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DUE DILIGENCE REPORT

on Aker Yards Design Ukraine

Limited Liability Company

Kyiv 2008

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TABLE OF CONTENTS

Summary p. 4

I. Incorporation and Statutory Matters: Historical Overview, Formation,Legal Status, Participant of the Company, Company Minutes, Lease

Agreements

p. 6

A Historical Overview and Formation p. 6

B Legal Status p. 7

C Participant of the Company p. 9

D Minutes of the General Meeting of Participants of the Company p. 10

E The Company Charter and its Compliance with the Requirements

of Ukrainian Legislation

p. 13

F Lease Agreements p. 14

II. Business Matters and Material Agreements p. 16

III. Governing Bodies, including Directors and Management p. 28

A Authority of the General Meeting of Participants of the Company p. 28

B Authority of the Chairman of the Company p. 30

C The Director and its Authority p. 31

D The Auditing Commission and its Authority p. 33

IV. Employment Matters p. 34

A Working Collective p. 34

B Employees p. 35

C Employee Bonuses and Benefits p. 36

D Labor Contract with the Companys Director p. 37

E Collective Agreement p. 39

V. Intellectual Property p. 41

VI. Real Property and Tangible Assets p. 44

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VII. Environmental Matters p. 44

VIII. Financial and Security Matters p. 45

IX. Insurance p. 47

A Mandatory Insurance p. 47

B Voluntary Insurance p. 50

X. Litigation p. 51

XI. Qualifications p. 52

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Summary

The following text sets forth the results of our review of the status of the Aker Yards

Ukraine Design, a limited liability company duly organized and existing under the

laws of Ukraine (hereinafter referred to as the Company). Our due diligence

investigation with respect to the Company was based entirely upon documentation(copies of which were located in the Data Room located at the premises of the law

firm Wikborg Rein & Co, Kronprinsesse Mrthas plass 1, Oslo, 2nd Floor) provided to

us by the Company and, in limited cases, information supplied to us by the

Companys officers. The information was provided pursuant to a general request to

the Company.

For purposes of preparing our due diligence exercise with respect to the Company, we

were provided with a due diligence report performed by the law firm of Shevchenko

Didkovsky & Partners dated April 26, 2006 (hereinafter referred to as the SDP

DDR). To the extent possible, we have verified the information contained in the

SDP DDR and, where applicable, we highlight those issues mentioned in the SDPDDR which were not taken into consideration and remain outstanding or unresolved.

Otherwise, for purposes of highlighting issues pertinent to the transaction in question,

we shall not repeat those issues which are currently in compliance with Ukrainian

legislation and pose no risks to the transaction in question.

Our review of the document provided by the Company revealed the following:

1. In general, the documents reflecting the process of formation of the Company

comply with the requirement of the effective Ukrainian law. Under the law,

the Company was formed and duly registered as a limited liability company

with a certain place of business and the required corporate requisites and

certificates.

2. In general, the Companys constituent documents (i.e., the Charter and

relevant Minutes of the founding participants meeting) comply with the

requirements of the effective law. The minutes of the GMP must be drafted as

recommended, ex post.

3. The Participant of the Company appears to be the real owner of the corporate

rights, as confirmed by the constituent documents.

4. The Company does not possess any ownership or use rights with respect to

land.

5. The Company appears to own its long-term assets; however, we were not

provided with copies of the relevant sale-purchase agreements. With the

exception of the Companys automobiles, these assets appear to have been

properly insured as required by law.

6. The Company is a party to three lease agreements. The lease agreements

appear in general to be in compliance with the effective legislation with the

exception of the language issue discussed below.

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7. The Company appears to hold a number of software licenses and has

concluded certain license agreements to use software.

8. It appears that the employment practices of the Company are in compliance

with the requirements of the effective employment and labor related

legislation. It appears that the Company has not been in arrears with salarypayments to the employees. The Company does not maintain any special

pension or medical insurance plans with respect to their employees. The

Company provides special incentive and bonuses programs for its employees.

The Company has concluded a collective agreement with its worker collective.

The Company employs a foreign citizen as the Chairman of the Company;

however, such labor relation should properly documented as described below.

9. The Company is a party to insurance policies with respect to its long-term

assets and one automobile. However, the Company may need to conclude the

required mandatory insurance with respect to its automobiles as described

below. The Company is also compliant with the mandatory social insurancerequirements.

10. The Company is a party to two credit agreements.

11. The Company, in its capacity of a design company, is a party to several field

engineering agreements. It appears that the Company's agreements contain

certain inconsistencies with the requirements of the effective Ukrainian

legislation and, therefore, should be restated to bring them into compliance

with the legislation.

12. At the moment, the Company does not seem to be a party to any business-

related or employment-related lawsuit or dispute.

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I. Incorporation and Statutory Matters: Historical Overview, Formation,

Legal Status, Participant of the Company, Company Minutes, Lease

Agreements

Under Ukrainian law,1 a limited liability company means a company, which has an

authorized fund divided into shares2

whose size is defined in its foundationdocuments. Participants of the company are liable to the extent of their contributions.

A. Historical Overview and Formation

According to SDP DDR, the Company was registered with the Executive Committee

of the Mykolaiv City Council under the name of Ship Design and Engineering

Ukraine Limited Liability Company (hereinafter referred to as SDEU) on March 6,

2003 and entered into the state register under registration code 32391218. The SDP

DDR further states that this information was confirmed by the Certificate on State

Registration and Letter No. 21-10/39/808-2 of the Main Interregional Statistics

Administration in Kyiv City of the State Statistics Committee of Ukraine, datedNovember 28, 2005. We were unable to examine copies of these documents.

According to the copy of Minutes No. 27-07-2006, of the extraordinary Meeting of

the Participants of SDEU which was held in Kyiv, Ukraine on July 27, 2006, Juliet

SDEU B.V., a legal entity under the laws of the Netherlands, became a new and sole

participant of the Company, owning 100% of the authorized capital of the Company

on the basis of a sale-purchase agreement or agreements, entered into between the

Company and Scheepswerf Damen Vrachtschepen B.V. and B.V. Scheepswerf

Damen Hoogezand, dated July 21, 2006. During the Meeting it was resolved to

approve Juliet SDEU B.V. as the sole participant of the Company owning 100%

of the authorized capital of the Company and authorize the representatives of Juliet

SDEU B.V. to register all necessary amendments to the Charter.

We were not provided with a copy or copies of the said sale-purchase agreement(s)

evidencing the purchase of 100% of participation interest of the Company by Juliet

SDEU B.V.. However, based on the continued activity of the Company, we may

assume that the transaction took place and the Company was able to make the

relevant amendments to its Charter.

Pursuant to the procedure established by Ukrainian legislation, the company must

register the restated version of the Charter with the relevant state authority and notifythe necessary state authorities with respect to all amendments and/or additions to the

Companys Charter. We were provided with the restated version of the Companys

Charter, dated July 28, 2006, evidencing that the necessary registration of the

amended version of Charter had been performed and all relevant state authorities were

notified.

1Article 50 of the Law of Ukraine No. 1576-XII On Economic Associations, dated September 19,

1992 (as amended) (hereinafter the EA Law.)

2 Please note, in cases of limited liability companies, shares does not mean actual shares of stock

(certificates), rather shares represents the percentage of contributions (ownership) each participantmakes into the authorized capital of the limited liability company. We will refer to it as participation

interest.

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According to the copies of Minutes of the Session 6-01 of Meeting of Participants of

the Company, dated September, 4, 2006, and Minutes No. 4 of the General Meeting

of the Participants of the Company, dated October 10, 2006, the participant decided to

change the name of the Company. Pursuant to Minutes No. 4, mentioned above, the

General Participants Meeting duly resolved to change the Companys name fromShip Design and Engineering Ukraine to Aker Yards Design Ukraine. The

signatures of the Chairman and the Secretary of the General Participants Meeting, as

well as the participants and translators, were certified before the notary.

During the above-mentioned Meeting, the participants also resolved to introduce the

amendments to the Charter related to the change of the Companys name and

authorized Mr. Zhukov, the Director of the Company, to perform acts related to the

registration of the restated version of the Charter with all necessary state authorities

and institutions.

As mentioned above, all amendments to the Charter must be duly registered with therelevant state authorities. We also were provided with the restated version of the

Companys Charter, dated October 19, 2006, evidencing its re-registration with

respect to change of the Companys name.

