever.

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(l)Title to Assets.  Each Company has good and valid title to all of its real and personal property reflected in the Commission Documents, including the Vessel, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances (including in the case of the Vessel, any maritime liens or charters or leases), except for those indicated on Schedule 2.1(l) hereto.  Any leases of any Company are valid and subsisting and in full force and effect and each Company has performed all obligations required to be performed by it to date under any such leases.  The Vessel is not subject to any charters or leases of any kind or any other agreements or arrangements. No Company has received any notice of default under any leases and no Company is in default under any lease now in effect.

(m)Actions Pending.  There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of any Company, threatened against any Company which questions the validity of this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto.  Except as set forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of any Company, threatened against or involving any Company, or any of their respective properties or assets, which individually or in the aggregate, would reasonably be expected, if adversely determined, to have a Material Adverse Effect.  There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against any Company or any officers or directors of any Company in their capacities as such, which individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(n)Compliance with Law.  The business of the Companies has been and is presently being conducted in accordance with all material applicable federal, state and local governmental laws, rules, regulations and ordinances, including, without limitation, Environmental Laws (as hereinafter defined).  Each Company has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it.

(o)Taxes.  Each Company has accurately prepared and filed all federal, state and other tax returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Companies for all current taxes and other charges to which any Company is subject and which are not currently due and payable.  Except as disclosed on Schedule 2.1(o) hereto, none of the federal income tax returns of any Company have been audited by the Internal Revenue Service.  No Company has knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against any Company for any period, nor of any basis for any such assessment, adjustment or contingency.

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(p)Disclosure.  Except for the transactions contemplated by this Agreement, each Company confirms that neither it nor any other person acting on its behalf has provided the Investor or its agents or counsel with any information that constitutes or might constitute material, nonpublic information.  Neither this Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to the Investor by or on behalf of any Company in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

(q)Books and Records; Internal Accounting Controls.  The records and documents of the Companies accurately reflect in all material respects the information relating to the business of the Companies, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Companies. Each Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date. Each Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  Each Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for such Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by such Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Each Company’s certifying officers have evaluated the effectiveness of such Company’s disclosure controls and procedures as of the end of the period covered by such Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  Each Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in any Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, any Company’s internal control over financial reporting.

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(r)Material Agreements.  Each Company has performed all obligations required to be performed by them to date under any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, filed or required to be filed with the Commission or any other material contract, instrument, agreement, commitment, obligation, plan or arrangement to which any Company is a party (collectively, the “Material Agreements”).  No Company has received any notice of default under any Material Agreement.  No Company is in default under any Material Agreement now in effect.

(s)Transactions with Affiliates.  Except as set forth on Schedule 2.1(s) hereto, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) any Company or any of their respective customers or suppliers on the one hand, and (b) on the other hand, any officer, employee, consultant or director of any Company or any person owning at least 5% of the outstanding capital stock of any Company or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder which, in each case, is required to be disclosed in the Commission Documents or in any Company’s most recently filed definitive proxy statement on Schedule 14A, that is not so disclosed in the Commission Documents or in such proxy statement.

(t)Securities Act of 1933.  Island has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Securities hereunder.  Neither Island nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Securities or similar securities to, or solicit offers with respect thereto from, or enter into any negotiations relating thereto with, any person, or has taken or will take any action so as to bring the issuance and sale of any of the Securities under the registration provisions of the Securities Act and applicable state securities laws, and neither Island nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Securities.  Island is not, and has not been for at least 12 months prior to the date hereof, a company described in Rule 144(i)(1) under the Securities Act, and is a “reporting issuer” as described in Rule 144(c)(1) under the Securities Act.  More than one year has elapsed once the Company filed current “Form 10 Information” as that term is defined in Rule 144(i)(3) reflecting its status on an entity that is no longer a shell issuer.  No Company, nor any of its directors, officers or controlling persons, has taken or will, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in, or which has constituted, stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the securities issued or issuable in connection with the transactions contemplated hereunder.

(u)Employees.  No Company has any collective bargaining arrangements or agreements covering any of its employees, except as set forth on Schedule 2.1(u) hereto.  Except as set forth on Schedule 2.1(u) hereto, no Company has any employment contract, agreement regarding proprietary information, non-competition agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by any Company required to be disclosed in the Commission Documents that is not so disclosed.  No officer, consultant or key employee of any Company whose termination, either individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, has terminated or, to the knowledge of any Company, has any present intention of terminating his or her employment or engagement with such Company.

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(v)Intellectual Property.  Except as set forth on Schedule 2.1(v) hereto, each Company owns or possesses the rights to use all patents (and any patentable improvements thereof), trademarks, service marks, trade names, domain names, copyrights (and any copyrightable derivative works thereof), websites and intellectual property rights relating thereto (to any of the foregoing list, whether or not registered), licenses and authorizations which are necessary for the conduct of its business as now conducted without infringement or any conflict with the rights of others.

(w)Absence of Certain Developments.  Except as set forth in the Commission Documents or provided on Schedule 2.1(w) hereto, since June 30, 2011, no Company has:

(i)issued any stock, bonds or other corporate securities or any right, options or warrants with respect thereto;

(ii)borrowed any amount in excess of $50,000 or incurred or become subject to any other liabilities in excess of $50,000 (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the business of such Company;

(iii)discharged or satisfied any lien or encumbrance in excess of $50,000 or paid any obligation or liability (absolute or contingent) in excess of $50,000, other than current liabilities paid in the ordinary course of business;

(iv)declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock, in each case in excess of $25,000 individually or $50,000 in the aggregate;

(v)sold, assigned or transferred any other tangible assets, or canceled any debts or claims, in each case in excess of $50,000, except in the ordinary course of business;

(vi)sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights in excess of $50,000, or disclosed any proprietary confidential information to any person except to customers in the ordinary course of business;

(vii)suffered any material losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;

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(viii)made any changes in employee compensation except in the ordinary course of business and consistent with past practices;

(ix)made capital expenditures or commitments therefor that aggregate in excess of $50,000;

(x)entered into any material transaction, whether or not in the ordinary course of business;

(xi)made charitable contributions or pledges in excess of $10,000;

(xii)suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

(xiii)experienced any material problems with labor or management in connection with the terms and conditions of their employment; or

(xiv)entered into an agreement, written or otherwise, to take any of the foregoing actions.

(x)Public Utility Holding Company Act and Investment Company Act Status.  No Company is a “holding company” or a “public utility company” as such terms are defined in the Public Utility Holding Company Act of 2005, as amended.  No Company is, and as a result of and immediately upon the Closing, if applicable, will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

(y)ERISA.  No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan by any Company which is or would be materially adverse to the Companies, or any of them.  The execution and delivery of this Agreement and the issuance and sale of the Securities will not involve any transaction which is subject to the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended.  As used in this Section 2.1(y), the term “Plan” shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by any Company or by any trade or business, whether or not incorporated, which, together with any Company, is under common control, as described in Section 414(b) or (c) of the Code.

(z)No Integrated Offering.  No Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by Island for purposes of the Securities Act which would prevent Island from selling the Securities pursuant to Regulation D and Rule 506 thereof under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will Island or any of its affiliates or subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other offerings.  Island does not have any registration statement pending before the Commission or currently under the Commission’s review and except as set forth on Schedule 2.1(z) hereto, since June 30, 2011, Island has not offered or sold any of its equity securities or debt securities convertible into shares of Common Stock.

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(aa)Transfer Agent.  The name, address, telephone number, fax number, contact person and email of Island’s transfer agent is set forth on Schedule 2.1(aa) hereto.

(bb)Governmental Approvals.  Except for the filing of any notice prior or subsequent to the Closing that may be required under applicable state and/or federal securities laws (which if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of the Note and the Shares, or for the performance by any Company of its obligations under the Transaction Documents.

(cc)Broker’s Fees.  Except as set forth on Schedule 2.1(cc), no Company has any obligation to any Person in respect of any finder’s, broker’s, investment banking or other similar fee in connection with any of the transactions contemplated under the Transaction Documents.

(dd)[Reserved]

(ee)Representations and Warranties regarding the Vessel.

(i)The Provisional Registration of Navigation Certificate (Provisional Navigation Patente) for the Vessel is valid and unexpired under the laws of the Republic of Panama.

(ii)The Vessel is currently laid up in a safe and secure berth located at Kalimpaki Berth in the Port of Elefsina, Greece since September 2007.

(iii)The Shipowner has complied in all material respects with, and has obtained and maintained at all relevant times all licenses, permits and certificates required under, and has on board as required thereby valid certificates showing compliance therewith, (i) any and all applicable Requirements of Law with respect to the Vessel, and (ii) the requirements of the Hellenic Register of Shipping for the Vessel.

(iv)The Vessel has been maintained in accordance with the coverage requirements of the insurances required under the Mortgage, which insurances are in full force and effect as of the date hereof.

(v)Neither the Shipowner nor any operator of the Vessel is currently required to maintain a valid and current Certificate of Financial Responsibility (Water Pollution) pursuant to applicable Requirements of Law.

(vi)[Reserved].

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(vii)The Shipowner or an operator, as applicable, of the Vessel is not currently required to maintain valid and current ISM/ISPS Code Documentation pursuant to applicable Requirements of Law.

(viii)The Shipowner is in compliance with all manning requirements applicable to the Vessel while it is in lay up status and all requirements of the protection and indemnity and hull and machinery underwriters as is necessary to ensure insurance coverage in compliance with the Mortgage of the Vessel.

(ff)Marine Environmental Law Matters.

(i)The Shipowner and the Vessel are in compliance with, and neither the Shipowner nor the Vessel has any liability under, any applicable Environmental Law, and the Shipowner has obtained all Environmental Permits required for the operation of the Vessel in its current status.

(ii)There has been no Release or threatened Release of Hazardous Material on, at, under or from the Vessel or any Environmental Incident that could reasonably be expected to result in the Shipowner and/or the Vessel being liable under any applicable Environmental Law.

(iii)There is no Environmental Claim pending or, to the knowledge of the Shipowner, threatened against the Shipowner, or relating to the Vessel, and to the knowledge of the Shipowner, there are no actions, activities, circumstances, conditions, events or incidents that could reasonably be expected form the basis of such an Environmental Claim.

(iv)No person with an indemnity or contribution obligation to the Shipowner relating to compliance with or liability under Environmental Law is in default with respect to such obligation.

(v)The Shipowner is not obligated to perform any action or otherwise incur any expense under applicable Environmental Law pursuant to any order, decree, judgment or agreement by which it is bound or has assumed by contract, agreement or operation of law, and the Shipowner is not conducting or financing any Response pursuant to any applicable Environmental Law with respect to the Vessel.

(vi)No Lien has been recorded or, to the knowledge of any Company, threatened under any Environmental Law with respect to the Vessel.

(gg)Marine Insurance Matters. All insurance required under the Mortgage to be maintained by the Shipowner is in full force and effect, all premium payments due and payable with respect to such insurance policies have been duly paid, the Shipowner has not received notice of violation of such insurance policies or cancellation of such insurance policies, and the Vessel and the use and operation thereof comply in all material respects with all requirements of the insurances required by the Mortgage, and there exists no default under any such requirement.

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2.2Representations and Warranties of the Investor.

The Investor hereby represents and warrants to the Companies as of the date hereof that the Investor is purchasing the Shares solely for its own account and not with a view to or for sale in connection with distribution.  The Investor does not have a present intention to sell any of the Shares, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Securities to or through any person or entity; provided, however, that by making the representations herein, the Investor does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with Federal and state securities laws applicable to such disposition.  The Investor further represents and warrants to the Companies as of the date hereof that (i) the Investor has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of the proposed investment in the Securities; (ii) the Investor understands that neither the Note, nor the Shares may be sold, transferred or otherwise disposed of by it without registration under the Securities Act and any applicable state securities laws, or an exemption therefrom, and that in the absence of an effective registration statement covering such securities or an available exemption from registration, such Investor might be required to hold such securities indefinitely; and (iii) the Investor is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act.

ARTICLE III

COVENANTS

Each Company covenants with the Investor as follows, which covenants are for the benefit of the Investor and its assignees.  Unless otherwise set forth in the covenants in this Article III, such covenants shall survive the Closing, hereunder until (A) the Note is paid in full, and (B) the Investor no longer owns the Shares beneficially.

3.1Equity Put Right.

(a)At any time commencing the on the Twenty Second (22nd) month anniversary of the Closing Date or at any time following an Event of Default (as defined in the Note), the Investor shall have the right (but not the obligation), to cause the Companies to purchase any and all of the Shares that are not subject to the Repurchase Right pursuant to Section 3.9 for cash at a purchase price per share equal $0.10, subject to appropriate adjustment in the event of a stock split, stock dividend, recapitalization or similar transaction (the “Put Payment”).  Payment by the Companies pursuant to this Section 3.1 shall be made within 3 days following the date the Investor provides notice of its exercise its rights under this Section 3.1.

(b)To the extent payment is not made by the Companies when due in accordance with this Section 3.1, such amount shall bear interest at the rate equal to the lesser of 25% per annum or the maximum rate permitted by applicable law.  The Companies acknowledge and agree that their obligation to pay the Put Payment is secured by the collateral pledged to the Investor pursuant to the terms of the Security Documents and until such time as set forth therein.

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3.2Securities Compliance.

The Companies shall notify the Commission in accordance with its rules and regulations, of the transactions contemplated by any of the Transaction Documents and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Investor or subsequent holders.

3.3Registration and Listing.

Island shall cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in all respects with its reporting and filing obligations under the Exchange Act and to not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act.  Island will take all action necessary to continue the listing or trading of its Common Stock on the New York Stock Exchange, the NYSE Alternext Exchange, the Nasdaq Capital Markets, the Nasdaq Global Markets, the Nasdaq Global Select Market the American Stock Exchange or the OTC Markets.  If required, Island will promptly file the “Listing Application” for, or in connection with, the issuance and delivery of any of the Shares.  Subject to the terms of the Transaction Documents, Island further covenants that it will take such further action as the Investor may reasonably request, all to the extent required from time to time to enable the Investor to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act.  Upon the request of the Investor, Island shall deliver to the Investor a written certification of a duly authorized officer as to whether it has complied with such requirements.

3.4Compliance with Laws.

Each Company shall comply in all respects with all applicable laws, rules, regulations and orders of any governmental authority, including without limitation, all securities law, rules and regulations and timely make all filings required by any such laws, rules and regulations.

3.5[Reserved]

3.6Reporting Requirements.

The Companies shall furnish the following to the Investor:

(a)Electronic notification of the filing of all Quarterly Reports filed with the Commission on Form 10-Q as soon as practical after the document is or would have been required to be filed with the Commission;

(b)Electronic notification of the filing of all Annual Reports filed with the Commission on Form 10-K as soon as practical after the document is or would have been required to be filed with the Commission;

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(c)Electronic notification of the filing of all Current Reports filed with the Commission on Form 8-K as soon as practical after the document is or would have been required to be filed with the Commission;

(d)Electronic notification of the filing or copies of any other filings filed or required to be filed with the Commission as soon as practical after the document is or would have been required to be filed with the Commission;

(e)Electronic notification of the filing or copies of all notices, information and proxy statements in connection with any meetings that are, in each case, provided to holders of shares of Common Stock, contemporaneously with the delivery of such notices or information to such holders of Common Stock;

(f)Copies of each other report or letter submitted to the Company by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company, and a copy of any response by the Company, or the governing body of the Company, to such letter or report; and

(g)Within five (5) days of Investor’s request, copies of any other reports, information or filings reasonably requested by the Investor from time to time.

3.7Other Agreements.

No Company shall enter into any agreement in which the terms of such agreement would restrict or impair the right or ability of any Company to perform under any Transaction Document.

3.8Use of Proceeds.