B. Legal Status

The above-mention change of the Companys name is also confirmed by the

Certificate on State Registration, issued by the Executive Committee of Mykolaiv

City Council on October 31, 2006, which evidences that the name of the Company

was changed to the limited liability company Aker Yards Design Ukraine. Such

change of the Companys name leads to the change of the Companys previous

certificates and obtaining new relevant certificates by the Company, which must be

issued by Ukrainian state authorities, including new certificates from the social

insurance funds, the Ministry of Statistics of Ukraine and the local tax authority.

Accordingly, the Company provided for our review copies of the new certificates,

issued by the Ukrainian state authorities in connection with the change of the

Companys name and evidencing its corporate existence. Specifically, we reviewed

copies of the following:

1. Certificate No. 13[last digit not legible]/11-3976 from the Unified StateRegister of Enterprises and Organizations of Ukraine (USREOU),

dated October 16, 2007 and issued by the Main Department of

Statistics in the Mykolaiv Region. This certificate evidences that the

Companys director is Yuriy Danilovych Zhukov, it was assigned the

identification code No. 32391218, and it has a legal address at 54001,

Mykolaiv, Central District, Spasska Street, Building 1. The Company

is registered as a limited liability company and has the following

activities: (i) research and development in the sphere of technical

sciences; (ii) construction and repair of vessels; and (iii) construction

and repair of sport and recreational vessels;

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2. Notice on entry into the register of the Central Inter-District Executive

Directorate of the Mykolaiv Regional Department of the Social

Insurance Fund in case of Temporary Disability, dated November 1,

2006;

3. Insurance certificate No. 1402003628 from the Social Insuranceagainst Accidents at Work and Professional Illnesses, dated October

26, 2006 and issued by the Department of the Executive Directorate of

the Fund in the Central District of the city of Mykolaiv;

4. Notice on entry into the register of insurance contribution payers of the

Central Regional State Social Insurance Fund in case of

Unemployment in the city of Mykolaiv, dated October 26, 2006;

5. Notice on entry into the register of legal entities of the Pension Fund of

Ukraine in the Central District of the city of Mykolaiv, dated October

26, 2006;

6. Certificate No. 2036/29 on entry into the taxpayer register, dated

October 25, 2006 and issued by the State Tax Inspection of the Central

District of the city of Mikolaiv. The Company is currently registered

under No. 14035876;

7. Certificate No. 19776941 on registration of a payer of value added tax,

dated November 3, 2006 and issued by the State Tax Inspection of the

Central District of the city of Mykolaiv.

The Companys current location is at 54001, Mykolaiv, Central District, Spasska

Street, Building 1, Ukraine, which is confirmed by a lease agreement concluded with

the Open Joint Stock Company Proyektno-Vyshukuvalniy Institute (Design and

Research Institute) Mykolaivagroproject on December 25, 2006.

Please note that we were not provided with copies of the documents, evidencing the

initial formation of the Companys authorized capital. However, based on the

documents provided by the Company, the current shareholding and capitalization of

the Company can be described as set forth below.

For the purpose of this report, we were provided with a copy of the latest restatedversion of the Companys Charter, dated May 15, 2007 (hereinafter the Charter).

According to the Charter, the General Participants Meeting approved the amended

version of the Charter on April 10, 2007.

The Charter was duly notarized on April 12, 2007 in the city of Mykolaiv; however, it

was only registered on May 15, 2007 with the Executive Committee of the Mykolaiv

City Council. According to Article 17.3 of the Charter and Article 7 of the EA Law,

amendments to the Charter of the Company must be registered within a five-day term

with the authority that registered the Company. Nevertheless, we do not believe that

this violation of the formal rules has a significant impact on the transaction in

question, as the Company has continued its operations without any claims or penaltiesimposed by the local authorities.

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Thus, the new version of the Companys Charter, as registered by the Executive

Committee of the Mykolaiv City Council on May 15, 2007, was registered under

number 15221050004006189.

C. Participant of the Company

According to the Charter, the sole participant of the Company is Aker Yards Design

Ukraine B.V. (hereinafter the Participant), a legal entity under the laws of The

Netherlands, located at Houtsingel 5, 2719EA Zoetermeer, The Netherlands. The

Charter sets the authorized capital of the Company at UAH 571,890.30 (five hundred

seventy one thousand eight hundred ninety Ukrainian Hryvnias and thirty kopecks).

At the time of the registration of the Charter, the authorized capital was equivalent to

EUR 100,000 (one hundred thousand euros) at the then effective exchange rate of the

National Bank of Ukraine. Accordingly, the Participant owns 100% of the

participation interests in the Company which is equivalent to UAH 571,890.30 (five

hundred seventy one thousand eight hundred ninety Ukrainian Hryvnias and thirtykopecks).

Please note that from the date of the registration of the Company the authorized

capital of the Company was not subject to an increase or a decrease. However, we

were not provided with any documents confirming payment of the authorized capital

by the previous participants (Damen Vrachtschepen and Damen Hoogezand).

Further, at the time of this report, we were not provided with any documents

confirming the present status of the payment of the authorized capital in full. We

assume that the authorized capital is paid in full, as the previous founders could not

have alienated their participation interests in the Company to the Participant if the

authorized capital was not paid in full at the time of the said alienation.

The Companys principal business activities, among others, include (i) research and

development in the sphere of technical sciences; (ii) construction and repair of

vessels; and (iii) construction and repair of sport and recreational vessels, etc. By

virtue of law as well as according to the Companys Charter, the Company is entitled

to carry out foreign trade.

Further, the Companys Charter provides that the Company is a legal entity under the

effective legislation of Ukraine. It possesses its assets, corporate seal with its name

thereon, and maintains an independent balance sheet and bank accounts withauthorized banks. It is also entitled to possess trademarks, and, at its own discretion,

to enter into agreements, assume property and personal non-proprietary rights,

perform duties, and act as a plaintiff and defendant in courts of law, arbitration and ad

hoc tribunals.

The Company may not be held liable for the obligations of its participants. The

participants of the Company may be held liable for the obligations of the Company

only to the extent of their capital contributions to the authorized capital.

By virtue of law, the participants of the Company enjoy the following rights:3

3

Article 11 of the EA Law.

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(1) to participate in managing the business of the Company in the manner

set forth in the constituent documents (i.e., the Charter, etc.), except in

such instances as set forth in the EA Law;

(2) to participate in the distribution of the Companys profits and toreceive a share thereof (dividends). Each person, who is a participant

of the Company at the date of the payment of dividends, has the right

to receive a portion of the profit (dividends) in proportion to the

participation interest of each participant;

(3) to withdraw from the Company in the prescribed manner;

(4) to receive information regarding the activity of the Company. The

Company must provide annual balance sheets, reports of the Company

concerning its activity, and the minutes of any meetings to a

participant upon its demand; and,

(5) to carry out disposal of participation interests in the authorized capital

of the Company, according to procedure set forth by law.

The participants may also have such other rights as provided by law and in the

constituent documents of the Company.

Under the law, the participant of the Company shall have the following duties: 4

(a) to comply with the constituent documents of the Company and

implement the resolutions of the GMP and other governing bodies of

the Company;

(b) to fulfill their duties towards the Company, including those which are

connected with investment in the Company, and to make contributions

in such amount and manner and by such method as provided in the

constituent documents;

(c) to refrain from disclosing commercial secrets and confidential

information regarding the Company's activity; and,

(d) to bear other duties if so provided in the EA Law, other laws of

Ukraine or the constituent documents.

According to the Charter of the Company, its Certificate of State Registration and the

other above-mentioned documents, the Companys participant is the true owner of the

corporate rights in the Company.

D. Minutes of the General Meeting of Participants of the Company

4 Article 11 of EA Law.

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Upon our review of the Minutes of the General Participants Meeting, we have

revealed that the Minutes since April 21, 2004 till March 16, 2006, as well as Minutes

of the Session 6-01, dated September 4, 2006, were executed only in English which is

a violation of the requirements of Ukrainian legislation related to execution of

documents in two languages. Specifically, Article 11 of the Law of Ukraine No.

8312-XI On Languages in the Ukrainian SSR, dated October 28, 1989, as amended,obliges Ukrainian companies to maintain their documentation at least in the Ukrainian

language.

Theoretically, a court of law may render the above-mentioned Minutes invalid due to

their non-compliance with the requirements of Ukrainian legislation. We recommend

preparing a translation of the said Minutes into the Ukrainian language for sake of

maintaining the Companys documentation in Ukrainian in case of any inquiries by

the local authorities in the future.

Pursuant to the Agenda of Minutes of SDEU Board Meeting No. 2.2, which were held

on June 25, 2004, the Minutes of Board Meeting No. 2.1, dated May 14, 2004, weresigned by the Chairman. Please note that we were not provided with the said Minutes

No. 2.1 or the documents evidencing the convocation of the SDEU Board Meeting

No. 2.2, including the relevant notices to the participants with the agenda of the Board

Meeting. This document should be maintained by the Company in its records in the

Ukrainian language.

In general, the above-mentioned Minutes, as well as Minutes of the 4 th and 5th Session

of Meeting of Participants of SDEU were held in compliance with the requirements of

Ukrainian legislation.

With respect to Minutes of the 6th Session of Meeting of Participants, dated

November 12, 2004, we were provided only with the unfinished draft Minutes, and

therefore, we are not able to confirm its compliance with the procedural requirements

of Ukrainian legislation, as well as to confirm whether the Meeting took place and the

issues stated in agenda were discussed during the said Meeting.

Upon our review of the Companys Minutes of the 7th Session of Meeting of

Participants, dated December 11, 2004, Minutes of the Session 1 (8) of Meeting of

Participants, dated February 4, 2005, Minutes of the Session 2 (9), dated March 5,

2005, and Minutes No. 3 of Minutes of Participants, dated March 16, 2006, we did

not reveal any non-compliances of the above-mentioned Minutes with Ukrainianlegislation except for the violation of rule obliging Ukrainian companies to maintain

their documentation in at least the Ukrainian language.

According to the copy of Minutes No. 27-07-2006, of the extraordinary Meeting of

the Participants of SDEU which was held in Kyiv, Ukraine on July 27, 2006, Juliet

SDEU B.V., a legal entity under the laws of the Netherlands, became the new and

sole participant of the Company, owning 100% of the authorized capital. During this

meeting it was resolved to approve Juliet SDEU B.V. as the sole participant of the

Company owning 100% of the authorized capital of the Company and authorize the

representatives of Juliet SDEU B.V. to register all necessary amendments to the

Charter.

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According to the copies of Minutes of the Session 6-01 of Meeting of Participants of

the Company, dated September, 4, 2006, and Minutes No. 4 of the General Meeting

of the Participants of the Company, dated October 10, 2006, the participant decided to

change the name of the Company. Pursuant to Minutes No. 4, mentioned above, the

General Participants Meeting duly resolved to change the Companys name fromShip Design and Engineering Ukraine to Aker Yards Design Ukraine. The

signatures of the Chairman and the Secretary of the General Participants Meeting, as

well as the participants and translators, were certified before the notary. During the

meeting, the participants also resolved to introduce the amendments to the Charter

related to the change of the Companys name.

According to the copy of Minutes of the Session 6-02 of 2006 Meeting of Participants

of Ship Design and Engineering Ukraine held on October 11, 2006 in the office of

SDEU in Mykolaiv, Ukraine, the sole Participant (Juliet-SDEU B.V.) resolved to hold

the sessions of the Meeting of Participants once per quarter during every second week

of the month after the last month of each quarter. Please note that the copy of theseMinutes was not signed by the Participant or the Director of the Company and shows

no evidence of an official character.

According to Minutes No. 1 of the General Meeting of Participants, dated December

20, 2006, the General Meeting of the Participants resolved to authorize the

Companys Director to conclude a lease agreement of the office premises between the

Company and PLC Design and Research Institute Mykolaivagroproject in total

amount from 160 up to 200 square meters for the term of two years. Our comments

to the said lease agreement are provided below.

The next Meeting of Participants was held on January 11, 2007 in the Companys

office in Mykolaiv, Ukraine. According to a copy of the corresponding Minutes of

Session 7-01, the sole Participant discussed budgetary matters and internal issues,

including the conclusion of Contract Floro BN-151-154. Please note that the copy

provided for our review was not signed by the Participant or Director, and shows no

evidence of an official character.

According to Minutes No. 4 of the General Meeting of the Participants, dated April

10, 2007, the General Meeting of the Participants resolved to introduce the

amendments to the Charter by restatement thereof, and authorize the Director of the

Company, Mr. Zhukov, to perform actions related to the registration of the Charterwith the relevant state authorities. These Minutes do not refer to the reason for

making the above-mentioned amendments.

We were provided with unsigned and undated copies of Minutes of the General

Meeting of the Participants Nos. 2 and 3. We can only assume that such Meetings

actually took place due to the fact that pursuant to the Minutes of the Session 6-01 of

Meeting of Participants, dated September 4, 2006, it was taken a decision to have

sessions of the Meeting once per month.

In general, the Company should keep detailed records of the Minutes of the General

Meeting of Participants in the future, including signed and dated copies of the saidMinutes. The past Minutes should be translated into Ukrainian and the future

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Minutes should be recorded in Ukrainian and, if necessary, any other language for

sake of good record keeping.

E. The Company Charter and its Compliance with the Requirements

of Ukrainian Legislation

As required by EA Law, the Companys Charter includes information regarding the

type of the Company, the object and purposes of its activity, the composition of its

founders and participants, its name and location, the amount of the authorized capital

and the procedure for its formation, the procedure for distributing profits and losses,

the composition and competence of the Companys governing bodies and the

procedure pursuant to which they approve their resolutions, including a list of issues

which require a qualified majority of votes, the procedure for amending the

constituent documents and the procedure for the liquidation and reorganization of the

Company. Also, the Charter provides for the information on the size of the

participation interest of each participant, the amount and composition of their

contributions and the manner in which such contributions are made. This is all incompliance with the requirements of Ukrainian law.

Our due diligence exercise revealed that Article 16.7 of the Charter does not fully

comply with the latest changes to the Civil Code of Ukraine and the EA Law with

respect to the liquidation commission of the Company. In order to avoid any

questions regarding the validity of the Charter, we recommend bringing Article 16.7

into compliance with Article 105 of the Civil Code of Ukraine and Article 20 of the

EA Law. Specifically, we recommend amending Article 16.7 to read as follows:

16.7 The liquidation commission shall:

16.7.1 within a three-day term of its appointment publish a notice on the

Companys liquidation in the official mass media publications in which

the information on the state registration of the Company is published

with the procedure and term for creditor claims against the Company;

16.7.2 ensure the determination of the value of the Companys property

pursuant to the procedure established by the legislation on the appraisal

of property and property rights and professional appraisal activity;

16.7.3 identify the Companys debtors and creditors and make settlementswith them;

16.7.4 take measures for the payment of the Companys debts to third parties

and its Participants;

16.7.5 make settlements with the Companys creditors on the basis of the

intermediary liquidation balance sheet and in compliance with the

legislatively established priorities and terms;

16.7.6 in case of insufficiency of the monetary funds of the Company to

satisfy the creditors claims, sell the Companys property;

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16.7.7 prepare a liquidation balance sheet and submit it for approval to either

the Meeting of Participants or the body that appointed the liquidation

commission.

In general, the latest version of the Charter was registered after the latest amendments

to the EA Law. Based on our review of the Charter, with the exception of our specificcomment above, we believe that the Charter in its present version fully complies with

the requirements of Ukrainian legislation.

F. Lease Agreements

According to the information provided to us, the Company is not currently a party to a

lease agreement where the Company is a lessor.

We were provided with three lease agreements under which the Company acts as the

lessee. These agreements are described below.

1. On December 25, 2006, a lease agreement was concluded between the Open

Joint Stock Company Proyektno-Vyshukuvalniy Institute (Design and Research

Institute) Mykolaivagroproject, as the Lessor, and the Company, as the Lessee. The

Director of the Company was authorized to sign the lease agreement by the General

Meeting of Participants on December 20, 2006. According to the copy of this

agreement provided for our review, the Company agreed to lease a non-residential

structure as an office with a total area of 163.4 (one hundred sixty three and four

tenths) square meters which is made up of three full rooms (Nos. 1-123, 1-124, 1-125)

and part of a fourth room (No. 1-126). The leased premises are located on the fourth

floor at 1/1 Spaska Street in the city of Mykolaiv, which is presumably the legal

address of the Company.

The monthly lease payments under the agreement are equal to UAH 10,560 (ten

thousand five hundred sixty Ukrainian Hryvnias), including VAT. However, during

the entire term of the agreement, the lease payment for one square meter of leased

area must be equivalent to EUR 10 (ten euros). The amount of the monthly lease

payment is determined in Ukrainian Hryvnias pursuant to the official exchange rate of

the National Bank of Ukraine on the last day of the month and is reflected in an act of

performed work.