The Companies shall use the proceeds of the Initial Advance for working capital purposes, to pay Transaction expenses relating to this Agreement, and at the Companies option to repurchase from persons or entities that are not affiliates of the Companies up to $100,000 of Island notes outstanding on the date hereof.  The Companies shall use the proceeds of each Advance (other than the Initial Advance) to pay for completed refurbishment work on the Vessel and up to an aggregate of $110,000 to begin the permitting process for the embarkment location in North Charleston, South Carolina.  Except as set forth in the prior sentence, in no event shall the proceeds be used to redeem any Common Stock or securities convertible, exercisable or exchangeable into Common Stock or to settle any outstanding litigation.

3.9Repurchase Right

In the event the aggregate principal amount of Advances made pursuant to this Agreement on the Maturity Date or the date on which the Note is paid in full is less than the Advance Limit, Island shall have the right within three (3) Business Days thereafter, which right may be exercised by providing written notice to the Investor, to purchase from the Investor, and upon exercise of that right, the Investor shall have the obligation to sell, assign and transfer to Island, such number of shares of Common Stock as shall equal the Shares multiplied by the quotient of the aggregate principal amount of Advances made pursuant to this Agreement divided by the Advance Limit at a deemed purchase price of $0.001 per share, rounded to the nearest dollar (the “Repurchase Right”).

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3.10Reporting Status.

Island shall timely file all reports required to be filed with the Commission pursuant to the Exchange Act, and Island shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.  Island shall promptly disclose on Form 8-K the occurrence of any Material Adverse Effect or any event that could reasonably be expected to cause a Material Adverse Effect.

3.11Pledge of Securities.

The Companies acknowledge that the Securities may be pledged by the Investor in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities.  The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and Investor shall not be required to provide the Companies with any notice thereof or otherwise make any delivery to the Companies pursuant to this Agreement or any other Transaction Document. For so long as the Investor owns any Securities, each Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by the Investor.

3.12Compliance with Transaction Documents.

Each Company will (a) observe and perform in all material respects all of the terms, covenants, conditions and provisions of each Transaction Document to be observed and performed by it, (b) not do, permit or refrain from doing anything that could reasonably be expected to result in a default under or breach by the Company of any of the terms of any Transaction Document or give rise to a right by the counterparty to terminate or suspend such Transaction Document, (c) give the Investor prompt written notice of any material breach of any obligation, or any default, by any Company, under any Transaction Document, and deliver to the Investor a copy of each notice of default, and (d) promptly enforce against the relevant counterparty each material term, covenant, condition and provision of such Transaction Document in accordance with its terms.

3.13Amendments.

No Company shall, without the prior written consent of the Investor, modify or otherwise change its certificate of incorporation or bylaws, including, without limitation, entering into any new agreement with respect to any of its capital stock.

3.14Distributions.

So long as the Note remains outstanding, each Company agrees that it shall not (i) declare or pay any dividends or make any distributions (by reduction of capital or otherwise) to any holder(s) of Common Stock (or security convertible into or exercisable for Common Stock) or set aside or otherwise deposit or invest any sums for such purpose, or (ii) except as permitted in Section 3.8 hereof, redeem, retire, defease, purchase or otherwise acquire for value, directly or indirectly, any Common Stock or other equity security of any Company or set aside or otherwise deposit or invest any sums for such purpose.

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3.15Prohibition on Liens.

So long as the Note remains outstanding, no Company shall enter into, create, incur, assume, suffer or permit to exist any Liens on or with respect to any of its assets, including the Collateral, now owned or hereafter acquired or any interest therein or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect any financing statement or other similar notice of any Lien with respect to such assets, other than Permitted Encumbrances or, in the case of the Vessel, Permitted Maritime Liens (as defined in the Mortgage).  “Permitted Encumbrances” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of such Company) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of such Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of such Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of such Company or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; (c) the Liens set forth in Schedule 3.15 hereto in effect on the date hereof (d) Liens on the assets of the Hong Kong Companies (as defined below) securing Hong Kong Indebtedness (as defined below); and (e) the Liens of Investor set forth in the Security Documents.

3.16Prohibition on Indebtedness.

So long as the Note remains outstanding, other than (i) Indebtedness existing on the date hereof and disclosed on Schedule 2.1(k) to this Agreement or, (ii) the issuance of Indebtedness to repurchase or refinance any Indebtedness disclosed on Schedule 2.1(k) (“Refinance Indebtedness”) and (iii) Indebtedness in favor of the Investor, no Company shall enter into, create, incur, assume, suffer, become or be liable for in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse or otherwise become responsible for (directly or indirectly), any Indebtedness, performance, obligations or dividends of any other Person.  Notwithstanding the foregoing, Island Breeze International Asia Limited, a subsidiary of the Company, and any other direct or indirect subsidiary of the Company formed exclusively for the purpose of purchasing, refurbishing and operating a passenger vessel to conduct cruises to nowhere from a port located in Hong Kong (such subsidiaries, the “Hong Kong Companies” and such vessel, the “Hong Kong Vessel”), may incur Indebtedness in connection with the purchase, refurbishment and operations of the Hong Kong Vessel (“Hong Kong Indebtedness”), provided, however, that neither the Companies nor any of their direct or indirect subsidiaries (other than the Hong Kong Companies) may guaranty, assume, endorse or otherwise become responsible or liable for (directly or indirectly) such Indebtedness.

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3.17Compliance with Transaction Documents.

Each Company shall comply with its respective obligations under the Note and the other Transaction Documents.

3.18Transactions with Affiliates.

No Company shall, directly or indirectly, (i) purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director, agent, employee or any affiliate of such Company, or (ii) make any payments of management, consulting or other fees for management or similar services, or of any Indebtedness owing to any officer, director, agent, employee, or other affiliate of such Company, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director, agent or such employee or, to the knowledge of any Company, any entity in which any officer, director, agent or any such employee has a substantial interest or is an officer, director, trustee or partner, in an aggregate amount in excess of $50,000, other than (x) for payment of reasonable salary for services actually rendered, as approved by the Board of Directors of such Company as fair and reasonable in all respects to such Company and upon terms no less favorable to such Company that such Company would obtain in a comparable arm’s length transaction with an unaffiliated person, (y) reimbursement for expenses incurred on behalf of such Company in the ordinary course of and pursuant to the reasonable requirements of the business and (z) as set forth on Schedule 3.18 hereof.

3.19No Merger or Sale of Assets.

No Company shall, directly or indirectly, (i) merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it; (ii) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any or all of its assets (other than inventory in the ordinary course of business); (iii) in any way or manner alter its organizational structure (other than the creation of new subsidiaries) or effect a change of entity; (iv) become a partner in any partnership or joint venture, or make any acquisition of any interest in any Person or acquire substantially all of the assets of any Person; (v) wind up, liquidate or dissolve or (vi) agree to do any of the foregoing.  Without limiting the generality of the forgoing and for avoidance of doubt, (i) no Company may transfer any of its assets to any of its direct or indirect subsidiaries, including without limitation, the Hong Kong Companies and the North Charleston Subsidiary (other than a cash contribution to the Hong Kong Companies and the North Charleston Subsidiary), (ii) the Hong Kong Companies may purchase, refurbish and operate the Hong Kong Vessel and (iii) a subsidiary of the Company formed for the exclusive purpose of purchasing, refurbishing and operating a passenger vessel to conduct cruises to nowhere from a port in North Charleston, South Carolina (the “North Charleston Subsidiary”) , may make such purchase and refurbish and operate such vessel.

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3.20Payment of Taxes, Etc.

Each Company shall promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of such Company; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if such Company shall have set aside on its books adequate reserves with respect thereto, and provided, further, that such Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor.

3.21Corporate Existence.

Each Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business.

3.22Maintenance of Assets.

So long as the Note remains outstanding, each Company shall keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto.  In the case of the Vessel, so long as it is laid-up and not operating, the Shipowner shall maintain the Vessel in a safe and secure location in Elefsina, Greece (or such other location approved by the Investors in its reasonable discretion) “Cold Stacked” or “Warm Stacked” (as such terms are used in the maritime industry) and take such actions as are necessary to preserve the condition of the Vessel as it exists on the date hereof so that it shall not diminish beyond fair wear and tear while not in operation (including, without limitation, actions necessary to maintain the Vessel’s seaworthiness).

3.23No Investments.

No Company shall make or suffer to exist any Investments or commitments therefor, other than Investments made in the ordinary course of business or a cash contribution by the Companies to the Hong Kong Companies and the North Charleston Subsidiary.  “Investment” means, with respect to any Person, all investments (by capital contribution or otherwise) in any other Person, or any extension of credit, loan, advance, purchase or repurchase of stock or other ownership interest, any Indebtedness or all or a substantial part of the assets or property of any Person, bonds, notes, debentures or other securities, or otherwise, and whether existing on the date of this Agreement or thereafter made, but such term shall not include the cash surrender value of life insurance policies on the lives of officers or employees, excluding amounts due from customers for services or products delivered or sold in the ordinary course of business.

3.24Opinions.

For so long as the Investor holds any Shares, Island will provide, at Island’s expense, such legal opinions in the future as are reasonably necessary for the resale of the Shares pursuant to an effective registration statement, Rule 144, if available, or an exemption from registration.  In the event that Shares are sold in a manner that complies with an exemption from registration, Island will promptly instruct its counsel (at its expense) to issue to the transfer agent an opinion permitting removal of the legend (indefinitely, if more than six months have elapsed from the Closing Date, or to permit sale of the shares if pursuant to the other provisions of Rule 144, if available).

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3.25[Reserved].

3.26Registration Rights.

If Island shall determine to prepare and file with the Commission a registration statement (a “Registration Statement”) relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their then equivalents, relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then Island shall send to the Investor a written notice of such determination and, if within twenty (20) days after the date of such notice, the Investor shall so request in writing, Island shall include in such Registration Statement all or any part of the Shares as the Investor requests to be registered so long as such Shares are proposed to be disposed in the same manner as those set forth in the Registration Statement.  Island shall use its best efforts to cause any Registration Statement to be declared effective by the Commission as promptly as is possible following it being filed with the Commission and to remain effective until all Shares subject thereto have been sold or may be sold without limitations as to volume or the availability of current public information under Rule 144, if available.  All fees and expenses incident to the performance of or compliance with this Section 3.26 by Island shall be borne by Island whether or not any Shares are sold pursuant to the Registration Statement.  Island may abandon the offering in its sole discretion at any time provided however, the provisions of this Section 3.26 shall continue to apply to future offerings.  The Companies shall, jointly and severally, indemnify and hold harmless the Investor, the officers, directors, members, partners, agents, brokers, investment advisors and employees of the Investor, each person who controls the Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), and the officers, directors, members, shareholders, partners, agents and employees of each such controlling person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any prospectus included therein or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by Island of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Section 3.26.

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3.27Notices of Certain Events.

The Companies shall promptly notify the Investor of any event or events that have had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on any Company including, without limitation:.

(a)the occurrence of any Event of Default under the Note;

(b)the occurrence of any default or event of default under any loan, security purchase, financing, intercreditor or other agreement entered into in respect of any indebtedness in excess of $50,000 of any Company; or

(c)the filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or governmental authority against or affecting the Company not previously disclosed in writing to the Investor or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Investor) that, in either case could reasonably be expected to result in liability in excess of $250,000.

3.28Inspection.

Each Company will keep proper books of record and account in accordance with generally accepted accounting practices.  Each Company shall permit Investor and its duly authorized representatives or agents to visit any of such Company’s properties and inspect any of its assets or books and records to examine and make copies of its books and records and to discuss its affairs, finances, technology and accounts with, and to be advised as to the same by, its officers and employees at such times and intervals as Investor may reasonably designate.  The Companies, jointly and severally, agree to reimburse Investor for all of the reasonable hotel, travel, and other out-of-pocket expenses incurred by the Investor or their representatives in any such inspection or examination upon presentation of invoices or other documentation of such expenses and, in the case of travel, a commercially reasonably justification for such trip.

3.29Material Contracts.

Each Company shall comply with and perform all obligations required to be performed by them to date under any material written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement to which such Company is a party or by which such Company or any of its properties or assets are bound.  No Company shall default under or breach any terms of any material written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement to which such Company is a party or by which such Company or any of its  properties or assets are bound.

3.30Maritime Covenants.

(a)The Shipowner shall maintain a valid and unexpired (Provisional) Registration of Navigation Certificate (Provisional Navigation Patente) under the laws of the Republic of Panama for the Vessel.

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(b)The Shipowner shall comply in all material respects with, and obtain and maintain all licenses, permits and certificates required under, and have on board as and when required thereby valid certificates showing compliance therewith, (i) any and all applicable Requirements of Law with respect to the Vessel bearing in mind its operational status, and (ii) the requirements of the Hellenic Register of Shipping (or of a member of the International Association of Classification Societies approved by the Investor) applicable to the type of service in which the Vessel is engaged or will engage.

(c)If the Shipowner or an operator, as applicable, of the Vessel is required to maintain a valid and current Certificate of Financial Responsibility (Water Pollution) pursuant to applicable Requirements of Law, the Shipowner shall deliver to the Investor a copy of any newly issued or renewed certificate of financial responsibility relating to the Vessel within thirty (30) days of receipt from the National Pollution Funds Center of the U.S. Coast Guard.

(d)Following completion of the next drydocking and special survey of the Vessel, which shall occur while the Vessel is undergoing refurbishment, the Shipowner shall deliver to the Investor annually not later than each date that is the anniversary hereof and from time to time as may be reasonably requested by the Investor, a certificate of Confirmation of Class from the Hellenic Register of Shipping (or of a member of the International Association of Classification Societies approved by the Investor) showing such classification of the Vessel to be maintained free of conditions and recommendations affecting class, except for such conditions or recommendations which, with approval of such classification society, will be remedied at the Vessel’s next scheduled survey.

(e)If the Shipowner or an operator, as applicable, of the Vessel is required to maintain valid and current ISM/ISPS Code Documentation pursuant to applicable Requirements of Law, the Shipowner shall deliver to the Investor as reasonably requested from time to time copies of such ISM/ISPS Code Documentation reflecting compliance by the Shipowner or such operator with such Requirements of Law.

(f)The Shipowner shall comply with all manning requirements applicable to the Vessel bearing in mind its operational status and all requirements of the protection and indemnity and hull and machinery underwriters as is necessary to ensure full insurance coverage of the Vessel in accordance with the requirements of the Mortgage.

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(g)The Shipowner shall not:  (i) sell the Vessel; (ii) permit the Vessel to be used for any illegal purpose; (iii) change the class or the classification society of the Vessel, the management of the Vessel or the control of the Vessel; (iv) cause or permit the Vessel to be operated or moved without the prior written approval of the Investor, which shall not be unreasonably withheld; (iv) cause or allow any change in the structure, rig or type of the Vessel; (v) will not cause or permit the Vessel to be chartered or leased to, or cause or permit the Vessel to serve under any contract with, a Person on the “List of Specially Designated Nationals and Blocked Persons” published by the Office of Foreign Assets Control of the United States Treasury Department (“OFAC”), any similar list published by the United Nations or the European Union or any Member country thereof, or any similar list published under any applicable laws of any other jurisdiction; (vi) will not cause or permit the Vessel to call on any port or ports, carry any cargo or passengers, or otherwise participate, directly or indirectly, in any activity or activities that would subject the Shipowner to any sanctions, including fines, penalties and other measures, or cause the Vessel or any assets of Shipowner to be blocked, under the laws of the United States, any Member country of the United Nations or the European Union, or any other applicable jurisdiction, related to embargoes or restrictions on trade or transactions with any country or Person; (vii) will not violate or engage in any transaction that violates any other applicable regulations existing now or adopted from time to time after the date hereof by OFAC restricting trade with particular foreign countries; (viii) cause or permit the Vessel to call at a Cuban port to load or discharge cargo or to effect repairs on the Vessel; (ix) abandon the Vessel or allow the Vessel to be abandoned; (x) cause or permit the Vessel to engage in any unlawful trade or violate any Requirements of Law or carry any cargo or passengers that in each instance shall expose the Vessel to forfeiture or capture; (xi) operate or allow the Vessel to be operated in any jurisdiction or in any manner that could reasonably be expected to (A) cause the Lien created by the Mortgage to be rendered unenforceable, (B) materially impair or hinder the Investor’s foreclosure or enforcement rights, or (C) expose the Investor to any penalty, sanction or investigation; (xii) cause or permit the Vessel to carry any cargoes or passengers or proceed into any area then excluded by trading warranties under the insurance policies covering the Vessel without first obtaining any necessary additional coverage, satisfactory in form and substance, and evidence of which shall be furnished, to the Investor; (xiii) make, do, consent or agree to any act or omission that would or could render any insurance covering the Vessel invalid, void, voidable, or unenforceable or render any sum payable thereunder repayable in whole or part; (xiv) change or transfer the flag of the Vessel from the Republic of Panama or provisionally register the Vessel under another flag or under the bareboat registry of another flag; (xv) change the name of the  Vessel; or (xvi) cause or allow the discontinuance, withdrawal or expiry of the Vessel’s class within the classification society.