Importantly, under the agreement, the lessee has the right to transfer the premises forsub-lease upon the written consent of the lessor.

This lease agreement was concluded for the period up to December 31, 2008.

According to the Ukrainian law effective at the time of signing, the lease agreement

was subject to notarization due to the fact that it was concluded for a term exceeding

12 months. The copy of the lease agreement provided for review reveals that the

agreement was duly notarized on December 25, 2006 in the State Register of

Transactions by the private notary of the city of Mykolaiv, N. P. Yakovleva under

transaction number 1831550.

This lease agreement may be terminated in accordance with Ukrainian law. Theagreement may be unilaterally terminated by the Lessor upon written notice to the

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Lessee thirty calendar days before the date of termination should the Lessee

systematically fail to fulfill or improperly fulfill the terms and conditions of the

agreement. The Lessee has the right to unilaterally terminate the agreement upon a

one-month prior written notice to the Lessor.

2. Lease Agreement No. 07/04 was concluded in the city of Mykolaiv on July 1,2007 between the limited liability company Tekhnopark Spasskiy, as the Lessor,

and the Company, as the Lessee. According to the copy of this agreement provided

for our review, the Company agreed to lease non-residential premises as an office

with a total area of 514 (five hundred fourteen) square meters. The leased premises

are located on the sixth floor at 1 Spaska Street in the city of Mykolaiv.

The monthly lease payments under the agreement are equal to UAH 68 (sixty eight

Ukrainian Hryvnias) per square meter, including VAT. However, during the entire

term of the agreement, the lease payment for one square meter of leased area must be

equivalent to EUR 10 (ten euros). The amount of the monthly lease payment is

determined in Ukrainian Hryvnias pursuant to the official exchange rate of theNational Bank of Ukraine on the first working day of the month and is reflected in an

act of performed work.

Importantly, under the agreement, the Lessee has the right to transfer the premises for

sub-lease upon the written consent of the Lessor. This lease agreement was

concluded for the period up to May 31, 2010.

Lease Agreement No. 07/04 may be terminated in accordance with Ukrainian law.

The agreement may be unilaterally terminated by the Lessor upon written notice to

the Lessee should the lessee fail to fulfill or improperly fulfill the terms and

conditions of the agreement. The Lessor also has the right to prematurely and

unilaterally terminate the agreement should the Lessee fail to make a lease payment

within 10 (ten) days after the 5th (fifth) day of each month.

We were also provided with a copy of Annex No. 1 to Lease Agreement No. 07/04

(Act No. 1 of the transfer-acceptance of property for lease dated July 1, 2007), which

states that the leased premises were transferred in a satisfactory matter by the Lessor

to the Lessee.

Although the copy of Agreement No. 07/04 shows that the agreement is executed in

the Russian language only, we believe that this does not entail any significant risk, assuch agreements in practice are quite often executed in Russian only. Nevertheless,

we believe that the Company may request the re-conclusion of the agreement with the

Lessor in the Ukrainian language.

3. On December 1, 2007, Lease Agreement No. 24/ap was concluded between

the Open Joint Stock Company Proyektno-Vyshkuvalniy Institute (Design and

Research Institute) Mykolaivagroproject, as the Lessor, and the Company, as the

Lessee. According to the copy of this agreement provided for our review, the

Company agreed to lease a non-residential structure as an office with a total area of

64 (sixty four) square meters which is made up of two areas. The leased premises are

located on the fourth floor at 1/1 Spaska Street in the city of Mykolaiv.

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The monthly lease payments under the agreement are equal to UAH 4,600 (four

thousand six hundred Ukrainian Hryvnias), including VAT. However, during the

entire term of the agreement, the lease payment for one square meter of leased area

must be equivalent to EUR 10 (ten euros). The amount of the monthly lease payment

is determined in Ukrainian Hryvnias pursuant to the official exchange rate of the

National Bank of Ukraine on the last day of the month and is reflected in an act ofperformed work.

Importantly, under the agreement, the Lessee has the right to transfer the premises for

sub-lease upon the written consent of the Lessor.

This lease agreement was concluded for the period up to November 25, 2010. The

lease agreement may be terminated in accordance with Ukrainian law. The agreement

may be unilaterally terminated by the Lessor upon written notice to the Lessee 30

(thirty) calendar days before the date of termination should the Lessee systematically

fail to fulfill or improperly fulfill the terms and conditions of the agreement. The

Lessee has the right to unilaterally terminate the agreement upon a one-month priorwritten notice to the Lessor.

Please note that the copy of this lease agreement provided for our review does not

reflect the signature of the Lessor. Therefore, we are unable to definitively confirm

whether the agreement was signed by the Lessor and executed by the parties thereto.

In general, the above-described lease agreements contain all of the material terms and

conditions required by Ukrainian law and, with the exception of the above-described

minor inconsistencies, comply with the requirements of Ukrainian law. All of the

lease agreements are signed by the Director of the Company, Y. D. Zhukov, as

required by Ukrainian law and the Charter of the Company.

II. Business Matters and Material Agreements

According to the documents provided for our review, the Company, being a design

and field engineering company, is a party to several agreements (contracts) involving

design and field engineering. Our review of these agreements (contracts) revealed

that, although the agreements contain certain inconsistencies with Ukrainian law as

described below on a case-by-case basis, they do not contain provisions which may

represent a substantial risk to the Company.

Pursuant to the information provided by the Company, the Companys largest

customers ranked by revenue for each of the last three full years (2004, 2005 and

2006) and the first nine months of 2007 are as follows:

No. Customer Location Year

1 Damen Shipyards

Hoogezand

Scheepswervenweg 13, 9607 PX

Foxhol/P.O. Box 79, 9600AB

Hoogezand, The Netherlands

2004

2 Damen Shipyards

Cargo Vessels


Foxhol/P.O. Box 79, 9600ABHoogezand, The Netherlands

2004

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3 Damen Shipyards

Bergum

4 Damsingel, 9262 NC SUAMEER

The Netherlands

2004

4 Damen Shipyards

Bergum

4 Damsingel, 9262 NC SUAMEER

The Netherlands2005

5 Damen Shipyards

Gorinchem

Damen Shipyards Gorinchem

Avelingen West 20, 4202 MSGorinchem / P.O. Box 1,

4200 AA Gorinchem, The

Netherlands

2005

6 Damen Shipyards

Cargo Vessels


Foxhol/P.O. Box 79, 9600AB

Hoogezand, The Netherlands

2005

7 Damen Shipyards

Okean

54050, 1, Zavodskaya Sq., Mykolaiv,

Ukraine

2005

8 Damen Shipyards

Gorinchem

Damen Shipyards Gorinchem

Avelingen West 20, 4202 MS

Gorinchem / P.O. Box 1,


Netherlands

2006

9 Damen Shipyards

Cargo Vessels

Avelingen West 20, 4202 MS

Gorinchem / P.O. Box 1,


Netherlands

2006

10 Aker Yards Design

Floro

P.O. Box 334, NO-6902 Floro,

Norway

2006

11 Aker MTW GmbH Wendorfer Weg 5, D-23966 Wismar,

Germany

2007

12 Aker Yards Design

Floro

P.O. Box 334, NO-6902 Floro,

Norway

2007

13 Damen Shipyards

Okean

54050 1, Zavodskaya Sq., Mykolaiv,

Ukraine

2007

Further, the Company also provided the following information regarding its largest

suppliers and service providers ranked by total annual cost for each of the last three

years.

Supplier

Name

Address 2004

KUAH

2005

KUAH

2006

KUAH

2007

KUAH

Goods/Services

AVEVA AB Drottninggatan

18

P.O. Box

50555

S-202 15

MALMO

Sweden

1081 990 734 539 AVEVA Software

Iks-

Nikolaev

LLC

No. 5 Busnika

Str.

54000,

Nikolaev

Ukraine

284 178 335 608 Hardware

Technopark No. 1 109 330 326 Rent of premises

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Spasskiy,

LLC

Spasskaya

Str.

54030

Nikolaev

Ukraine

IncomJSC

No. 31-33,Smolenskaya

Str.

03005, Kiev

Ukraine

328 Hardware

Nikolaevagro-

Project JSCNo. 1,

Spasskaya

Str.

54030,

Nikolaev

Ukraine

159 109 11 100 Rent of premises

Kievstar

J.S.M. JSC

No. 24,

Vosstaniya

Str.

01010, Kiev

Ukraine

15 20 26 24 Telecommunication

Datagroup

JSC

No. 31a,

Pushkinskaya

Str.

54029,

Nikolaev

Ukraine

7 19 Internet

Pursuant to the Company, the Company completed the following project in May of

2007: NB 149/150 (Contract 001-AYDF/AYDU dtd 05/09/2006 between Aker Yards

Design Floro and Aker Yards Design Ukraine), Detail Engineering of Foreship for

Tanker for Chemical and Oil Products. Under this Contract, the price was EUR

151,290 (one hundred fifty one thousand two hundred ninety euros) and the scope of

work involved 10,805 man-hours.

Please note that we were not provided with a copy of Contract001-AYDF/AYDU.

However, we were provided with the Delivery and Acceptance Protocol No. NB149

dated May 30, 2007 under Contract No. 001-Aker/SDEU dated September 5, 2006.This Protocol states that 100% of the engineering work was performed by the

Company and accepted by the Customer (Aker Yards Design Floro) and that the total

scope of work included additional work according to Change Order Request No. 1-

NB149 dated April 19, 2007. Please note that we were not provided with a copy of

this Change Order Request for our review.

Further, the Protocol states that the cost of performed works was EUR 151,290 (one

hundred fifty one thousand two hundred ninety euros). An advance payment was

made in the amount of EUR 126,900 (one hundred twenty six thousand nine hundred

euros) and, upon signing of the Protocol, EUR 24,390 (twenty four thousand three

hundred ninety euros) was to be paid. Thus, we believe that the Protocol evidences

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that the Contract was performed in satisfaction of the parties expectations and

demands.

According to the Company, it has secured the following projects for 2007 through

2010:

1. NB 151/154 (Contract 003-AYDF/AYDU dtd 09/01/2007 between

Aker Yards Design Floro and the Company) for Detail Engineering of

Fore ship, Aft ship and Superstructure for Chemical and Oil Tanker.

2. BN 159, Engineering for ROPAX 5500 (Contract 005-AYG/AYDU

dtd 09/01/2007 between Aker Yards MTW GmbH and the Company).

3. BN 159, Engineering for ROPAX 5500 (Contract B 025/07 No. 008-

WD/AYDU dtd 01/11/2007 between Warnow Design and the

Company).

4. Field engineering for Damen Shipyards Okean (Contract No. 02/07 dtd

March 19, 2007; Contract No. 03/07 dtd November 01, 2007).

We describe the details of the above-listed contracts in more detail below.

1. NB 151/154 (Contract 003-AYDF/AYDU) was concluded by and between

Aker Yards Design Floro AS, a company established and incorporated under

the law of Norway, as the Customer, and the Company, as the Seller on

January 9, 2007 (hereinafter referred to as Contract 003- AYDF/AYDU).

Contract 003- AYDF/AYDU involves Project AYDF-TCOPss 43000, project number

NB151/154, which calls for the provision of engineering services by the Company for

Fore ship, Aft ship and Superstructure parts of AYDF Tanker for Chemical and Oil

Products. According to the Company, the contract price was EUR 323,000 (three

hundred twenty three thousand euros), which included a price adjustment due to the

man-hours spent on the project. According to the Company, the contract should have

been completed in December of 2007.

As the governing law chosen by the parties is the law of Norway, we not in a position

to comment on the aspects of Norwegian law which govern Contract 003-

AYDF/AYDU.

According to Contract 003- AYDF/AYDU, the initial purchase price agreed upon by

the parties was EUR 306,000 (three hundred six thousand euros), subject to possible

adjustment in case the Seller reports to Customer spent and agreed man-hours in

scope less/more than 18.000 man-hours. The adjusted price is based on rate of EUR

17 (seventeen euros) per hour.

The purchase price is to be paid in installments with the last installment of EUR

46,000 (forty six thousand euros) to be paid within 30 (thirty) calendar days after

acceptance and delivery of the complete scope of work. Please note that we were not

provided with the Exhibits referred to in the contract (including the Protocol on the

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Acceptance of Work) and, therefore, we are unable to confirm the actual delivery of

the work performed and the date thereof.

The Customer is entitled to (partially) cancel at any time the contract by means of a

written statement for reasons other than force majeure. In the event of cancellation of

the contract, the parties must discuss a reasonable financial settlement for thoseactivities actually performed and completed to the Customers satisfaction.

Contract 003- AYDF/AYDU or any of the rights and obligations thereunder cannot be

assigned or transferred by any of the parties without the prior consent in writing of the

other party.

Please note that our review of Contract 003- AYDF/AYDU revealed the following

inconsistencies with Ukrainian law: (i) the agreement was not executed in the

Ukrainian language as required by the provision of Article 24 of the Law of Ukraine

No. 8312-XI On Languages in the Ukrainian SSR, dated October 28, 1989, as

amended, obligating Ukrainian companies to make the foreign economic contractswith non-residents both in Ukrainian and the language of the other party to the

contract and (ii) the agreement does not provide the bank requisites of the parties, the

parties addresses for notices, and a dispute resolution clause as required by Order No.

201 of the Ministry of Economy and European Integration Issues On Approving the

Regulations on the Form of Foreign Economic Agreements (Contracts), dated

September 6, 2001 (hereinafter referred to as Order No. 201). Therefore, we

recommend bringing this contract into compliance with Ukrainian legislation by

introducing the relevant amendments, including a translation into Ukrainian.

Finally, we were not provided with a copy of the corporate approval necessary for the

Director to execute the contract in accordance with Article 10.5.9 of the Charter.

2. BN 159, Engineering for ROPAX 5500 (Contract 005-AYG/AYDU) was

entered into by and between Aker Yards Germany (AYG), a company

established and incorporated under the law of Germany, as the Customer, and

the Company, as the Seller on January 9, 2007 (hereinafter referred to as

Contract 005-AYG/AYDU). Please note that the face of the document itself

reflects the date of March 21, 2007.

Contract 005-AYG/AYDU involves engineering services provided by the Company

for the vessel BN159, Ropax Ferry for a contract price of EUR 540,000 (five hundredforty thousand euros) and a scope of work of 20000 man-hours. According to the

information provided by the Company, this contract was to have been completed in

February, 2008.

Contract 005-AYG/AYDU was initially concluded for the term from April 15, 2007

until December 21, 2007. Any extra work outside the agreed scope of the work

ordered by the Customer shall be invoiced with the hourly rate of EUR 27 (twenty

seven euros) per hour. The customer is obliged to pay the purchase price to the Seller

in several installments as follows: (i) EUR 35,000 (thirty five thousand euros) upon

signing the contract and (ii) remaining payments upon calculating the purchase

price within 30 (thirty) calendar days after signing of Acceptance Protocol onmonthly progress.

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Please note that we were provided with copies of the following monthly Acceptance

Protocols:

1. Delivery and Acceptance Protocol No. 1-BN159 dtd June 07, 2007

under Contract No. 005-AYG/AYDU dated March 21, 2007.According to this Protocol, the cost of performed works was EUR

64,000 (sixty four thousand euros) based on the actual man-hours spent

by the Company in April-May 2007.

2. Delivery and Acceptance Protocol No. 2-BN159 dtd July 20, 2007

under Contract No. 005-AYG/AYDU dated March 21, 2007.

According to this Protocol, the cost of performed works was EUR

61,000 (sixty one thousand euros) based on the actual man-hours spent

by the Company in June 2007.

3. Delivery and Acceptance Protocol No. 3-BN159 dtd August 03, 2007under Contract No. 005-AYG/AYDU dated March 21, 2007.


76,600 (seventy six thousand six hundred euros) based on the actual

man-hours spent by the Company in July 2007.

4. Delivery and Acceptance Protocol No. 4-BN159 dtd September 06,

2007 under Contract No. 005-AYG/AYDU dated March 21, 2007.


76,100 (seventy six thousand one hundred euros) based on the actual

man-hours spent by the Company in August 2007.

5. Delivery and Acceptance Protocol No. 5-BN159 dtd October 8, 2007

under Contract No. 005-AYG/AYDU dated March 21, 2007.


72,700 (seventy two thousand seven hundred euros) based on the

actual man-hours spent by the Company in September 2007.

6. Delivery and Acceptance Protocol No. 6-BN159 dtd November 15,



66,400 (sixty six thousand four hundred euros) based on the actualman-hours spent by the Company in October 2007.