(h)Prior to the entry into any contract for the refurbishment of the Vessel, the applicable Company shall obtain:  (i) the written consent of the Investor, which shall not be unreasonably withheld, conditioned or delayed; or (ii) an assignment and subordination agreement in form and substance satisfactory to the Investor executed and delivered by the shipyard or such other person (the “Shipyard”) that will refurbish the Vessel, in which the Shipyard will agree to the assignment by the Shipowner of all of its right, title and interest in, to and under the contract for the refurbishment of the Vessel (the “Vessel Refurbishment Contract”) and to subordinate any and all Liens on the Vessel that the Shipyard may then have or acquire from time to time under any law to the Lien of the Mortgage, and, to the extent determined necessary by the Investor, a landlord’s lien waiver, access agreement and consent with respect to the landlord of the Shipyard, if applicable.

3.31Marine Environmental Law Compliance.

(a)The Shipowner shall:  (i) comply with all Environmental Laws and Environmental Permits applicable to the Vessel and its operations; (ii) report any and all Environmental Incidents to the Investor within three (3) Business Days of obtaining knowledge of the occurrence thereof and the notice in writing of any Environmental Claim with respect to the Vessel within three (3) Business Days of the receipt thereof; and (iii) and conduct all Responses relating to the Vessel required by, and in accordance with, applicable Environmental Laws.

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(b)The Shipowner shall maintain all certificates or other evidence of financial responsibility for water pollution as may be required by any applicable Requirements of Law with respect to the trade which the Vessel from time to time engage in and the operations conducted by the Vessel.

(c)If a default caused by reason of a breach of Section 2.1(ff) or Section 3.31(a) hereof shall have occurred and be continuing for more than ten (10) days without the Shipowner commencing activities reasonably likely to cure such default in accordance with Environmental Laws, at the written request of the Investor, the Shipowner shall provide to the Investor within ten (10) days after such request, at the expense of the Companies, an environmental assessment report regarding the matters which are the subject of such default, including, where appropriate, soil and/or groundwater sampling, prepared by an environmental consulting firm and, in the form and substance, reasonably acceptable to the Investor and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or Response to address them.

(d)The Shipowner shall provide, promptly upon its obtaining knowledge of the occurrence of any of the following events, to the Investor a certificate of an officer of the Shipowner specifying in detail the nature of such event and the proposed response of the Shipowner or its agents and contractors, and upon the written request by the Investor, the Shipowner shall submit to the Investor, at reasonable intervals, a report updating the status of any occurrence of any Environmental Claim, any Environmental Incident, or any Release of Hazardous Materials relating to the Vessel:  (i) the receipt in writing by the Shipowner or any of its agents or contractors of any Environmental Claim relating to the Vessel; or (ii) any actual or threatened Environmental Incident or Release of Hazardous Materials of which any Company has knowledge.

3.32Marine Insurance.  With respect to the Vessel, the Shipowner shall maintain the hull and machinery insurance, protection and indemnity insurances and such other insurances as required by the Mortgage.

ARTICLE IV

CERTIFICATE LEGEND

4.1Legend.

Each certificate representing the Shares shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities or “blue sky” laws):

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR ISLAND BREEZE INTERNATIONAL, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

Island agrees to issue or reissue certificates representing any of the Shares, without the legend set forth above if at such time, prior to making any transfer of the Shares, the holder thereof shall give written notice to Island describing the manner and terms of such transfer and removal as Island may reasonably request, and (x) such Shares have been registered for sale under the Securities Act and the holder is selling such shares and is complying with its prospectus delivery requirement under the Securities Act, (y) the holder is selling such Shares in compliance with the provisions of Rule 144 or other exemption from registration or (z) the provisions of paragraph (b)(1)(i) of Rule 144 apply to such Shares.

ARTICLE V

INDEMNIFICATION

5.1General Indemnity.

The Companies, jointly and severally, agree to indemnify and hold harmless the Investor (and its directors, officers, members, partners, affiliates, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Investor as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Companies, or any of them, herein.

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5.2Indemnification Procedure.

Any party entitled to indemnification under this Article V (an “indemnified party”) will give written notice to the indemnifying party of any matter giving rise to a claim for indemnification; provided, that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article V except to the extent that the indemnifying party is actually prejudiced by such failure to give notice.  In case any such action, proceeding or claim is brought against an indemnified party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the indemnifying party a conflict of interest between it and the indemnified party exists with respect to such action, proceeding or claim (in which case the indemnifying party shall be responsible for the reasonable fees and expenses of one separate counsel for the indemnified parties), to assume the defense thereof with counsel reasonably satisfactory to the indemnified party.  In the event that the indemnifying party advises an indemnified party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or claim.  In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder.  The indemnified party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or claim.  The indemnifying party shall keep the indemnified party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense.  The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent.  Notwithstanding anything in this Article V to the contrary, the indemnifying party shall not, without the indemnified party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the indemnified party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such claim.  The indemnification obligations to defend the indemnified party required by this Article V shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the indemnified party shall refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification.  The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the indemnified party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the law.

ARTICLE VI

MISCELLANEOUS

6.1Certain Defined Terms.  As used in this Agreement, the following terms shall have the meanings specified below:

“Assignment of Insurances” shall mean the Assignment of Insurances, dated as of the Closing Date, made by the Shipowner in favor of the Investor with respect to certain insurances relating to the Vessel, which is in form and substance acceptable to the Investor.

“Assignment of Earnings and Maritime Contracts” shall mean the Assignment of Earnings and Maritime Contracts, dated as of the Closing Date, made by the Shipowner in favor of the Investor with respect to the earnings of the Vessel and certain maritime contracts concerning the Vessel, which is in form and substance acceptable to the Investor.

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“Collateral” shall mean the Vessel, the Insurances (as defined in the Assignment of Insurances), the Earnings Collateral (as defined in the Assignment of Earnings and Maritime Contracts), and the proceeds thereof.

“Environment” shall mean ambient air, indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources, the workplace or as otherwise defined in any Environmental Law.

“Environmental Claim” shall mean any claim, notice, demand, order, action, suit, proceeding or other communication in writing alleging liability for or obligation with respect to any investigation, remediation, removal, cleanup, response, corrective action, damages to natural resources, personal injury, property damage, fines, penalties or other costs resulting from, related to or arising out of (i) the presence, Release or threatened Release in or into the Environment of Hazardous Material at any location or (ii) any violation or alleged violation of any Environmental Law, and shall include any claim seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from, related to or arising out of the presence, Release or threatened Release of Hazardous Material or alleged injury or threat of injury to health or safety, as each relates to exposure to Hazardous Materials, or the Environment.

“Environmental Incident” shall mean (a) any Release of Hazardous Materials from the Vessel; or (b) any incident in which there is a Release of Hazardous Materials from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, including an allision, in either case, where the Vessel or the relevant Company (or its agents) or the charterer or lessee of the Vessel is actually or allegedly at fault or otherwise liable (in whole or in part); or (c) any incident in which there is a Release of Hazardous Materials from a vessel other than the Vessel and where the Vessel is actually or could reasonably be expected to be liable to be arrested as a result thereof and/or where the relevant Company (or its agents) or the charterer or lessee of the Vessel is actually or allegedly at fault or otherwise liable.

“Environmental Law” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. § 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901, et seq.), the Federal Clean Water Act (33 U.S.C. § 1251, et seq.), the Clean Air Act (42 U.S.C. § 7401, et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601, et seq.), the Occupational Safety and Health Act (29 U.S.C. § 651, et seq.), the Pipeline Safety Act (49 U.S.C. § 601, et seq.), the Oil Pollution Act of 1990 (33 U.S.C. § 2701, et seq.), and any and all other present and future treaties and international conventions and U.S. federal, state, and local and other nations’ laws, statutes, ordinances, regulations, rules, decrees, orders, judgments, consent orders, consent decrees, code or other binding requirements, and the common law, relating to pollution or protection of public health or the Environment, the Release or threatened Release of any Hazardous Material, natural resources or natural resource damages, or occupational safety or health, and any and all Environmental Permits.

“Environmental Permit” shall mean any permit, license, approval, registration, notification, exemption, consent or other authorization required by or from a Governmental Authority under Environmental Law.

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“Governmental Authority” shall mean the government of the United States of America or any other nation, or of any political subdivision thereof, whether state, provincial or local, and any agency, authority, department, bureau, commission, instrumentality, regulatory body, court, or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, and  any international governmental agency, body, commission, court, or other governmental regulatory authority or instrumentality (including the United Nations and the International Maritime Organization).

“Hazardous Materials” shall mean any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous or toxic material, substance or waste, or any material, substance or waste having any constituent elements displaying any of the foregoing characteristics, including petroleum, its derivatives, by products and other hydrocarbons, mold, polychlorinated biphenyls (“PCBs”) or any substance or compound containing PCBs, asbestos or any asbestos-containing materials in any form or condition, and any material, substance or waste regulated under any Environmental Laws or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any such hazardous or toxic material, substance or waste, or any material, substance or waste having any constituent elements displaying any such characteristics.

“ISM/ISPS Code Documentation” shall mean (a) the Safety Management Certificate and Document of Compliance specified in the International Management Code for the Safe Operation of Ships and for Pollution Prevention (including the guidelines on its implementation) contained in Chapter IX of the International Convention for the Safety of Life at Sea, adopted by the International Maritime Organization, as the same may be amended, supplemented, or replaced from time to time; (b) the International Ship Security Certificate specified as applicable in (i) the International Ship and Port Facility Security Code, as adopted, on December 12, 2002, by Resolution 2 of the Conference of Contracting Governments to the International Convention for the Safety of Life at Sea, 1974, as the same may be amended, supplemented, or replaced from time to time, or (ii) the Maritime Transportation Security Act of 2002, Pub.L. No. 107-295, as codified at 46 U.S.C. § 70101 et seq., as the same may be amended, supplemented, or replaced from time to time; and (c) such other documentation reflecting compliance with the foregoing that may be reasonably requested by the Investor.

“Lien” shall mean, with respect to any property, (a) any mortgage, deed of trust, lien, pledge, charge, assignment, hypothecation, security interest or encumbrance of any kind or any arrangement to provide priority or preference or any filing of any financing statement under the Uniform Commercial Code or any other similar notice of lien under any similar notice or recording statute of any Governmental Authority, in each of the foregoing cases whether voluntary or imposed by law, and any agreement to give any of the foregoing; and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such property; and (c) in the case of securities of the Companies, any purchase option, call or similar right of a third party with respect to such securities.

“Mortgage” shall mean the Panamanian First Priority Naval Mortgage, dated as of the Closing Date, granted by the Shipowner in favor of the Investor with respect to the Vessel, which is in form and substance acceptable to the Investor.

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“Release” shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the Environment.

“Requirements of Law” shall mean, collectively, any and all requirements of any Governmental Authority including any and all laws, judgments, orders, decision, decrees, ordinances, rules, regulations, statutes or case law, and international conventions and treaties.

“Security Documents” shall mean the Assignment of Insurances, the Assignment of Earnings and Maritime Contracts, and the Mortgage.

6.2Fees and Expenses.

The Companies shall pay the costs, fees and expenses of the Investor incurred in connection with the transactions contemplated by the Transaction Documents, including reasonable diligence and legal fees and expenses.  In addition, the Companies shall pay all reasonable fees and expenses incurred by the Investor in connection with the administration and enforcement of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’ fees and expenses.

6.3Specific Performance; Consent to Jurisdiction; Venue.

(a)The Companies and the Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the other Transaction Documents and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

(b)The parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue.  The parties irrevocably consent to personal jurisdiction in the state and federal courts of the state of New York.  Each Company and the Investor consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 6.3 shall affect or limit any right to serve process in any other manner permitted by law.  THE PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

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6.4Entire Agreement; Amendment.

This Agreement and the Transaction Documents contain the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the other Transaction Documents, neither any Company nor the Investor make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein.  No provision of this Agreement may be waived or amended other than by a written instrument signed by each Company and the Investor.  Any amendment or waiver effected in accordance with this Section 6.3 shall be binding upon the Investor (and its assigns) and each Company.

6.5Notices.

Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a Business Day (as defined in the Note) during normal business hours where such notice is to be received), or the first Business Day (as defined in the Note) following such delivery (if delivered other than on a Business Day (as defined in the Note) during normal business hours where such notice is to be received) or (b) on the second Business Day (as defined in the Note) following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Companies:	Island Breeze International, Inc. 211 Benigno Blvd. Suite 201 Bellmawr, New Jersey 08031 Tel: (856) 931-1505 Fax: (856) 931-1508 Attention: Bradley Prader
with copies (which copies shall not constitute notice to the Companies) to:	Eaton & Van Winkle LLP 3 Park Avenue 16th Floor New York, NY 10016 Tel:(212) 561-3633 Fax: (212) 779-9928 Attention:  Joseph L. Cannella
If to the Investor:	__________________________
with copies (which copies shall not constitute notice to the Investor) to:	__________________________

Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto.

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6.6Waivers.

No waiver by any party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

6.7Headings.

The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

6.8Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  After the Closing, the assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement.  The Investor may assign the Securities and its rights under this Agreement and the other Transaction Documents and any other rights hereto and thereto without the consent of the Companies.

6.9No Third Party Beneficiaries.

This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

6.10Governing Law.

This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction.  This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

6.11Survival.

The representations and warranties of each Company and the Investor shall survive the execution and delivery hereof and the Closing, as applicable; the agreements and covenants set forth in Articles I, III, IV, V and VI of this Agreement shall survive the execution and delivery hereof and the Closing hereunder, as applicable.

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6.12Publicity.

Each Company agrees that it will not disclose, and will not include in any public announcement, the names of the Investor without the consent of the Investor, which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable regulation and then only to the extent of such requirement.

6.13Counterparts.

This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.

6.14Severability.

The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

6.15Further Assurances.

From and after the date of this Agreement, upon the request of the Investor, the Companies shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement and the other Transaction Documents.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized officers as of the date first above written.

Companies:	ISLAND BREEZE INTERNATIONAL, INC. By: ________________________________ Name: ______________________________ Title: ________________________________
	ISLAND BREEZE INTERNATIONAL By:                                                                 Name: Title:
Investor:	By: ________________________________ Name: ______________________________ Title: ________________________________

[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

S-1

EX-4.15

EXHIBIT 4.15

THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR ISLAND BREEZE INTERNATIONAL, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

SENIOR SECURED PROMISSORY NOTE

Dated:           November 9, 2011 $2,750,000

For value received, ISLAND BREEZE INTERNATIONAL, INC., a corporation organized under the laws of the State of Delaware (“Island”) and, ISLAND BREEZE INTERNATIONAL, a Cayman Islands exempt company, together with Island, the “Makers” or the “Companies” and each individually referred to as a “Maker” or a “Company”), hereby, jointly and severally, promise to pay to the order of ____________________ (together with its successors, representatives, and assigns, the “Holder”), in accordance with the terms hereinafter provided, the principal amount of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) hereunder or, if less, the unpaid principal amount of all Advances made by the Investor pursuant to the Securities Purchase Agreement, bearing even date herewith (the “Purchase Agreement”), by and among the Makers and the Holder, together with interest and all other obligations outstanding hereunder.