7. Delivery and Acceptance Protocol No. 7-BN159 dtd December 06,



64,500 (sixty four thousand five hundred euros) based on the actual

man-hours spent by the Company in November 2007.

8. Delivery and Acceptance Protocol No. 8-BN159 dtd December 24,



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29,300 (twenty nine thousand three hundred euros) based on the actual

man-hours spent by the Company in December 2007.

Please note that we are unable to verify whether the contract was completed and the

final work was accepted by the Customer as satisfactory, as we were not provided

with a copy of the final Delivery and Acceptance Protocol signed by the parties andstipulating that the work was performed in satisfaction of the Customers demands

and there are no claims by either party with respect to the performed work.

As the governing law chosen by the parties is the law of Germany, we not in a

position to comment on the aspects of German law which govern Contract 005-

AYG/AYDU. The contract or any of the rights and obligations under the contract

cannot be assigned or transferred by any of the parties without the prior consent in

writing of the other party.

Please note that our review of Contract 005- AYDF/AYDU revealed the following

inconsistencies with Ukrainian law: (i) the agreement was not executed in theUkrainian language as required by the provision of Article 24 of the Law of Ukraine

No. 8312-XI On Languages in the Ukrainian SSR, dated October 28, 1989, as

amended, obligating Ukrainian companies to make the foreign economic contracts

with non-residents both in Ukrainian and the language of the other party to the

contract and (ii) the agreement does not provide the bank requisites of the parties, the

parties addresses for notices, and a dispute resolution clause as required by Order No.

201 of the Ministry of Economy and European Integration Issues On Approving the

Regulations on the Form of Foreign Economic Agreements (Contracts), dated

September 6, 2001 (hereinafter referred to as Order No. 201). Therefore, we

recommend bringing this contract into compliance with Ukrainian legislation by

introducing the relevant amendments, including a translation into Ukrainian.



3. BN 159, Engineering for ROPAX 5500 (Contract B 025/07 No. 008-

WD/AYDU) was entered into by and between Warnow Design GmbH, a

company established and incorporated under the law of the Federal Republic

of Germany, as the Purchaser, and the Company, as the Seller on November 1,

2007 (hereinafter referred to as Contract B 025/07 No. 008-WD/AYDU).

Contract B 025/07 No. 008-WD/AYDU was concluded for the engineering activities

as described in Exhibit I thereto for Ropax 5500. However, we were not provided

with a copy of the said Exhibit I and, therefore, we are unable to comment on the

actual engineering activities under the contract. According to the information

provided by the Company, Contract B 025/07 No. 008-WD/AYDU should be

completed in December of 2008.

Contract B 025/07 No. 008-WD/AYDU was concluded for a price of EUR 360,000

(three hundred sixty thousand euros), which shall be paid in monthly rates as follows:

(i) the first installment will be paid with 10% of the contractual price (36.000 Euro) in

advance. The installment for the second month will be paid 10 (ten) calendar daysafter receiving of the invoice. The remaining installments will be paid 30 (thirty)

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calendar after receiving of the invoice. The monthly rate will be paid according to the

progress of the project in percentage of the total purchase price.

As the governing law chosen by the parties is the law of Germany, we not in a

position to comment on the aspects of German law which govern Contract B 025/07

No. 008-WD/AYDU. The contract or any of the rights and obligations under thecontract cannot be assigned or transferred by any of the parties without the prior

consent in writing of the other party.

Please note that we were not provided with the Exhibits referred to in the contract

(including the Delivery and Acceptance Protocol) and, therefore, we are unable to

confirm the actual delivery of the work performed and the date thereof up until the

present date.

Please note that our review of Contract B 025/07 No. 008-WD/AYDU revealed the

following inconsistencies with Ukrainian law: (i) the agreement was not executed in

the Ukrainian language as required by the provision of Article 24 of the Law ofUkraine No. 8312-XI On Languages in the Ukrainian SSR, dated October 28, 1989,

as amended, obligating Ukrainian companies to make the foreign economic

contracts with non-residents both in Ukrainian and the language of the other party

to the contract and (ii) the agreement does not provide the bank requisites of the

parties, the parties addresses for notices, the date of the contract, and the place of

conclusion as required by Order No. 201 of the Ministry of Economy and European

Integration Issues On Approving the Regulations on the Form of Foreign Economic

Agreements (Contracts), dated September 6, 2001 (hereinafter referred to as Order

No. 201). Therefore, we recommend bringing this contract into compliance with

Ukrainian legislation by introducing the relevant amendments, including a translation

into Ukrainian. Therefore, we recommend bringing this contract into compliance

with Ukrainian legislation by introducing the relevant amendments, including a

translation into Ukrainian.



4. Field engineering for Damen Shipyards Okean (Contract No. 02/07) was

signed in the city of Mykolaiv by and between the Company, as the Executor,

and JSC Damen Shipyards Okean (hereinafter referred to as DSO), as the

Customer on March 19, 2007 (hereinafter referred to as Contract No.02/07).

According to the terms and conditions of Contract No. 02/07, the Executor shall

provide 2 (two) engineers to perform on-site field engineering in the Technical

Department of DSO for a period of up to 3 (three) months. The term for performance

of the contract is as follows: Start of work March 19, 2007 and completion of work

June, 2007 (completion term may be corrected by the Customer).

Contract No. 02/07 provides that the estimated contract price is UAH 867,000 (eight

hundred sixty seven thousand Ukrainian Hryvnias) and the scope of work is set

according to actual spent man-hours. According to the statement made by theCompany, this contract should be completed in February of 2008.

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Contract No. 02/07 further provides that the actual contract price is to be determined

monthly based on the quantity of man-hours actually spent by the Executor and

calculated according to the tariff amounting to UAH 137 (one hundred thirty seven

Ukrainian Hryvnias) per man-hour, including VAT. The price is to be stated in

Delivery and Acceptance Protocols. We were provided with copies of the followingDelivery and Acceptance Protocols:

1. Delivery and Acceptance Protocol No. 1-02/07 dated May 03, 2007.

According to this Protocol, the cost of performed work was UAH

70,692 (seventy thousand six hundred ninety two Ukrainian Hryvnias),

including VAT of UAH 11,782.00 for engineering work for design and

technical support of shipbuilding in the scope of 516 man-hours during

the period from March 19, 2007 till April 28, 2007.

2. Delivery and Acceptance Protocol No. 2-02/07 dated June 5, 2007.

According to this Protocol, the cost of performed work was UAH69,870 (sixty nine thousand eight hundred seventy Ukrainian

Hryvnias), including VAT of UAH 11,645.00 for engineering work for

design and technical support of shipbuilding in the scope of 510 man-

hours during the period from May 1, 2007 till May 31, 2007.

3. Delivery and Acceptance Protocol No. 3-02/07 dated July 03, 2007.


40,415 (forty thousand four hundred fifteen Ukrainian Hryvnias),



the period from June 1, 2007 till June 30, 2007.

4. Delivery and Acceptance Protocol No. 4-02/07 dated August 03, 2007.


10,960 (ten thousand nine hundred sixty Ukrainian Hryvnias),



the period from July 1, 2007 till July 31, 2007.

5. Delivery and Acceptance Protocol No. 5-02/07 dated September 05,

2007. According to this Protocol, the cost of performed work wasUAH 87,810 (eighty seven thousand eight hundred ten Ukrainian



hours during the period from August 1, 2007 till August 31, 2007.

6. Delivery and Acceptance Protocol No. 6-02/07 dated October 08,

2007. According to this Protocol, the cost of performed work was

UAH 109,600 (one hundred nine thousand six hundred Ukrainian



hours during the period from September 1, 2007 till September 30,2007.

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7. Delivery and Acceptance Protocol No. 7-02/07 dated November 20,


UAH 150,150 (one hundred fifty thousand one hundred fifty Ukrainian

Hrvynias), including VAT of UAH 25,025.00 for engineering work for

design and technical support of shipbuilding in the scope of 1,096 man-hours during the period from October 1, 2007 till October 31, 2007.

8. Delivery and Acceptance Protocol No. 8-02/07 dated December 14,


UAH 105,078 (one hundred five thousand seventy eight Ukrainian



hours during the period from November 1, 2007 till November 30,

2007.

Please note that we are unable to verify whether the contract was completed and thework was accepted by the Customer as satisfactory, as we were not provided with a

copy of the final Delivery and Acceptance Protocol signed by the parties and

stipulating that the work was performed in satisfaction of the Customers demands

and there are no claims by either party with respect to the performed work.

Contract No. 02/07 is governed by the law of Ukraine and is concluded from moment

of its signing until complete fulfillment by the parties of their contractual obligations.

Please note that our review of Contract 02/07 revealed the following inconsistencies

with Ukrainian law: (i) the agreement was not executed in the Ukrainian language as

required by the provision of Article 24 of the Law of Ukraine No. 8312-XI On

Languages in the Ukrainian SSR, dated October 28, 1989, as amended, obligating

Ukrainian companies to make the foreign economic contracts with non-residents

both in Ukrainian and the language of the other party to the contract.

In addition to the above-mentioned contracts, the Company also provided information

regarding the following field engineering contracts:

1. Field engineering for DSO (Contract No. 03/07), which was signed in the city

of Nikolayev by and between the Company, as the Executor, and DSO, as the

Customer on October 1, 2007 (hereinafter referred to as Contract No.03/07).

According to the copy of Contract No. 03/07 we reviewed, the estimated contract

price was UAH 867,000 (eight hundred sixty seven thousand Ukrainian Hryvnias)

and the scope of work was set according to actual spent man-hours. According to the

information provided by the Company, the contract should be completed in December

of 2007.

Pursuant to Contract No. 03/07, the Executor shall provide 5 (five) engineers to

perform on-site field engineering at in Hull Design and As-built Departments of DSO

and 6 (six) engineers at in the Mechanical Department of DSO for a period of up to 3(three) months. The term for performance of the contract is as follows: Start of work

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November 1, 2007 and completion of work December, 2007 (completion term

may be corrected by the Customer).

Contract No. 03/07 states that the contract price is to be determined monthly based on

the quantity of man-hours actually spent by the Executor and calculated according to

the tariff amounting to UAH 84 (eighty four Ukrainian Hryvnias) per man-hour,including VAT of UAH 14 per man-hour. The price is to be stated in Delivery and

Acceptance Protocols.

Contract No. 03/07 is governed by the law of Ukraine and is concluded from moment

of its signing until complete fulfillment by the parties of their contractual obligations.

Please note that our review of Contract 03/07 revealed the following inconsistencies

with Ukrainian law: (i) the agreement was not executed in the Ukrainian language as

required by the provision of Article 24 of the Law of Ukraine No. 8312-XI On

Languages in the Ukrainian SSR, dated October 28, 1989, as amended, obligating

Ukrainian companies to make the foreign economic contracts with non-residentsboth in Ukrainian and the language of the other party to the contract.

We were also provided with the following Delivery and Acceptance Protocol in

relation to Contract No. 03/07, dated October 1, 2007:

1. Act No. 1-03/07, dated December 14, 2007, regarding the transfer and

acceptance of works under Contract No. 03/07 dated October 01, 2007.


143,136 (one hundred forty three thousand one hundred thirty six

Ukrainian Hryvnias), including VAT of UAH 23,856 for engineering

works for design and technical support of shipbuilding in the scope of

1704 man-hours during the period from November 1, 2007 till

November 30, 2007.

Taking into consideration the similarity of Contract No. 03/07 to Contract No. 02/07,

we presume that there have been other Delivery and Acceptance Protocols signed in

accordance with Contract No. 03/07. However, we were not provided with such

Protocols for our review.

Thus, we are unable to verify whether the contract was completed and the work was

accepted by the Customer as satisfactory, as we were not provided with a copy of thefinal Delivery and Acceptance Protocol signed by the parties and stipulating that the

work was performed in satisfaction of the Customers demands and there are no

claims by either party with respect to the performed work. As mentioned above,

according to the information provided by the Company, the Contract should have

been completed in December of 2007.

2. While we were not provided with a copy of Agreement No. 01/9123 and the

additional agreement No. 1 thereto, according to the information provided by the

Company, this Agreement has been completed and there are no open claims by the

parties with respect to their performance and obligations. In this connection, we were

provided with the following Acts on the transfer-acceptance of works underAgreement No. 01/9123 of July 11, 2005:

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(i) Act No. 1-01/9123, dated September 29, 2005, regarding the

acceptance of works under Agreement No. 01/9123. This Act

evidences that the parties, which were the Company and DSO,

confirmed that the Executor performed work under the agreement in

the amount of UAH 76,700 (seventy six thousand seven hundredUkrainian Hryvnias), including UAH 12,783.33 in VAT.

(ii) Act No. 2-01/9123, dated October 26, 2005, regarding the acceptance

of works under Agreement No. 01/9123. This Act evidences that the

parties, which were the Company and DSO, confirmed that the

Executor performed work under the agreement in the amount of UAH

149,400 (one hundred forty nine thousand four hundred Ukrainian

Hryvnias), including UAH 24,900 in VAT.

(iii) Act No. 3-01/9123, dated February 16, 2006, regarding the acceptance

of works under Agreement No. 01/9123 of July 11, 2005 andadditional agreement No. 1 of November 24, 2005 to Agreement No.

01/9123. This Act evidences that the parties, which were the Company

and DSO, confirmed that the Executor performed the full volume of

work in the total amount of UAH 241,000 (two hundred forty one

thousand Ukrainian Hryvnias), including UAH 41,166.67 in VAT.

3. While we were not provided with a copy of Agreement No. 02/9123 of July

11, 2005 and the additional agreement No. 1 thereto, according to the information

provided by the Company, this Agreement has been completed and there are no open

claims by the parties with respect to their performance and obligations. In this

connection, we were provided with the following Acts on the transfer-acceptance of

works under Agreement No. 02/9123 of July 11, 2005:

(i) Act No. 1-02/9123, dated October 6, 2005, regarding the acceptance of

works under Agreement No. 02/9123. This Act evidences that the



72,000 (seventy two thousand Ukrainian Hryvnias), including UAH

12,000 UAH in VAT.

(ii) Act No. 2-02/9123, dated October 25, 2005, regarding the acceptanceof works under Agreement No. 02/9123. This Act evidences the



36,000 (thirty six thousand Ukrainian Hryvnias), including UAH 6,000

in VAT.

(iii) Act No. 3-02/9123, dated November 3, 2005, regarding the acceptance

of works under Agreement No. 02/9123 of July 11, 2005. This Act


confirmed that the Executor performed the full volume of work in the

total amount of UAH 122,400 (one hundred twenty two thousand fourhundred Ukrainian Hryvnias), including UAH 20,400 in VAT.

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(iv) Act No. 4-02/9123, dated January 17, 2006, regarding the acceptance

of works under Agreement No. 02/9123 of July 11, 2005. This Act


confirmed that the Executor performed the full volume of work in the

total amount of UAH 216,000 (two hundred sixteen thousandUkrainian Hryvnias), including UAH 36,000 in VAT.

Finally, according to the information available from the Company, the following is a

list of the Companys major competitors on the Ukrainian market.

EDRPOU Code Company name Address, tel., fax Goods/Services

14308782 Chernomorsudoproject Nikolaev, Buznika

Str., 5

38 0512 34 10 60

Engineering

01373890 Shipyard Liman Nikolaev, Portovaya

Str. 238 0512 50 75 25

Engineering

30083484 Torola, LLC Nikolaev, Bolshaya

Morskaya Str. 63

38 0512 35 98 49

Engineering

Izumrud Kherson Engineering

Korall Sevastopol Engineering

Cheromorets Sevastopol Engineering

III. Governing Bodies, including Directors and Management

The Company's Charter provides for the following governing bodies thereof:

(a) the general meeting of participants (hereinafter referred to as the

GMP) as the highest governing body;

(b) the Chairman of the Company;

(c) the Director as its executive body; and

(d) the Auditing Commission as its controlling body.

A. Authority of the General Meeting of Participants of the Company

According to the Company's Charter, the GMP is the highest governing body of the

Company. According to the law,5 the GMP consists of the Companys participants or

proxies appointed thereby. A proxy may be permanent or appointed for a certain

period. A participant may at any time replace his proxy in the GMP by giving notice

thereof to the other participants. A participant of the Company has the right to

transfer its powers at the GMP to another participant or to the proxy of another

5 Article 58 of the EA Law.

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participant of the Company. A participant shall have the number of votes in

proportion to the size of his participation interest in the authorized capital.

Further the Companys Charter provides that the GMP is entitled to decide on any

matter of the Companys business. A GMP is deemed valid (competent) if attended

by participants who in total hold more than sixty percent (60%) of the votes.