All payments under or pursuant to this Senior Secured Promissory Note (this “Note”) shall be made in United States Dollars in immediately available funds to the Holder at the address of the Holder first set forth above or at such other place as the Holder may designate from time to time in writing to the Makers or by wire transfer of funds to the Holder’s account, instructions for which are attached hereto as Exhibit A.  The outstanding principal balance of this Note shall be due and payable on the earlier of November 9, 2012 and the date all obligations and indebtedness hereunder are accelerated (the “Maturity Date”).

ARTICLE I

Section 1.1Purchase Agreement.  This Note has been executed and delivered pursuant to the Purchase Agreement.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement.

Section 1.2Interest.  Interest on the outstanding principal amount of this Note shall accrue at a rate of nine percent (9%) per annum and with respect to each Advance shall be payable in full on an unconditional, non-refundable, original issue discount basis on the on the date of such Advance.  Additional interest on the outstanding principal amount of this Note shall accrue at a rate of fourteen percent (14%) per annum and shall be payable on each monthly anniversary of the date hereof beginning on the fifth monthly anniversary of this Note and ending on the scheduled Maturity Date.  Furthermore, upon the occurrence of an Event of Default (as defined below), the Makers will pay additional default rate interest to the Holder, payable on demand, at a rate equal to the lesser of three percent (3%) per month (prorated for partial months) and the maximum applicable legal rate per annum on the outstanding principal balance of this Note and on all unpaid interest from the date of the Event of Default.  Interest hereunder shall be computed on the basis of a 360-day year of twelve (12) thirty-day months and the actual number of days elapsed.

Section 1.3Payment of Principal; Prepayment.  The outstanding principal balance plus all outstanding interest and all other amounts due and owing hereunder shall be paid in full on the Maturity Date.  Any amount of principal repaid hereunder may not be reborrowed.  The Makers may prepay all or any portion of the principal amount of this Note in an amount equal to the sum of (i) 100% of the amount of such principal prepayment and (ii) all outstanding interest and all other amounts due and owing hereunder, upon not less than three (3) Business Days prior written notice to the Holder.  This Note is further subject to mandatory prepayment at the option of the Holder as set forth in Article 3 hereof.

Section 1.4Security Documents.  The obligations of the Makers hereunder are secured by a continuing security interest in the Collateral pursuant to the terms of the Security Documents and other collateral documents.

Section 1.5Payment on Non-Business Days.  Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of New York, such payment shall be due on the next succeeding Business Day and such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

Section 1.6Transfer.  This Note may be transferred or sold, and may also be pledged, hypothecated or otherwise granted as security, by the Holder; provided, however, that any transfer or sale of this Note must be in compliance with any applicable securities laws, provided, further, that this Note may not be transferred or sold without the simultaneous transfer or sale of the continuing security interest in the Collateral pursuant to the terms of the Security Document and other collateral documents.

Section 1.7Replacement.  Upon receipt of a duly executed, notarized and unsecured written statement from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof) and a standard indemnity, or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Makers shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.

Section 1.8Use of Proceeds.  The Makers shall use the proceeds of this Note as set forth in the Purchase Agreement.

ARTICLE II

EVENTS OF DEFAULT; REMEDIES

Section 2.1Events of Default.  The occurrence of any of the following events shall be an “Event of Default” under this Note:

(a)any failure to make any payment of the principal amount, interest or any other monetary obligation under this Note, as and when the same shall be due and payable (whether on the Maturity Date or by acceleration or otherwise);

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(b)any Mortgage Default shall occur (as defined in the Mortgage);

(c)any Maker shall fail to observe or perform any other condition, covenant, undertaking or agreement contained in this Note, the Purchase Agreement or any other Transaction Document, which failure is not cured within seven (7) days after the earlier of (i) the date on which such failure first becomes known to an officer of any Maker or (ii) notice thereof is given to the Makers by the Holder; or

(d)the suspension from listing, without subsequent listing on any one of, or the failure of the Common Stock to be listed on at least one of The New York Stock Exchange, Inc., the American Stock Exchange, the Nasdaq Capital Markets, the Nasdaq Global Market, the Nasdaq Global Select Market, the NYSE Alternext Exchange, or the OTC Markets for a period of five (5) consecutive Trading Days; or

(e)any representation or warranty made by the Makers, or any of them, herein or in the Purchase Agreement or any other Transaction Document shall prove to have been false or incorrect or breached in a material respect on the date as of which made; or

(f) (A) a default in any payment of any amount or amounts of principal of or interest on any Indebtedness of the Makers, or any of them (other than the Indebtedness hereunder), the aggregate principal amount of which Indebtedness is in excess of $50,000or (B) a default in the observance or performance of any other agreement or condition relating to any Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders or beneficiary or beneficiaries of such Indebtedness to cause with the giving of notice, if required, such Indebtedness to become due prior to its stated maturity; or

(g) the Makers, or any of them, shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same, or (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing; or

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(h)a proceeding or case shall be commenced in respect of the Makers, or any of them, without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of Makers, or any of them, or of all or any substantial part of Makers’, or any Maker’s, assets or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of thirty (30) days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Makers, or any of them, or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Makers, or any of them, and shall continue undismissed, or unstayed and in effect for a period of thirty (30) days; or

(i)a judgment or judgments in the aggregate amount exceeding $50,000 is/are entered against the Makers, or any of them, and not dismissed or discharged within twenty (20) days following the entry thereof; or

(j)the Makers, or any of them, shall cease to actively conduct its business operations as currently conducted or once the Vessel commences operations as then conducted for a period of five (5) consecutive Business Days; or

(k)any material portion of the properties or assets of the Makers, or any of them, is seized by any governmental authority; or

(l)the Makers, or any of them, are indicted for the commission of any criminal activity; or

(m)the Vessel becomes a Total Loss (as defined in the Mortgage); or

(n)the Makers fail to effect the Mandatory Prepayment in accordance with Articles II hereof; or

(o)a Material Adverse Effect with respect to the Makers shall have occurred.

Section 2.2Remedies Upon An Event of Default.  If an Event of Default shall have occurred and shall be continuing, the Holder may at any time at its option (a) declare the entire unpaid principal balance of this Note, together with all interest accrued hereon, plus other fees and expenses, due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Makers; provided, however, that upon the occurrence of an Event of Default described in Sections 2.1 (f) or (g) above, the outstanding principal balance and accrued interest hereunder, plus other fees and expenses, shall be immediately and automatically due and payable, and/or (b) exercise or otherwise enforce any one or more of the Holder’s rights, powers, privileges, remedies and interests under this Note, the Purchase Agreement, the Security Documents or other Transaction Document or applicable law.  No course of delay on the part of the Holder shall operate as a waiver thereof or otherwise prejudice the right of the Holder.  No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.  Upon and after an Event of Default, this Note shall bear interest at the default rate set forth in Section 1.2 hereof.

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ARTICLE III

Section 3.1Mandatory Prepayment. In addition to any other rights of the Holder contained herein, simultaneously with the consummation of any debt or equity financing by a Maker (a “Financing”), the Holder shall have the right, at Holder’s option, to require the Maker to use the proceeds of such Financing to prepay the Note in cash at a price equal to the sum of (i) one hundred percent (100%) of the aggregate outstanding principal amount of this Note plus all accrued and unpaid interest (if any), and (ii) all other fees, costs, expenses, liquidated damages or other amounts (if any) owing in respect of this Note (the “Mandatory Prepayment”), provided however, that such Mandatory Prepayment right shall not apply to (i) Refinance Indebtedness,  (ii) the issuance and sale by Island of up to $700,000 in the aggregate of its shares of Class A Common Stock in connection with the issuance of Hong Kong Indebtedness (as defined in the Purchase Agreement) consummated after the date hereof (the “Hong Kong Related Equity”) or (iii) in addition to the Hong Kong Related Equity, the issuance and sale by Island of shares of Island’s Class A Common Stock in which Island receives net proceeds in the amount of $1,000,000 in the aggregate consummated after the date hereof. No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Financing the Makers shall deliver written notice thereof (“Financing Notice”) to the Holder of this Note.  At any time after receipt of a Financing Notice, the Holder may require the Makers to prepay, simultaneously with the consummation of such Financing, the Note by delivering written notice thereof to the Makers.

ARTICLE IV

MISCELLANEOUS

Section 4.1Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery, telecopy or facsimile at the address or number designated in the Purchase Agreement (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.

Section 4.2Governing Law.  This Note shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction.  This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.

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Section 4.3Headings.  Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.

Section 4.4Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a holder’s right to pursue actual damages for any failure by the Makers to comply with the terms of this Note.  Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Makers, or any of them, (or the performance thereof).  Each Maker  acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach may be inadequate. Therefore each Maker agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek and obtain such equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of showing economic loss and without any bond or other security being required.

Section 4.5Enforcement Expenses.  Each Maker agrees to pay all costs and expenses incurred from time to time by the Holder with respect to any modification, consent or waiver of the provisions of this Note or the Transaction Documents and any enforcement of this Note and the Transaction Documents, including, without limitation, reasonable attorneys’ fees and expenses.

Section 4.6Amendments.  This Note may not be modified or amended in any manner except in writing executed by the Makers and the Holder.

Section 4.7Compliance with Securities Laws.

(a)The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell or otherwise dispose of this Note except in accordance with applicable law.

(b)The Holder is an “accredited investor” (as defined in Rule 501 of Regulation D under the Securities Act), and such Holder has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities.  The Holder is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and it is not a broker-dealer.  The Holder acknowledges that an investment in the Securities is speculative and involves a high degree of risk.

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Section 4.8Consent to Jurisdiction.  Each Maker and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Each Maker and the Holder consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 4.8 shall affect or limit any right to serve process in any other manner permitted by law.

Section 4.9Binding Effect.  This Note shall be binding upon, inure to the benefit of and be enforceable by the Makers, the Holder and their respective successors and permitted assigns.  No Maker shall delegate or transfer this Note or any obligations or undertakings contained in this Note.

Section 4.10Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

Section 4.11Maker Waivers; Dispute Resolution.

(a)Except as otherwise specifically provided herein, each Maker and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands’ and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Makers liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

(b)No delay or omission on the part of the Holder in exercising its rights under this Note, or course of conduct relating hereto, shall operate as a waiver of such rights or any other right of the Holder, nor shall any waiver by the Holder of any such right or rights on any one occasion be deemed a waiver of the same right or rights on any future occasion.

(c)EACH MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

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Section 4.12Definitions.  Capitalized terms used herein and not defined shall have the meanings set forth in the Purchase Agreement.  For the purposes hereof, the following terms shall have the following meanings:

“Business Day” (whether or not capitalized) shall mean any day banking transactions can be conducted in New York City, NY, USA and does not include any day which is a federal or state holiday in such location.

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“Trading Day” means (a) a day on which the Common Stock is traded on the New York Stock Exchange or other registered national securities exchange, or (b) if the Common Stock is not traded on the OTC Bulletin Board or a registered national securities exchange, a day on which the Common Stock is quoted in the over-the-counter market as reported by the pink sheets (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

“Trading Market” means the OTC Markets, the American Stock Exchange, the New York Stock Exchange, the NYSE Alternext Exchange, the Nasdaq Capital Markets, the Nasdaq Global Markets, or the Nasdaq Global Select Market.

“Transaction Documents” means this Note, the Purchase Agreement, Security Documents, and all other security documents or related agreements now or hereafter entered into in connection with and/or as security for this Note and all amendments and supplements thereto and replacements thereof and any other Transaction Document (as that term is defined in the Purchase Agreement).

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IN WITNESS WHEREOF, each Maker has caused this Note to be duly executed by its duly authorized officer as of the date first above indicated.

ISLAND BREEZE INTERNATIONAL, INC.

By:  

Name:                  

Title:    

ISLAND BREEZE INTERNATIONAL

By: 

Name:                 

Title:    

[SIGNATURE PAGE TO SENIOR SECURED

PROMISSORY NOTE]

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EXHIBIT A

WIRE INSTRUCTIONS

Wire instructions for Holder

EXHIBIT A

EX-4.16

EXHIBIT 4.16

FIRST PRIORITY NAVAL MORTGAGE

dated as of November 9, 2011

from

ISLAND BREEZE INTERNATIONAL,

as Owner

in favor of

________________________________

 as Mortgagee

FIRST PRIORITY NAVAL MORTGAGE

THIS FIRST PRIORITY NAVAL MORTGAGE,dated as of November 9, 2011 (this “Mortgage”), is made and given by ISLAND BREEZE INTERNATIONAL, an exempt company duly organized and existing under the laws of the Cayman Islands, with offices at P.O. Box 309 GT, Ugland House, Georgetown, Grand Cayman Island, Cayman Islands. (the “Owner”), to ___________________________ (the “Mortgagee”).

RECITALS

A.The Owner is the sole legal and beneficial owner of the whole of the Panamanian-flag vessel named ISLAND BREEZE, with provisional patente number 35375-PEXT, radio call sign 3EJF7, of 4593.00 gross tons, 2152.29 net tons, length 126.27 meters, width 17.00 meters, and depth 5.90 meters (the “Vessel”).

B.The Owner executed and delivered that certain Senior Secured Promissory Note, dated as of November 9, 2011 (as the same may be further amended, supplemented, restated, amended and restated, extended or otherwise modified from time to time, the “Note”), the form of which (without any exhibits) is attached hereto as Exhibit A and which is hereby specifically incorporated by reference in this Mortgage and made a part of this Mortgage, among each of the Owner and ISLAND BREEZE INTERNATIONAL, INC., a Delaware corporation, each as a maker of the Note (the “Companies” and each a “Company”), in favor of the Mortgagee, as the Note holder.  The Note has been executed and delivered pursuant to a Securities Purchase Agreement, dated as of November 9, 2011 (as the same may be further amended, supplemented, restated, amended and restated, extended or otherwise modified from time to time, the “Purchase Agreement”), by and among the Companies and the Mortgagee, the form of which (without any exhibits or schedules) is attached hereto as Exhibit B and which is hereby specifically incorporated by reference in this Mortgage and made a part of this Mortgage.

C.To secure the (i) repayment of each of the Note and the Put Payment (as such term is defined in the Purchase Agreement) and (ii) full and punctual performance of the terms and conditions contained in this Mortgage and the other Loan Documents (as such term is defined in Section 2 below), expressed or implied to be performed, observed and complied with by and on the part of the Owner (collectively with the repayment of each of the Note and the Put Payment (as such term is defined in the Purchase Agreement), the “Secured Obligations”), the Owner and Mortgagee have duly authorized the execution and delivery of this First Priority Naval Mortgage under and pursuant to Chapters V and VI, Title IV of Law No. 55 of August 6, 2008 and all other applicable laws of the Republic of Panama, as amended from time to time (the “Panamanian Maritime Laws”).

NOW, THEREFORE, THIS MORTGAGE WITNESSETH:

1.Mortgage.  In consideration of the premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to secure the payment of the Secured Obligations and to secure the full and punctual performance and observance of and compliance with the covenants, terms and conditions contained in this Mortgage and the performance of and compliance with conditions of the other Loan Documents, the Owner has granted, conveyed and mortgaged, and by these presents does hereby grant, convey and mortgage, to and in favor of the Mortgagee the whole of the Vessel, together with (i) all of its boilers, engines, machinery, masts, rigging, boats, anchors, chains, cables, tackle, apparel, spare gear, fuel, consumable or other stores, equipment and all other appurtenances thereto appertaining or belonging and appropriated to the exclusive use of the Vessel, whether now owned or hereafter acquired, whether on board or not, (ii) all additions, improvements and replacements hereafter made in or to the Vessel, or any part thereof, or in or to the stores, equipment and appurtenances aforesaid except such equipment and stores that, when placed aboard the Vessel, do not become the property of the Owner and leased equipment not belonging to the Owner, (iii) all Earnings, and (iv) all logs, books and records pertaining to the use, operation and employment of the Vessel;

TO HAVE AND TO HOLD the same unto the Mortgagee, its successors and permitted assigns, forever, upon the terms set forth in this Mortgage for the enforcement of the payment of the Note, the Put Payment and the other Secured Obligations and to secure the performance and observance of and compliance with the covenants, terms and conditions contained in this Mortgage and the other Loan Documents;

PROVIDED, HOWEVER, and the conditions of these presents are such that, if the Owner, or its successors or assigns, shall pay or cause to be paid to the Mortgagee or to its successors and assigns, the Note, the Put Payment and the other Secured Obligations as and when the same shall become due and payable (other than indemnification obligations and other similar contingent obligations that survive the termination of the Note and that are not yet due and payable at such time) in accordance with the terms of this Mortgage and the other Loan Documents (or any other agreement entered into pursuant to the terms thereof or hereof) and shall perform, observe and comply with each and all of the covenants, terms and conditions contained in this Mortgage and the other Loan Documents, expressed or implied, to be performed, observed or complied with by and on the part of the Owner or its successors or assigns, all without delay and according to the true intent and meaning hereof and thereof, then, these presents and the rights of the Mortgagee under this Mortgage shall cease and terminate and the security interest created hereby shall be released and, in such event, at the expense of the Owner, the Mortgagee agrees to execute and deliver to the Owner and record, if appropriate, (at the Owner’s sole cost and expense) all such documents and instruments as the Owner may reasonably request to release and discharge this Mortgage as satisfied under the laws of the Republic of Panama or to acknowledge or evidence the same; otherwise this Mortgage shall be and remain in full force and effect; PROVIDED FURTHER, HOWEVER, that payment of the Put Payment as a condition to the release of this Mortgage shall only be required if a notice of the exercise of the Mortgagee’s right to receive the Put Payment has been issued by the Mortgagee under Section 3.1 of the Purchase Agreement.

  It is declared and hereby agreed that the security created by this Mortgage shall be held by the Mortgagee as a continuing security for the payment of the Note, the Put Payment and the Secured Obligations.

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2.Definitions.  Capitalized terms used herein (including in the recitals hereto) and not otherwise defined shall have the meanings given such terms in the Note and such definitions are hereby specifically incorporated by reference herein and made a part hereof.  In this Mortgage, unless the context otherwise requires:

(a)“Earnings” means all moneys whatsoever due or to become due to or for the account of the Owner at any time arising out of any charter, lease, or other contract of employment of the Vessel or any other use or operation of the Vessel, including, but not limited to, all earnings, income, profits, freights, subfreights (to the extent of the Owner’s interest, if any, therein), hire and passage moneys, compensation payable to the Owner in the event of requisition of the Vessel for hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (or payments for variation or termination) of any charter, lease, refurbishment contract, or other contract of employment or use or operation of, or otherwise relating to, the Vessel and all sums receivable under the Insurances in respect of loss of Earnings (as defined herein);

(b)“Insurances” means all policies and contracts of insurance and all entries of the Vessel in a protection and indemnity or war risks association or club that are from time to time taken out or entered into in respect of the Vessel or its Earnings or otherwise howsoever in connection with the Vessel or its Earnings;

(c)“Loan Documents” means this Mortgage, the Note, the Purchase Agreement, an Assignment of Insurances made by the Owner in favor of the Mortgagee, as assignee and dated as of the date hereof, and an Assignment of Earnings and Maritime Contracts, made by the Owner in favor of the Mortgagee, as assignee and dated as of the date hereof;

(d)“Permitted Maritime Liens” means

(i)Liens for crews’ wages (including the wages of the master of the Vessel) that are discharged in the ordinary course of business and have accrued for not more than thirty (30) days unless any such Lien is being contested in good faith and by appropriate proceedings or other acts by the Owner and the Owner shall have set aside on its books adequate reserves with respect to such Lien and so long as such deferment in payment shall not subject the Vessel to sale, forfeiture or loss;

(ii)Liens for salvage (including contract salvage) or general average, and Liens for wages of stevedores employed by the Owner, the master of the Vessel or a charterer or lessee of the Vessel, which in each case have accrued for not more than thirty (30) days unless any such Lien is being contested in good faith and by appropriate proceedings or other acts by the Owner and the Owner shall have set aside on its books adequate reserves with respect to such Lien and so long as such deferment in payment shall not subject the Vessel to sale, forfeiture or loss;

(iii)Liens arising by operation of law arising in the ordinary course of business in operating the Vessel (other than those referred to in (i) and (ii) above), which in each case have accrued for not more than thirty (30) days unless any such Lien is being contested in good faith and by appropriate proceedings or other acts by the Owner, and the Owner shall have set aside on its books adequate reserves with respect to such Lien and so long as such deferment in payment shall not subject the Vessel to sale, forfeiture or loss; provided that any such Lien shall be permitted only to the extent it is subordinate to the Lien of this Mortgage;

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(iv)Liens for damages arising from maritime torts which are unclaimed, or are covered by insurance and any deductible applicable thereto, or in respect of which a bond or other security has been posted on behalf of the Owner with the appropriate court or other tribunal to prevent the arrest or secure the release of the Vessel from arrest, unless any such Lien is being contested in good faith and by appropriate proceedings or other acts by the Owner, and the Owner shall have set aside on its books adequate reserves with respect to such Lien and so long as such deferment in payment shall not subject the Vessel to sale, forfeiture or loss;

(v)Liens that, as indicated by the written admission of liability therefor by an insurance company, are covered by insurance (subject to reasonable deductibles);

(vi)Liens for charters or subcharters or leases or subleases permitted under this Mortgage; provided that any such Lien shall be permitted only to the extent it is subordinate to the Lien of this Mortgage; and

(vii)the Lien of this Mortgage.

(e)“Requisition Compensation” means all moneys or other compensation payable by reason of requisition for title or other compulsory acquisition of the Vessel other than by requisition for hire; and

(f)“Total Loss” means the occurrence of any one or more of the following:  (a) the actual or constructive total loss or compromised, agreed or arranged total loss of the Vessel; (b) the loss, theft or destruction of the Vessel or damage thereto to such extent as shall make repair thereof uneconomical or shall render the Vessel permanently unfit for normal use for any reason whatsoever; (c) the requisition of title to or other compulsory acquisition of the Vessel (otherwise than by requisition for hire); or (d) the capture, seizure, arrest or detention of the Vessel by any Governmental Authority or by persons acting or purporting to act on behalf of any Governmental Authority (as established to the reasonable satisfaction of the Mortgagee), unless the Vessel shall be released from such capture, seizure, arrest or detention within one month after such occurrence but in all events prior to the Maturity Date.

3.Representations and Warranties.  In addition to the representations and warranties provided in the other Loan Documents, the Owner hereby represents and warrants that:

(a)it is an exempt company duly organized, validly existing and in good standing under the laws of the Cayman Islands, has the requisite power and authority to carry on its business as now conducted and as contemplated by the Loan Documents to which it is a party, and is duly authorized and qualified to register the Vessel in its name as owner thereof under the flag of the Republic of Panama;

(b)it has good and valid rights in and title to the whole of the Vessel, and the Vessel is duly registered in the name of the Owner under the laws and flag of the Republic of Panama;

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(c)the Vessel is in the absolute and unencumbered ownership of the Owner except for Permitted Maritime Liens;

(d)there are no taxes payable by it or the Mortgagee imposed by the Cayman Islands or the Republic of Panama or any political subdivisions thereof in connection with the execution and delivery by the Owner or the Mortgagee of this Mortgage;

(e)all consents, licenses, approvals and authorizations (including any approvals of the Cayman Islands and the Republic of Panama) required as of the date hereof for the entry into, performance, validity and enforceability of, this Mortgage have been duly obtained and are in full force and effect; and

(f)as of the date hereof, except for the filing and recordation of this Mortgage at Public Registry of Vessels of the Panama Maritime Authority (the “Public Registry of Vessels”), it is not necessary for the legality, validity, enforceability or admissibility in evidence of this Mortgage that it be registered, filed, recorded or enrolled with any court or authority in any relevant jurisdiction, except for the recording fee payable to the Public Registry of Vessels.

4.Insurance Covenants.  The Owner hereby covenants and agrees to comply with the following insurance requirements:

(a)At no expense to the Mortgagee (as the mortgagee and not in any other capacity) the Owner shall insure and keep the Vessel insured against the risks prescribed below, in addition to such other risks that the Mortgagee may reasonably request from time to time:

(i)On the date of this Mortgage and for so long as the Vessel is laid up in Greek waters, port risks hull and machinery insurance as per Institute Time Clauses Hulls-Port risks CL 311, but exclusions for earthquake, malicious damage, and strikes are to be deleted.  Such port risks hull and machinery insurance shall include protection and indemnity cover per Port Risks Clauses (excluding cargo cover and crew liability cover) and shall be extended to include Terrorism, Strikes, War and Protection and Indemnity War and Strikes Clauses, all as per the Time Institute Clauses.  All insurance required under this Section 4(a)(i) shall be maintained in an amount equal at all times to not less than US$10,000,000 and may provide for a deductible amount of up to US$250,000 with respect to any one accident, occurrence or event; provided that any deductibles shall not apply to a Total Loss, which shall be payable in full.  In addition, all insurance required under this Section 4(a)(i) shall contain an endorsement that reflects the Vessel’s class status as “class suspended – laid up” and that coverage under such insurance continues.

(ii)Prior to any movement of the Vessel (including non-commercial operation under its own power) and during any period that the Vessel is in tow, hull and machinery insurance per the (London) Institute Voyage Clauses-Hulls, CL 285-95, Institute Protection and Indemnity Clauses Hulls-Time (CL 344), excluding cargo and crew liability cover.  Such insurance coverage shall include Malicious Acts, Terrorism, Strikes, War and Protection and Indemnity War and Strikes Clauses, all as per Institute Clauses, and shall have such other terms and conditions as may beas may be approved by the Mortgagee in its reasonable discretion.  All insurance required under this Section 4(a)(ii) shall be maintained in an amount equal at all times to not less than US$10,000,000 and may provide for a deductible amount of up to US$250,000 with respect to any one accident, occurrence or event; provided that any deductibles shall not apply to a Total Loss, which shall be payable in full.  In addition, all insurance required under this Section 4(a)(ii) shall contain an endorsement that reflects the Vessel’s class status as “class suspended – laid up” and that coverage under such insurance continues.

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(iii)Prior to the placement of the Vessel in a shipyard or dock for any refurbishment work, builders’ risks Insurance per the Institute Clauses for Builders’ Risks CL 351 (1/6/88), including Earthquake, Malicious Acts and Protection and Indemnity, and excluding cargo and crew liability cover.  Such builder’s risk insurance coverage to be extended to include Terrorism, Strikes, War and Protection and Indemnity War and Strikes Clauses, all as per Institute Clauses, and shall have such other terms and conditions as may be approved by the Mortgagee in its reasonable discretion.  All insurance required under this Section 4(a)(iii) shall be maintained in an amount equal at all times to not less than US$10,000,000 and may provide for a deductible amount of up to US$250,000 (or such other amount approved in writing by the Mortgagee), with respect to any one accident, occurrence or event; provided that any deductibles shall not apply to a Total Loss, which shall be payable in full.In addition, all insurance required under this Section 4(a)(iii) shall contain an endorsement that reflects the Vessel’s class status as “class suspended – laid up” and that coverage under such insurance continues.

(iv)During the period prior to the commencement of any commercial operations by the Vessel, crew liability insurance on such terms and conditions as may be approved by the Mortgagee in its reasonable discretion. The crew liability insurance required under this Section 4(a)(iv) shall provide coverage for each accident, occurrence or event in an amount to be approved by the Mortgagee from time to time based on the number of crew members at such time and may provide for a deductible amount of (A) for personal injury or death claims, US$35,000 per any one accident, occurrence or event with respect to the Vessel’s crew, and (B) for other claims, US$50,000 per any one accident, occurrence or event.  In addition, all insurance required under this Section 4(a)(iv) shall contain an endorsement that reflects the Vessel’s class status as “class suspended – laid up” and that coverage under such insurance continues.  The crew liability insurance required under this Section 4(a)(iv) shall be for two (2) crew members on the date hereof.  Prior to hiring of any additional crew members, the Owner shall propose to the Mortgagee at least five (5) Business Days prior to hiring such additional crew members the increased amount of crew liability insurance required under this Section 4(a)(iv) to cover such additional crew members, which shall be reviewed and approved by the Mortgagee in its reasonable discretion.  Thereafter, the Owner shall provide evidence of such increase in coverage to the Mortgagee, which shall take effect prior to the Owner’s hiring such crew members.

(v)As a condition to the commencement of any commercial operations by the Vessel, navigating risk hull and machinery insurance per the American Institute Hull Clauses (June 2, 1977) or equivalent, and war risk insurance as per American Hull Insurance Syndicate Hull War Risks and Strikes Clause, Terrorism Included (T.I.N.) (March 19, 2002) form of policy or equivalent.  Such navigating risk hull and machinery insurance shall be maintained in the broadest forms substantially equivalent to the coverage carried by prudent shipowners for similar vessels engaged in similar trades to the Vessel.  All insurance required under this Section 4(a)(v) shall be maintained in an amount equal at all times to not less than US$10,000,000, which shall be subject to increase to reflect the fair market value of the Vessel following completion of the refurbishment of the Vessel, and may provide for a deductible amount of up to US$250,000 with respect to any one accident, occurrence or event; provided that any deductibles shall not apply to a Total Loss, which shall be payable in full.

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(vi)As a condition to the commencement of any commercial operations by the Vessel, marine and war risk, full form protection and indemnity insurance as per American Institute of Marine Underwriters Protection and Indemnity Clauses Form SP-23 (Revised 1/56) or equivalent, with war protection and indemnity as per the American Hull Insurance Syndicate War Risks Protection and Indemnity Clauses Form SP-22B (January 18, 1970) or equivalent extended to include claims for loss, damage or expense caused by or resulting from any terrorist or any person acting maliciously or from a political motive.  The protection and indemnity insurance required under this Section 4(a)(vi) and shall provide coverage for each accident, occurrence or event of not less than US$50,000,000.  The maximum deductible permitted under such protection and indemnity coverage shall be (X) for personal injury or death claims, US$35,000 per any one accident, occurrence or event with respect to the Vessel’s crew and US$25,000 per any one accident, occurrence or event with respect to other persons, and (Y) for other claims, US$50,000 per any one accident, occurrence or event.

(vii)The protection and indemnity insurance required under Sections 4(a)(i), (ii), (iii) and (vi) shall be maintained in the broadest forms generally available in the European markets, shall include a cross liability endorsement, if obtainable.

(viii)Pollution risk insurance (including Water Quality Insurance Syndicate coverage or equivalent pollution policy) in a coverage amount equal to the greater of US$5,000,000 or the amount required by applicable law; provided, however, that such insurance shall not be required until the commencement of commercial operations by the Vessel (unless sooner required by the laws applicable to the Vessel in her then current waters), or until the Vessel enters the territorial waters of the United States of America.

(ix)If not covered by the protection and indemnity policy required under Section 4(a)(vi) or by entry in a P&I club, passenger, liquor, premises, and crew liability insurance (and to the extent that the Vessel transports any cargo, cargo liability insurance) under forms of policies at least equivalent to the coverage carried by prudent shipowners for similar vessels engaged in similar trades as the Vessel; provided, however, that insurance relating to passengers, liquor, premises and cargo liabilities shall not be required until the commencement of commercial operations by the Vessel.  Any such separate passenger, liquor, premises and cargo liability insurance shall be in an amount for each accident, occurrence or event of not less than US$50,000,000 and may provide for a deductible amount of up to US$25,000 per any one accident, occurrence or event;

(x)Workmen’s compensation, longshoremen’s and harbor worker’s insurance with such coverages and in such amounts as shall be required by applicable law; provided, however, that such insurance shall not be required until the commencement of commercial operations by the Vessel (unless sooner required by the laws applicable to the Vessel in her then current waters), or until the Vessel enters the territorial waters of the United States of America;

(xi)Breach of warranty or mortgagee’s interest insurance (including extended mortgagee’s interest-additional perils (pollution) risks cover) in an amount equal to U.S.$4,000,000;and

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(xii)Such other Insurances in such amounts and against such risks arising from or connected with the ownership or operation of the Vessel as from time to time may be commonly insured against by prudent shipowners for similar vessels engaged in similar trades as the Vessel and may be reasonably required by the Mortgagee, and such other Insurances as may at the time be required by applicable law.

(b)All Insurances required under this Section 4 shall be placed and kept with insurers or underwriters of recognized standing having a minimum rating of A-, Financial Size Category VIII (or equivalent category size rated (i.e., US$100,000,000 to US$250,000,000 in policy holder surplus), by A.M. Best or a minimum rating of A by Fitch, Inc. or Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc.), or Underwriter’s at Lloyd’s of London or such other insurers and underwriters as are reasonably satisfactory to the Mortgagee; provided, however, that the protection and indemnity cover may be through membership in one of the International Group of P&I Clubs.  If the rating of any insurer or underwriter is or falls below the rating required by the immediately preceding sentence (whether on initial placement, renewal or otherwise), unless the Mortgagee shall consent otherwise (and the Mortgagee agrees promptly to respond to any written request for such consent), the Owner shall replace such insurer or underwriter with an insurer or underwriter that meets or exceeds such rating requirement not later than thirty (30) days after such required rating is no longer met.

(c)(i)  All Insurances (except for workmen’s compensation insurance) required to be taken out and maintained pursuant to the terms of this Mortgage shall name the Mortgagee, the Owner, and any permitted charterer of the Vessel (except any breach of warranty or mortgagee’s interest insurance (including extended mortgagee’s interest-additional perils (pollution) risks cover), which shall be solely in the name of the Mortgagee) as named insured or additional named insured (provided, however, that in the case of Insurances pursuant to Sections 4(a)(iv), (vi), (viii), (ix) and (x), the Mortgagee shall be named only as a co-assured for claims that are more properly the responsibility of the named assured(s)), and the policies or certificates of insurance shall provide that there shall be no recourse against the Mortgagee for the payment of any premiums, commissions, club calls, assessments or advances.

(ii) Each policy in respect of the Insurances required by Section 4(a) shall contain a waiver of subrogation with respect to the Mortgagee and its assigns.  All such policies shall provide that they are primary insurance with respect to any insurance carried by the Mortgagee or its assigns without any right of contribution with respect to any insurance carried by or on behalf of the Mortgagee and that any “Other Insurance Clause” contained in the Owner’s Insurances shall be inoperative as to the Mortgagee and its assigns.  In addition, no policy shall contain any provision under which the Owner is a co-insurer, but all polices may provide for deductibles in accordance with the terms of this Section 4.

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(d)The marine insurance broker arranging the Insurances shall provide the Mortgagee with (i) at least ten (10) Business Days’ written notice prior to the cancellation, modification or non-renewal of the Insurances carried pursuant to Section 4(a) (other than war risk insurance) by reason of nonpayment of premium (giving the Mortgagee the right to cure defaults in the payment of premiums), and (ii) written notice of any proposed or actual cancellation, modification or non-renewal of the Insurances carried pursuant to Section 4(a) (other than war risk insurance) for any other reason, such notice to be provided to the Mortgagee immediately after the marine insurance broker learns thereof from any source.  Each war risk insurance policy carried pursuant to Section 4(a) shall provide for not less than seven (7) days’ prior written notice of cancellation, modification or non-renewal thereof by the insurer or underwriter to the Owner’s marine insurance broker, who shall immediately provide such notice to the Mortgagee.  The Owner shall deliver to the Mortgagee, prior to the cancellation, modification or non-renewal of any such policy of Insurances, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Mortgagee), together with evidence reasonably satisfactory to the Mortgagee of payment of the premium therefor.

(e)The Owner irrevocably makes, constitutes and appoints the Mortgagee as the Owner’s true and lawful agent and attorney-in-fact (which appointment is coupled with an interest) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of the Vessel under the Insurances, endorsing the name of the Owner on any check, draft, instrument or other item of payment for the proceeds of such Insurances and for making all determinations and decisions with respect thereto.  In the event that the Owner at any time or times shall fail to obtain or maintain any of the Insurances required hereby or to pay any premium in whole or in part relating thereto by the due date thereof, the Mortgagee may, but shall have no obligation to, without waiving or releasing any obligation or liability of the Owner hereunder or an Event of Default, in its sole discretion, obtain and maintain such Insurances as are required hereby and pay such premium and take any other commercially reasonable actions with respect thereto as the Mortgagee deems necessary to insure the Vessel and to collect on such Insurances.  All sums disbursed by the Mortgagee in connection with this Section 4(e), including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, within thirty (30) days after receipt of a reasonably detailed written invoice therefor, by the Owner to the Mortgagee and shall be additional Secured Obligations, and the Owner shall reimburse the Mortgagee, with interest at a rate per annum equal to the default rate under Section 1.2 of the Note (such rate, the “Default Rate”), for any and all expenditures that the Mortgagee may from time to time make in connection with this Section 4(e).

(f)All policies of the Insurances required to be taken out and maintained pursuant to the terms of this Mortgage or other evidence thereof (except for any mortgagee’s interest insurance (breach of warranty coverage) requested by the Mortgagee) shall provide that losses thereunder shall be payable, until this Mortgage shall have been discharged, to the Mortgagee for application pursuant to Section 8 of this Mortgage; provided, however, that the policies of such Insurances or other evidence thereof shall provide that:

(i)In the case of hull and machinery insurance required to be carried pursuant to Section 4(a)(i):

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a.upon the occurrence and continuance of an Event of Default, all insurance payments of any kind or nature whatsoever and other compensation therefor shall be paid to the Mortgagee for application in accordance with Section 8 of this Mortgage;

b.upon the occurrence of a Total Loss, all insurance payments of any kind or nature whatsoever and other compensation therefor shall be paid to the Mortgagee for application in accordance with Section 8 of this Mortgage; and

c.so long as no Event of Default has occurred and is continuing, upon the occurrence of an accident, occurrence or event involving any damage to the Vessel not (x) constituting a Total Loss or (y) resulting in liability to persons other than the Owner, a named assured, or any permitted charterer, the insurers or underwriters may pay directly for the repair, salvage, liability or other charges involved, or directly to the Owner, or other named assured, or any permitted charterer, as the case may be, if such person shall have first fully repaired the damage and paid the cost thereof or discharged the liability or paid all of the salvage or other charges involved and the insurers or underwriters shall have received evidence that such repair and payment has been made or will be paid simultaneously with the payment by the insurers or underwriters, then the insurers or underwriters may pay such person as reimbursement therefor and may pay any remaining balance of such insurance proceeds to the Owner; provided, however, that if such damage involves a loss in excess of US$25,000 with respect to any one accident, occurrence or event for the loss and other charges involved, the insurers or underwriters shall not make such payment without first obtaining the prior written consent thereto of the Mortgagee.  If there is an existing Event of Default, no payment shall be made to the Owner and all such payments received and retained by the Mortgagee hereunder shall be applied by the Mortgagee, at its option, (I) in accordance with Section 8 hereof, or (II) for the purposes stated in this Section 4(f)(i)c, with the balance, if any, applied in accordance with Section 8 hereof;

(ii)In the case of protection and indemnity insurance carried pursuant to Sections 4(a)(ii) and (iii):

a.the insurer may make payments in discharge of any bonds or guarantees issued in favor of persons other than the Owner, and further may make payments directly to such persons in discharge of claims against the Owner, if the Owner shall not have incurred the loss, damage or expense in question (whether or not an Event of Default or default then exists); and

b.the insurer may make payments to the Owner or any permitted charterer, as the case may be, in respect of any liability, loss, damage or expense incurred or paid by the Owner or such permitted charterer in reimbursement for such liability, loss, damage or expense except that if an Event of Default has occurred and is continuing and the insurer has received written notice thereof from the Mortgagee, all payments otherwise payable to the Owner shall be made to the Mortgagee for application in accordance with Section 8 of this Mortgage.

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(g)In the event that a claim is made against the Vessel for any loss, damage or expense that is covered by insurance and it is necessary for the Owner to obtain a bond or to supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of such claim, the Mortgagee, on written request of the Owner, shall assign to any person executing a surety or guaranty bond or other agreement to save or release the Vessel from such arrest all right, title and interest of the Mortgagee in and to such insurance proceeds covering such loss, damage or expense up to the amount of such bond or agreement as collateral security to indemnify such person against liability under such bond or other agreement.

(h)The Owner shall have the duty and responsibility to make, or cause to be made, all proofs of loss and take any and all other steps necessary to effect collections from underwriters for any loss under any Insurances carried pursuant to Section 4(a).

(i)On the date hereof, or in the case of insurances required under Sections 4(a)(ii) and (iii) only, on the date such insurances become effective, and on the anniversary date of this Mortgage each year hereafter, the Owner shall deliver to the Mortgagee with respect to the Insurances required at such date under Section 4(a) copies of (i) certificates of insurance or cover notes, (ii) policies or binders of insurance, (iii) letters of undertaking, if any, and (iv) a detailed report signed by independent marine insurance brokers designated by the Owner or any permitted charterer or lessee and satisfactory to the Mortgagee describing the Insurances carried on or with respect to the Vessel and its operation and stating, in effect, that such insurance complies in all material respects with the applicable requirements of this Section 4.  Such report shall also state that, in the opinion of such insurance broker, the forms of policies or other evidence of such Insurances and the amounts of Insurances and other terms are (x) not materially less than what is reasonably necessary for the protection of the interests of the Mortgagee and (y) are customary at the time for vessels of similar size, type, trade, operation, cargo and number of passengers.  In addition, such report shall set forth any recommendations such insurance broker may have for additional or reduced insurance which prudent shipowners or operators of vessels of similar size, type, trade, operation, cargo and number of passengers are then carrying.  Such report shall further state that, in the opinion of such independent insurance broker, all Insurances carried pursuant to Section 4(a) is underwritten by insurance companies, underwriters’ associations or underwriting funds or covered by enrollment with such P&I clubs that should be reasonably satisfactory to the Mortgagee.

(j)The Owner shall use commercially reasonable efforts to cause such independent insurance broker to agree (i) to advise the Mortgagee promptly of any default in the payment of any premium, commission, club call, assessment or advance required (whether for new insurance or for insurance replacing, renewing or extending existing insurance) and of any other act, omission or event of which such independent insurance broker has knowledge and which in its sole judgment (A) might invalidate or render unenforceable, or cause the cancellation or lapse or prevent the renewal or extension of, in whole or in part, any Insurances carried pursuant to Section 4(a), (B) has resulted or might result in any material modification of the terms of any such Insurances, or (C) has or might result in any such Insurances not being in compliance with the applicable requirements of this Section 4, and (ii) to furnish the Mortgagee from time to time, upon request, detailed information with respect to any of the Insurances carried on or with respect to the Vessel or the operation thereof.

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(k)The Owner shall not declare or agree upon a compromised, constructive, arranged or agreed Total Loss of the Vessel without the prior written consent of the Mortgagee.

(l)The Owner agrees that it will not do any act or voluntarily suffer or permit any act to be done whereby any Insurances shall or may be suspended, impaired or defeated and will not suffer or permit the Vessel to engage in any voyage or to carry out any operations not permitted under the insurance policies in effect without first covering the Vessel to the amount herein provided for such voyage or such operations.

5.Vessel Covenants.  The Owner hereby covenants and agrees to comply with any and all covenants relating to the Vessel contained in the other Loan Documents, and covenants and undertakes at all times:

(a)to warrant and defend the title and possession of the Vessel and of every part thereof for the benefit of the Mortgagee against the claims and demands of all persons whomsoever;

(b)to remain authorized to register the Vessel in its name under the laws and flag of the Republic of Panama, so long as this Mortgage is in effect, and to give evidence thereof to the Mortgagee upon its reasonable request;

(c)to (i) keep the Vessel duly and validly registered under the laws and flag of the Republic of Panama and to do or suffer to be done nothing whereby such registration may be suspended, forfeited or canceled, and (ii) provide the Mortgagee at least seven (7) Business Days prior to the expiration of the then current provisional registration of the Vessel under the Panamanian flag written evidence that such registration has been extended or renewed for an additional three (3) month period from the then current provisional registration period;

(d)to not transfer or change, or permit to be transferred or changed, the flag or hailing port of the Vessel;

(e)to assign and provide that any Requisition Compensation is applied in accordance with the Note;

(f)to keep and to cause the Vessel to be kept free and clear of all Liens (except in favor of the Mortgagee) other than Permitted Maritime Liens, and not to pledge, charge, assign or otherwise encumber the Insurances or Earnings of the Vessel in favor of any person other than the Mortgagee, or to suffer the creation of any such pledge, charge, assignment or encumbrance as aforesaid to or in favor of any person other than the Mortgagee;

(g)to pay to the Mortgagee on demand all moneys (including, but not limited to, reasonable, documented, out-of-pocket fees of counsel), with interest thereon at the Default Rate, that the Mortgagee shall or may reasonably expend, be put to or become liable for which arise from the protection, maintenance or enforcement of the security created by this Mortgage or arise from the reasonable exercise by the Mortgagee of any of the powers vested in it hereunder;

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(h)to comply with and satisfy all the requisites and formalities established by the laws of the Republic of Panama necessary to establish and maintain this Mortgage as a legal, valid, binding and enforceable “first priority naval mortgage” under the Panamanian Maritime Laws upon the Vessel and upon all renewals, improvements and replacements made in or to the same, and to furnish to the Mortgagee from time to time such evidence as the Mortgagee may reasonably request so that it may be satisfied with respect to the compliance by the Owner with the provisions of this Section 5(h);

(i)if a libel or complaint be filed against the Vessel or the Vessel shall be attached, levied upon or taken into custody by virtue of any legal proceeding in any court, to promptly notify the Mortgagee by telecopy, confirmed by letter, and, within fifteen (15) days after the Owner receives notice of such event, to cause the Vessel to be released and all Liens thereon, other than this Mortgage and Permitted Maritime Liens, to be discharged and to promptly notify the Mortgagee thereof in the manner aforesaid; and to notify the Mortgagee within two (2) Business Days of any average or salvage incurred by the Vessel;

(j)to obtain, before the Vessel is put into possession of any shipyard for the purpose of any modifications or refurbishment to the Vessel, evidence of the insurances required under Sections 4(a)(vii) and (viii) and:  (i) the written consent of the Mortgagee, which shall not be unreasonably withheld, conditioned or delayed; or (ii) to provide evidence that any Liens that any such shipyard may have on the Vessel shall be subordinate and subject to the Lien of this Mortgage, and, in the case of any modification or refurbishment contracts to satisfy the requirements of Section 3.30(h) of the Purchase Agreement;

(k)not to sell, mortgage, transfer, charter, lease or change the management of the Vessel, in each case, without the prior written consent of the Mortgagee; and

(l)to place, and at all times and places to retain, a properly certified copy of this Mortgage on board the Vessel and to cause such certified copy and the Vessel’s marine documents to be exhibited to any and all persons having business therewith that could reasonably be expected to give rise to any Lien thereon and to any representatives of the Mortgagee; and to place and keep prominently displayed in the chart room and in the Master’s cabin of the Vessel a framed printed notice reading as follows:

NOTICE OF MORTGAGE

THIS VESSEL IS OWNED BY ISLAND BREEZE INTERNATIONAL (THE “OWNER”) AND IS COVERED BY A FIRST PRIORITY NAVAL MORTGAGE, DATED AS OF NOVEMBER 9, 2011, GIVEN BY THE OWNER IN FAVOR OF _______________ UNDER AUTHORITY OF CHAPTERS V AND VI, TITLE IV OF LAW NO. 55 OF AUGUST 6, 2008 AND OTHER APPLICABLE LAWS OF THE REPUBLIC OF PANAMA, AS AMENDED.  UNDER THE TERMS OF SAID MORTGAGE, NEITHER THE OWNER, ANY CHARTERER, THE MASTER OF THIS VESSEL NOR ANY OTHER PERSON HAS ANY RIGHT, POWER OR AUTHORITY TO CREATE, INCUR OR PERMIT TO BE PLACED OR IMPOSED UPON THIS VESSEL ANY LIEN WHATSOEVER OTHER THAN THE LIEN OF THE AFORESAID MORTGAGE AND LIENS FOR CURRENT CREW WAGES, WAGES OF STEVEDORES WHEN EMPLOYED DIRECTLY BY OWNER, MASTER, CHARTERER OR LESSEE OF THE VESSEL, GENERAL AVERAGE AND SALVAGE, AND CERTAIN OTHER LIENS PERMITTED AND SPECIFIED IN THE AFORESAID MORTGAGE.

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Such notice shall be changed as necessary to reflect the identity of any successor to or assignee of the Mortgagee.

6.Vessel Inspections;  Classification Society.

(a)The Owner will without cost or expense to the Mortgagee within thirty (30) days of the date hereof, irrevocably and unconditionally instruct and authorize the classification society of the Vessel, and shall request the classification society to give an undertaking to the Mortgagee as follows, provided that no Event of Default shall result hereunder from the classification society’s refusal to honor such request:

1.           to send to the Mortgagee, following receipt of a written request from the Mortgagee, certified true copies of all original class records held by the classification society relating to each Vessel;

2.           to allow the Mortgagee (or its agents), at any time and from time to time, to inspect the original class and related records of the Owner and the Vessel at the offices of the classification society and to take copies of them;

3.           following receipt of a written request from the Mortgagee:

(i)           to advise of any facts or matters which may result in or have resulted in a change, suspension, discontinuance, withdrawal or expiry of the Vessel’s class under the rules or terms and conditions of the Owner’s or the Vessel’s membership in the classification society;

(ii)           to confirm that the Owner is not in default of any of its contractual obligations or liabilities to the classification society and, without limiting the foregoing, that it has paid in full all fees or other charges due and payable to the classification society; and

(iii)           if the Owner is in default of any of its contractual obligations or liabilities to the classification society, to specify to the Mortgagee in reasonable detail the facts and circumstances of such default, the consequences thereof, and any remedy period agreed or allowed by the classification society.

(b)Notwithstanding the above instructions and undertaking given for the benefit of the Mortgagee, the Owner shall continue to be responsible to the classification society for the performance and discharge of all its obligations and liabilities relating to or arising out of or in connection with the contract it has with the classification society, and nothing herein or therein shall be construed as imposing any obligation or liability of the Mortgagee to the classification society in respect thereof.

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(c)The Owner shall further notify the classification society that all the foregoing instructions and authorizations shall remain in full force and effect until revoked or modified by written notice to the classification society received from the Mortgagee, and that the Owner shall reimburse the classification society for all its customary and reasonable costs and expenses incurred in complying with the foregoing instructions.

(d)The Owner agrees to give the Mortgagee at least ten (10) days written notice of the actual date and place of any survey or drydocking, in order that the Mortgagee may have representatives present if desired.

(e)The Owner shall promptly notify, in writing, the Mortgagee of and furnish the Mortgagee with full information, including copies of reports and surveys, regarding any material accident or accident involving repairs where the aggregate cost is likely to exceed One Million United States Dollars (US$1,000,000) (or its equivalent in another currency), any major damage to a Vessel, any event affecting a Vessel’s class, or any occurrence in consequence whereof a Vessel has become or is likely to suffer a Total Loss.

(f)The Mortgagee shall have the right at any time at the cost and expense of the Owner, on reasonable prior written notice, to have a surveyor conduct inspections and surveys of the Vessels to ascertain the condition of the Vessels and to satisfy itself that the Vessels are being properly repaired and maintained.  Such inspections and surveys shall be conducted at such times and in such manner as will not interfere with the Owner’s normal business operations and schedule, and shall not occur more frequently than once in any twelve (12) month period, with the first such inspection and survey not to occur before one year after the date hereof, unless an Event of Default shall have occurred and be continuing.

(g)The Owner shall at all reasonable times afford the Mortgagee or its authorized representatives, upon reasonable advance notice to the Owner, full and complete access to the Vessel for the purpose of inspecting the Vessel and her cargo (to the extent permitted by applicable law) and papers, including without limitation all material records pertaining to the Vessels’ maintenance and repair; provided, however, that such inspections shall be conducted at such times and in such manner as will not interfere with the Owner’s normal business operations and schedule, and shall not occur more frequently than once in any twelve (12) month period unless an Event of Default shall have occurred and be continuing and, at the written request of the Mortgagee, the Owner will deliver for inspection copies of any and all material contracts and documents relating to the Vessel, whether on board or not, at the cost and expense of the Owner.

7.Events of Default; Remedies.

(a)The occurrence of the following shall constitute a “Mortgage Default”:   any default in the due and punctual observance and performance of any of the material provisions of Section 4 hereof or any of the provisions of Sections 5(b), (c), (d), (h), (i), and (k) hereof shall have occurred and be continuing.

(b)If any Event of Default (as defined in the Note) shall have occurred and remain uncured, the Mortgagee may do any or all of the following (provided, however, notwithstanding any other provision herein to the contrary, except to the extent permitted by law, no sale, transfer or other disposition of the Vessel or any interest therein may be made in violation of the Panamanian Maritime Laws):

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(i)demand payment of the Note and the Put Payment and any other outstanding Secured Obligation, by written notice to the Owner, whereupon such payment by the Owner to the Mortgagee shall be immediately due and payable without prejudice to any other rights and remedies of the Mortgagee;

(ii)at any time and as often as may be necessary, take any action to protect the security created by this Mortgage and each and every expense or liability (including reasonable fees and expenses of counsel) so incurred by the Mortgagee in the protection of such security shall be repayable to the Mortgagee by the Owner on demand, together with interest thereon at the Default Rate from the date on which such expense or liability was incurred by the Mortgagee until full payment is received.  The Owner promptly shall execute and deliver, or cause to be executed and delivered, to the Mortgagee such documents, if any, and shall promptly do and perform such acts, if any, as in the reasonable opinion of the Mortgagee or its counsel are necessary or advisable to facilitate or expedite the protection, maintenance and enforcement of the security created by this Mortgage;

(iii)exercise all the rights and remedies in foreclosure and otherwise provided to mortgagees by any applicable law, including the provisions of the Panamanian Maritime Laws or other applicable law, including the law of any jurisdiction where any Vessel may be found;

(iv)take possession of the Vessel, whether actually or constructively and/or otherwise to take control of the Vessel, wherever it may be, without prior demand and without legal process (when permissible under applicable law) and cause the Owner of the Vessel forthwith upon demand of the Mortgagee to surrender possession thereof to the Mortgagee as demanded and the Mortgagee may, without being responsible for loss or damage (except to the extent such loss or damage are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted solely from the gross negligence, bad faith or willful misconduct of the Mortgagee), hold, lay up, stack, lease, charter, operate or otherwise use the Vessel for such time and upon such terms as it may deem to be for its best advantage, and demand, collect and retain all hire, freights, earnings, issues, revenues, income, profits, return premiums, salvage awards or recoveries, recoveries in general average, and all other sums due or to become due in respect of the Vessel or in respect of any insurance thereon from any person whomsoever, accounting for only the net profits, if any, arising from such use of the Vessel and charging upon all receipts from the use of the Vessel or from the sale thereof by court proceedings or pursuant to any following subsections, all costs, expenses, charges, damages, or losses by reason of such use; provided, however, that the Mortgagee shall be obligated to provide the Owner only with a final accounting; and if at any time the Mortgagee shall avail itself of the right herein given it to take the Vessel, the Mortgagee shall have the right to dock the Vessel, for a reasonable time at any dock, pier or other premises of the Owner without charge, or to dock the Vessel at any other place at the cost and expense of the Owner;

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(v)require that all policies, contracts and other records relating to the Insurances (including details of and correspondence concerning outstanding claims) be forthwith delivered to such adjusters, brokers or other insurers as the Mortgagee may nominate;

(vi)collect, recover, compromise and give a good discharge for all claims then outstanding or thereafter arising under the Insurances or any of them and to take over or institute (if necessary using the name of the Owner) all such proceedings in connection therewith as the Mortgagee reasonably thinks fit and to permit the brokers through whom collection or recovery is effected to charge the usual and customary brokerage therefor;

(vii)discharge, compound, release or compromise claims against the Owner concerning the Vessel that have given or may give rise to any Lien on the Vessel or that are or may be enforceable by proceedings against the Vessel;

(viii)take appropriate judicial, extra-judicial or administrative proceedings for the foreclosure of this Mortgage and/or for the enforcement of the rights of the Mortgagee hereunder or otherwise, recover judgment for any amount due on the Secured Obligations and collect the same out of any property of the Owner;

(ix)as permitted by the laws of the Republic of Panama and other applicable law, sell the Vessel at public auction, free from any claim of or by the Owner of any nature whatsoever by first giving notice of the time and place of sale with a general description of the Vessel in the following manner:

a.by publishing such notice for ten (10) consecutive days in a daily newspaper of general circulation published in New York City; and

b.if the place of sale should not be New York City, then also by publication of a similar notice in a daily newspaper, if any, published at the place of sale; and

c.by sending a similar notice by telecopy confirmed by mail to the Owner at least twenty (20) days before the date of sale as permitted by the laws of the Republic of Panama and other applicable law.

Such sale of the Vessel may be held at such place and at such time as the Mortgagee in such notices may have specified, or such sale may be adjourned by the Mortgagee from time to time by announcement at the time and place appointed for such sale or for such adjourned sale and without further notice or publication the Mortgagee may make such sale at the time and place to which the same shall be so adjourned.  Such sale may be conducted without bringing the Vessel to the place designated for such sale and in such manner as the Mortgagee may deem advisable, and the Mortgagee or any holders of the Secured Obligations may become the purchaser(s) at such sale and shall have the right to a credit against the purchase price of any and all amounts due in respect of the Note, the Put Payment and/or any other Secured Obligations, as appropriate.  Any sale made in accordance with the provisions of this Section 7(b)(ix) shall be deemed made in a commercially reasonable manner insofar as the Owner is concerned;

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(x)pending the sale of the Vessel (either directly or indirectly), as permitted by the laws of the Republic of Panama and other applicable law, manage, charter, lease, insure, maintain or repair the Vessel and employ, lay up, or stack the Vessel upon such terms, in such manner and for such period as the Mortgagee may reasonably deem expedient and for the purpose aforesaid the Mortgagee shall be entitled to do all acts and things incidental or conducive thereto and in particular to enter into such arrangements respecting the Vessel, their insurance, management, maintenance, operation, repair, classification and employment in all respects as if the Mortgagee were the owner of the Vessel but without any obligations to take any action with respect to the Vessel and without any responsibility for any loss thereby incurred;

(xi)recover from the Owner on demand any losses as may be incurred by the Mortgagee in the exercise of the power vested in the Mortgagee under this Section 7 with interest thereon at the Default Rate from the date when such losses were incurred by the Mortgagee until full payment is received; and

(xii)recover from the Owner on demand all expenses, payments and disbursements (including documented fees and expenses of outside counsel) incurred by the Mortgagee in the exercise by it of any of the powers vested in it hereunder, together with interest thereon at the Default Rate from the date when such expenses, payments or disbursements were incurred by it until indefeasible payment in full is received;

PROVIDED, ALWAYS, that any sale by the Mortgagee of the Vessel or any interest therein pursuant to this Section 7 shall operate to divest all right, title and interest of any nature whatsoever of the Owner, its successors and assigns, and all persons claiming by, through or under the Owner in or to the Vessel or such interest so sold and upon such sale the purchaser shall not be bound to see or inquire whether the power of sale of the Mortgagee has arisen in the manner herein provided and the sale shall be deemed to be within the power of the Mortgagee and the receipt by the Mortgagee of the purchase money shall effectively discharge the purchaser, who shall not be concerned with the manner of application of the proceeds of the sale or be in any way answerable therefor.  The Owner hereby irrevocably appoints the Mortgagee the true and lawful attorney of the Owner, in its name and stead, to make all necessary transfers of the whole or any part of the Vessel in connection with a sale, use or other disposition of any of the Vessel pursuant to this Section 7, and for that purpose to execute all necessary instruments of assignment and transfer.  Nevertheless, the Owner shall, if so requested by the Mortgagee, ratify and confirm any sale, assignment, transfer or delivery pursuant to this Section 7 by executing and delivering such proper bill of sale, assignment, conveyance, instrument of transfer or other instrument as may be designated by the Mortgagee in such request.

8.Application of Moneys.  The proceeds of any sale made either under the power of sale hereby granted to the Mortgagee or under a judgment or decree in any judicial proceeding for the foreclosure of this Mortgage, or proceeds arising from the enforcement of any remedy granted to the Mortgagee hereunder, or any net earnings arising from the management, charter or other use of the Vessel by the Mortgagee under any of the powers herein granted, or the proceeds of any and all Insurances and any claims for damages on account of the Vessel or the Owner of any nature whatsoever, and any net Earnings of the Vessel from the operation of the Vessel by the Mortgagee under any of the powers herein granted or by law provided, or any Requisition Compensation, shall be applied to the payment of the Note, the Put Payment and the other Secured Obligations.

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9.Delay and Cure.  No delay or omission of the Mortgagee to exercise any right or power vested in it under this Mortgage shall impair such right or power or be construed as a waiver thereof or as an acquiescence in any default by the Owner hereunder or under any other Loan Document, nor shall the acceptance by the Mortgagee of any payments concerning this Mortgage from any source be deemed a waiver hereunder.  However, if at any time after an Event of Default and before the actual sale of the Vessel by the Mortgagee or before any foreclosure proceedings, the Owner cures completely and promptly all Events of Default and pays promptly all expenses, advances and damages to the Mortgagee arising from such Events of Default, with interest at the Default Rate from the date when such expenses, advances and damages were incurred until full payment is received, then the Mortgagee may accept such cure and payment and restore the Owner to its former position, but such action shall not affect any subsequent Event of Default or impair any rights consequent thereon.

10.Delegation of Mortgagee’s Powers.  The Mortgagee shall be entitled at any time and as often as may be expedient to delegate all or any of the powers and discretions vested in it by this Mortgage (including the power vested in it by virtue of Section 12) in such manner and upon such terms and to such persons as the Mortgagee in its absolute discretion may think fit.

11.Owner’s Indemnity.  Without prejudice to any other rights and remedies of the Mortgagee arising under this Mortgage, the Owner hereby agrees and undertakes to indemnify the Mortgagee, and its successors and permitted assigns, from and against any and all obligations and liabilities whatsoever and whensoever incurred by the Mortgagee in good faith in the enforcement of the Mortgagee’s rights hereunder; provided that such indemnity shall not, as to the Mortgagee, be available to the extent that such obligations and liabilities are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted solely from the gross negligence, bad faith or willful conduct of the Mortgagee.  Notwithstanding anything to the contrary contained herein, the Mortgagee shall not be responsible for any loss or damage caused as a result of the exercise, or failure to do so, of any rights and/or remedies provided in this Mortgage (except to the extent such loss or damage are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted solely from the gross negligence, bad faith or willful misconduct of the Mortgagee).

12.Mortgagee Appointed Attorney-in-Fact; Authority to Act.

(a)The Owner hereby irrevocably appoints the Mortgagee as its true and lawful attorney-in-fact (which appointment is coupled with an interest) for the duration of the term hereof, with full power to do in the name of the Owner or in the Mortgagee’s own name following the occurrence and during the continuance of an Event of Default, all acts that the Owner, or its successors or assigns, could do in relation to the Vessel, including, without limitation, to file any claims or to take any action or institute any proceed­ings that the Mortgagee may deem to be necessary or advisable in the premises to demand, collect, receive, compromise, settle and sue for (insofar as the Mortgagee lawfully may), all Earnings of the Vessel and all amounts due from underwriters under the Insurances as payment for losses or as return of premiums or otherwise, salvage awards and recoveries, in general average or otherwise, and all other sums due or to become due to the Owner or with respect to the Vessel, and to make, give and execute in the name of the Owner acquittance, receipts, releases, or other discharges for the same, whether under seal or otherwise, to take possession of, sell or otherwise dispose of or manage or employ the Vessel, to execute and deliver charters and bills of sale for the Vessel, and to endorse and accept in the name of the Owner all checks, notes, drafts, warrants, agreements and all other instruments in writing with respect to the foregoing, to take any action and execute any instruments, which the Mortgagee may deem reasonably necessary or advisable to accomplish the purposes hereof.

(b)The exercise by or on behalf of the Mortgagee of the power granted in this Section 11 shall not require any person dealing with the Mortgagee to conduct any inquiry as to whether any Event of Default has occurred and is continuing, nor shall such person be in any way affected by notice that any Event of Default has not occurred nor is continuing, and the exercise by the Mortgagee of such power shall, with regard to such person only, be conclusive evidence of the Mortgagee’s right to exercise the same.

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13.Arrest by a Third Party.  If the Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction in any country of the world or by any government or other authority, and the Vessel shall not be released from arrest or detention within fifteen (15) days from the date of arrest or detention, the Owner hereby authorizes the Mortgagee, in the name of the Owner, to apply for and receive possession of and to take possession of the Vessel with all of the rights and powers that the Owner might have, possess and exercise in any such event.  This authorization is irrevocable and coupled with an interest.

14.Jurisdiction.  The Mortgagee shall have the right to commence proceedings in the courts of any country having jurisdiction over the Vessel. In particular, the Mortgagee shall have the right to arrest and take action against the Vessel at whatever place or places the Vessel shall be found lying before such courts or other competent judicial authority having jurisdiction over the Vessel.  The Owner agrees that for the purpose of proceedings against the Vessel, any writ, notice, judgment or other legal process or documents may be served upon the Master of the Vessel (or upon anyone acting as the Master) and that such service shall be deemed good service on the Owner for all purposes.

15.Concerning the Mortgagee.  (a) The Mortgagee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action, in accordance with this Mortgage and the other Loan Documents. The Mortgagee may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith.  The Mortgagee may assign its rights under this Mortgage and the other Loan Documents and any other rights hereto and thereto without the consent of the Owner.  Upon the acceptance of any appointment as the Mortgagee by a successor Mortgagee, that successor Mortgagee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the assigning Mortgagee under this Mortgage, and the assigning Mortgagee shall thereupon be discharged from its duties and obligations under this Mortgage.  After any assigning Mortgagee’s resignation, the provisions of Article V of the Purchase Agreement and any comparable provisions in this Mortgage shall inure to its benefit as to any actions taken or omitted to be taken by it under this Mortgage while it was the Mortgagee.  The Owner shall execute and deliver such amendments or supplements to this Mortgage in such form and substance as may be reasonably necessary in the opinion of its counsel to reflect the appointment of the successor Mortgagee, and the reasonably documented, out-of-pocket expenses relating to the foregoing shall become an obligation secured by this Mortgage.

(b)The Mortgagee shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Mortgage and its duties hereunder, upon advice of counsel selected by it in good faith.

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16.Severability of Provisions.  Any provision hereof which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof or affecting the validity, legality or enforceability of such provision in any other jurisdiction.  In the event that it should transpire that by reason of any law or regulation, or by reason of a ruling of any court, or by any other reason whatsoever, the mortgage herein contained is either wholly or partly defective, the Owner hereby undertakes to furnish the Mortgagee with an alternative mortgage or alternative security and/or to do all such other acts as, in the reasonable opinion of the Mortgagee, shall be required in order to ensure and give effect to the full intent of this Mortgage.

17.Further Assurance. The Owner hereby further undertakes at its own expense to execute, sign, perfect, do and (if required), register every such further assurance, document, act or thing reasonably necessary or advisable for the purpose of maintaining or perfecting or exercising the security constituted by this Mortgage.

18.Cumulative Remedies. Each and every power and remedy in this Mortgage specifically given to the Mortgagee shall be in addition to every other power and remedy herein specifically given or now or hereafter existing at law, in equity, admiralty, or by statute, and each and every power and remedy, whether specifically in this Mortgage given or otherwise existing, may be exercised from time to time and as often and in such order as may be deemed expedient by the Mortgagee, and the exercise or the commencement of the exercise of any such power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy under this Mortgage.

19.Amount of Mortgage.  The maximum principal amount secured by this Mortgage at any time is Two Million Nine Hundred Fifty-Eight Thousand Three Hundred Thirty-Three and 30/100 United States Dollars (US$2,958,333.30) (which is the maximum principal amount that may be outstanding at any time under the Note plus the amount of the Put Payment (as such term is defined in the Purchase Agreement) due pursuant to the Purchase Agreement).  In addition to principal, this Mortgage also secures interest, fees, costs and expenses of collection and other sums which are deemed to be secured by the relevant laws of the Republic of Panama as provided in this Mortgage and the other Loan Documents.  The principal amount plus all outstanding interest due and owing under the Note shall be paid in full on the Maturity Date (the earlier of November 9, 2012 and the date all obligations and indebtedness under the Note and the other Loan Documents are accelerated).

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20.Preferred Status.  Anything herein to the contrary notwithstanding, it is intended that nothing herein shall waive the priority status of this Mortgage under the Panamanian Maritime Laws or under the corresponding provisions of any other jurisdiction in which it is sought to be enforced and that, if any provision or portion of this Mortgage shall be construed to waive its preferred status, then such provision or portion to such extent shall be void and of no effect.

21.Notices.  Unless otherwise provided herein or in the Purchase Agreement, any notice or other communication herein required or permitted to be given hereunder shall be given in the manner and become effective as set forth in the Purchase Agreement, as to the Owner, addressed to it at the address of the Owner (identified as the Shipowner in the Purchase Agreement), set forth in the Purchase Agreement, and as to the Mortgagee, addressed to it at the address of the Mortgagee (identified as the Investor in the Purchase Agreement) set forth in the Purchase Agreement, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 20.

22.Parties Bound.  All the covenants, promises, stipulations and agreements of the Owner and all the rights and remedies of the Mortgagee contained in this Mortgage shall bind the Owner, its successors and assigns, and shall inure to the benefit of the Mortgagee, its successors and permitted assigns, whether or not so expressed.

23.Expenses.  The Owner shall reimburse the Mortgagee for all reasonably documented, out-of-pocket costs and expenses, which the Mortgagee may from time to time incur, lay out or expend, together with interest thereon at the Default Rate in insuring the Vessel, discharging Liens, paying taxes, dues, assessments, govern­mental charges, fines and penalties that may be lawfully imposed, making repairs or in performing any other duty that the Owner is obligated to perform hereunder, but otherwise fails to perform.  The obligation to reimburse the Mortgagee for such costs and expenses shall be a Secured Obligation due from the Owner, secured by this Mortgage, and shall be payable by the Owner on demand.  The Mortgagee, though privileged so to do, shall be under no obligation to make any such expenditures, nor shall the making thereof relieve the Owner of any default in that respect.

24.Rights of Owner.  Unless and until one or more Events of Default shall have occurred under any of the Loan Documents shall have occurred and be continuing and the Mortgagee shall have exercised any of its remedies under this Mortgage, the Owner shall (a) be permitted to retain possession and use of the Vessel, and to lease, charter, sublease or subcharter the Vessel and take any other actions in respect of the Vessel as and to the extent permitted by the Loan Documents, and (b) have the right, from time to time, in its discretion, and without application to the Mortgagee, and without obtaining a release thereof by the Mortgagee, to dispose of, free from the Lien hereof, any engines, boilers, machinery, bowsprits, masts, spars, rigging, boats, anchors, cables, chains, tackle, apparel, furniture, fittings, tools, pumps or equipment or any other appurtenances of the Vessel that are no longer useful, necessary, profitable or advantageous in the operation of the Vessel, after first or simultaneously replacing the same with new engines, boilers, machinery, bowsprits, masts, spars, rigging, boats, anchors, cables, chains, tackle, apparel, furniture, fittings, tools, pumps or equipment, or other appurtenances of substantially equal value as reasonably determined by the Owner, which shall forthwith become subject to the Lien of this Mortgage.

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25.Waiver; Amendment.  No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Owner therefrom, shall be effective unless in writing and signed by the Mortgagee.  Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Owner from the terms of any provision hereof in each case shall be effective only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this Mortgage or any other document evidencing Secured Obligations, no notice to or demand on the Owner in any case shall entitle the Owner to any other or further notice or demand in similar or other circumstances.

26.Governing Law.  This Mortgage shall be governed by, and construed in accordance with, the laws of the Republic of Panama.

27.Headings.  Clause and Section headings used herein are for convenience of reference only, are not part of this Mortgage and shall not affect the construction of, or be taken into consideration in interpreting, this Mortgage.

28.Power of Attorney to Record the Mortgage.  The parties hereto hereby confer a special power of attorney with the right of substitution upon any member of the law firm of ________________________, empowering each of them to take all necessary steps to record this instrument of Mortgage in the appropriate registries of the Republic of Panama.

29.Obligations Absolute.  All obligations of the Owner hereunder shall be absolute and unconditional irrespective of:

(a)any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Company;

(b)any lack of validity or enforceability of the Note or the Purchase Agreement, or any other agreement or instrument relating thereto;

(c)any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any other agreement or instrument relating thereto;

(d)any pledge, exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations;

(e)any exercise, non-exercise or waiver of any right, remedy, power or privilege under or in respect hereof, any Loan Document except as specifically set forth in a waiver granted pursuant to the provisions of Section 24 hereof; or

(f)any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Owner (other than payment or performance of such obligations in full in accordance with this Mortgage and the other Loan Documents).

[Signature page follows.]

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IN WITNESS WHEREOF, the Owner has caused this First Priority Naval Mortgage to be duly executed by its duly authorized representative on the date indicated in the below notarial acknowledgement, to be effective as of November 9, 2011.

ISLAND BREEZE INTERNATIONAL,

as Owner

By:__________________________________

Name:  _______________________________

Title:    Attorney-in-Fact

NOTARIAL ACKNOWLEDGEMENT

REPUBLIC OF PANAMA

CITY OF PANAMA

On November 9, 2011, before me personally came and appeared ________________, to me known, and known to me to be the person who executed the foregoing First Priority Naval Mortgage, who, being by me duly sworn, did depose and say she/he is the Attorney-in-Fact of Island Breeze International, the Cayman Islands exempt company described in and which executed the foregoing First Priority Naval Mortgage; that s/he signed her/his name thereto pursuant to authority granted to her/him by Island Breeze International by a Power of Attorney dated November 3, 2011; and she/he produced to me sufficient proof to the effect that she/he executed such First Priority Naval Mortgage having been duly authorized by such company; and that the same is the free and voluntary act and deed of such company and of herself/himself as the Attorney-in-Fact thereof, for the uses and purposes therein expressed.

Notary Public

[SEAL]

My commission expires:                                                                           .

Signature Page – Panamanian First Priority Naval Mortgage for ISLAND BREEZE

ACCEPTANCE OF MORTGAGE

________________ hereby accepts the annexed First Priority Naval Mortgage, dated as of November 9, 2011 (the “Mortgage”), executed in its favor by ISLAND BREEZE INTERNATIONAL, covering the Panamanian-flag vessel named ISLAND BREEZE, with provisional patente number 35375-PEXT, and hereby accepts the Mortgage in all respects and agrees to all terms and conditions of the Mortgage.

IN WITNESS WHEREOF, ________________ has caused this Acceptance of Mortgageto be duly executed by its duly authorized representative on the date indicated in the below notarial acknowledgement, to be effective as of November 9, 2011.

_____________________

as Mortgagee

By:__________________________________

Name:  _______________________________

Title:   Attorney-in-Fact

NOTARIAL ACKNOWLEDGEMENT

REPUBLIC OF PANAMA

CITY OF PANAMA

On November 9, 2011, before me personally came and appeared _______________, to me known, and known to me to be the person who executed and accepted the foregoing First Priority Naval Mortgage, who, being by me duly sworn, did depose and say she/he is the Attorney-in-Fact of ____________________ and which executed and accepted the foregoing First Priority Naval Mortgage; that she/he signed her/his name thereto pursuant to authority granted to her/him by ______________ by a Power of Attorney dated November 3, 2011; and she/he produced to me sufficient proof to the effect that s/he executed such acceptance of such First Priority Naval Mortgage having been duly authorized by such company; and that the same is the free and voluntary act and deed of such company and of herself/himself as the Attorney-in-Fact thereof, for the uses and purposes therein expressed.

Notary Public

[SEAL]

My commission expires:                                                                           .

Signature Page – Panamanian First Priority Naval Mortgage for ISLAND BREEZE

EXHIBIT A

SENIOR SECURED PROMISSORY NOTE

EXHIBIT B

SECURITIES PURCHASE AGREEMENT

EX-99.1

EXHIBIT 99.1

Island Breeze International, Inc. Secures $2.75 Million Dollar Loan

BELLMAWR, NJ--(November 10, 2011) - Island Breeze International, Inc. (OTCQB: IBII), an entertainment cruise development company, announced that on November 10, 2011, the Company and its wholly owned Cayman Islands subsidiary entered into a $2.75 million loan agreement with a private investment group.

Under the terms of the agreement, the Company can request advances that total up to $2.5 million.  If the full amount of the loan is funded it will represent $2.5 million in cash and a 9% original issue discount of $250,000.  The Company received an initial advance at closing of $724,580, inclusive of the original issue discount.  Subsequent advances will primarily be utilized for the refurbishment of the m/v Island Breeze, a vessel that the Company currently owns.  The loan is due and payable on November 9, 2012 and is secured by a mortgage on the m/v Island Breeze.

Commenting on the loan closing, Brad Prader, CEO of Island Breeze International stated, “We are pleased to announce the closing of this interim funding, as this will enable the Company to move forward with the renovation of the m/v Island Breeze and allow the Company to advance its project in the United States.”

Additional information with respect to this transaction is contained in the Company’s Form 8K which was filed with the Securities and Exchange Commission on November 14, 2011.

ABOUT ISLAND BREEZE INTERNATIONAL, INC.

Island Breeze International, Inc. (OTCBB: IBII) is focused on developing and operating entertainment cruise projects. Island Breeze International is currently evaluating port locations in the United States as well as East Asia for the establishment of its initial operations.  Island Breeze International's corporate website is www.IslandBreezeInternational.comwww.IslandBreezeInternational.com.

FORWARD LOOKING STATEMENTS

The information contained in this news release, other than historical information, consists of forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. Such forward-looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, market acceptance, future capital requirements, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected The Company is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

Contact:

Island Breeze International, Inc.

Bradley T. Prader

President & CEO

or

Steven G. Weismann

CFO

Phone: +1-856-931-1505

Email: info@IslandBreezeInternational.cominfo@IslandBreezeInternational.com