Please note that the EA Law provides that a limited liability company should holdits

GMP at least twice a year, unless otherwise provided by its constituent documents. 6

According to the EA Law, the GMP has the following exclusive authority:

(1) to determine the principal directions of activity of the Company and to

approve its plans and reports on their implementation;

(2) to establish, reorganize and liquidate subsidiaries, branches and

representative offices, and to approve their charters or by-laws;

(3) to expel a participant from the Company;

(4) to establish the amount and form of additional contributions of

participants and the manner in which they are to be made;

(5) to amend the Charter of the Company, and to change the size of its

authorized capital;

(6) to form and recall the executive body of the Company;

(7) to establish the forms of control over the activities of the executive

body, and to establish and determine the scope of authority of the

corresponding controlling bodies;

(8) to approve the annual reports and accounting balance sheets, to

distribute profit losses of the Company;

(9) to decide on the acquisition of the participation interest of a participant

by the Company;

(10) to adopt a resolution on the termination of the Company, to appoint a

liquidation commission and to approve the liquidation balance sheet.

According to the EA Law7 and the Charter, a participant of the Company may sell or

otherwise transfer its participation interest (a portion thereof) in the Authorized

Capital to one (1) or more participants of the Company. The sale (transfer) by a

participant of its participation interest (a portion thereof) to third parties is allowed



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only upon consent of the other participants of the Company. Further, the participants

of the Company enjoy the right of first refusal with respect to the participation interest

(a portion thereof) in proportion to the size of their participation interest unless the

Charter or agreement between the participants provides otherwise. The purchase is

carried out at the price and according to other conditions set forth for the sale of the

participation interest in question to third parties. Should the participants of theCompany fail to exercise their right of first refusal within a month following the date

of notification of the intent of a participant to sell its participation interest (a portion

thereof), or during another period set forth by the Charter or the agreement between

the participants, the participation interest (a portion thereof) in question can be sold

(transferred) to a third party.

The Charter provides that the resolutions regarding the issues set forth in points (1)

and (5) above and regarding the expulsion of a participant from the company shall be

deemed adopted if participants, which aggregately hold more than 50% of the total

number of votes, vote for such resolutions. Resolutions on other issues shall be

adopted by a simple majority of votes.

B. Authority of the Chairman of the Company

The Charter of the Company provides for the position of Chairman of the Company,

who is elected by the General Meeting of Participants and is vested with powers

determined by the Charter and Ukrainian legislation. According to the Charter, the

Chairman of the Company may be hired on the basis of labor relations (employment

agreement or other type of labor contract).

The Chairman of the Company has the authority to convene ordinary and

extraordinary General Meetings of Participants. His authorities also include the

ability to (i) confirm the procedural rules and other internal documents of the

Company and to determine the organizational structure of the Company; (ii)

determine the working conditions of officials of the Company, its subsidiaries,

branches and representative offices; and (iii) grant authorization to the Director in the

cases described below related to the limitations established on the Directors activity.

The aforementioned points (i) (iii) also fall within the competence of the General

Meeting of Participants. Should there be any disputes between the General Meeting

of Participants and the Chairman of the Company with respect to the aforementioned

points (i) and (iii), the decision of the General Meeting of Participants shall prevail

over the decision of the Chairman of the Company.

According to Minutes No. 4 of the General Meeting of Participants of the Company

of October 10, 2006, Mr. Michael Hake, a citizen of the Federal Republic of

Germany, was elected as the Chairman of the Company. As evidenced by Minutes

No. 4 of the General Meeting of Participants of the Company of April 10, 2007,

which were the latest Minutes provided for our review, Mr. Hake remains the

Chairman of the Company.

Please note that we were not provided with a copy of the current employment

agreement or other type of labor contract with the Chairman of the Company. As Mr.

Hake is not a citizen of Ukraine, he also requires a work permit to be employed by theCompany. However, we did not review a copy of Mr. Hakes work permit and,

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therefore, we are unable to comment on whether his employment by the Company is

in compliance with the effective labor and other legislation of Ukraine.

In general, as far as limited liability companies are concerned, the EA Law grants the

right to convene an extraordinary GMP to participants who own in total more than

twenty percent (20%) of the votes. Also such participants may demand convocationof the extraordinary GMP at any time and for any reason relating to the activity of the

Company. However, as the Company has only one participant, this provision of the

Charter remains as a statutory requirement.

Please also note that according to the EA Law, members of executive body who are

not participants of the Company may participate in the GMP with the right to cast an

advisory vote. The participants of the GMP who participate in a GMP shall register

with the indication of the number of votes of each participant. This list shall be

signed by the Chairman of the Company and the secretary of the GMP. Any

participant of the limited liability company may demand the consideration of an issue

at a GMP if he/she submits such issue no later than 25 days prior to the beginning ofthe GMP.8

C. The Director and its Authority

The executive body of the Company is comprised of a single director (the Director),

who resolves all issues concerning the day-to-day activities of the Company and is

subordinate to the General Meeting of Participants. The Director also organized the

performance of the decisions of the General Meeting of Participants and may not take

decisions which are binding as mandatory for the General Meeting of Participants.

Pursuant to Article 11.11 of the Charter, in the event of the Directors expected or

present extended absence, which renders him unable to perform his duties, the

Chairman of the Company may appoint an interim director at his discretion. In such

case, the Chairman of the Company must execute a corresponding order indicating the

term of the interim directors appointment which may not exceed the period between

such appointment and the next General Meeting of Participants. The interim director

enjoys all of the rights and bears all of the obligations of the Director provided by the

Charter and the decisions of the governing and other bodies of the Company within

the limits of their competence and Ukrainian legislation. Conversely, the governing

and other bodies of the Company enjoy all of the rights and bear all of the obligations

with respect to the interim director provided by the Charter and their respectivedecisions within the limits of their competence and Ukrainian legislation.

According to Ukrainian legislation, the Director has the following authority:

(1) to form the Companys administration and chair it;

(2) to bear responsibility before the GMP for the activities of the Directorate

regarding the achievement of the Companys goals and the level of its

business administration;


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(3) to represent the Company in its relations with Ukrainian and foreign

legal entities and natural persons;

(4) to issue orders and instructions, other acts within the scope of its

authority with respect to the Companys business;

(5) to enter into contracts and other agreements;

(6) to open bank account with banks;

(7) to approve employment schedule of the Company, its structural sub-

units, to establish salaries for the employees (workers), to appoint to

positions within the Company, and to transfer and dismiss the Company's

employees according to the effective legislation;

(8) to determine the procedure and sizes of monetary and in-kind rewards forquick and quality performance of work by the Company employees; to

carry out other responsibilities within the scope of his authority

according to the constituent documents, the Contract (if concluded) and

decisions of the GMP of the Company;

(9) to resolve all financial and business matters of the Company other than

those within the scope of authority of the GMP. The GMP may make a

decision to delegate a portion of its authority to Director; and

(10) to act on behalf of the Company without a power of attorney.

Article 10.5.9 of the Charter sets certain limitations on the authority of the Director of

the Company. Among other limitations, the Director must receive authorization from

the General Meeting of the Participants:

(i) to conclude an agreement or make other arrangement, expenditure of

funds or alienation of assets in connection with the provision of

services or performance of work by the Company, including designs,

drawing and the like, for an amount (value) that is equal to, or exceeds,

the equivalent of 100,000 (one hundred thousand) Euros in Ukrainian

Hryvnias (in one or a series of related transactions) at the officialexchange of the National Bank of Ukraine as of the date of such

authorization;

(ii) to conclude an agreement or make other arrangement, expenditure of

funds or alienation of assets in connection with the acquisition of

equipment and other goods, works or services, payment of wages and

the like by the Company for an amount (value) that is equal to, or

exceeds, the equivalent of 25,000 (twenty five thousand) Euros in

Ukrainian Hryvnias (in one single or a series of related transactions) at

the official exchange rate of the National Bank of Ukraine as of the

date of such authorization;

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(iii) to conclude any agreement between the Company on the one side and

the Chairman of the Company or the Director or any entity or person

affiliated or connected with the Chairman of the Company or the

Director on the other side, including without limitation the family or

business partners of the Chairman of the Company or the Director and

any companies where any of the aforesaid entities or persons haveownership interests, positions, employment or carries out work (paid or

unpaid) on behalf of;

(iv) to conclude any agreement or arrangement not demonstrably on market

based terms (arms length principle).

Importantly, should the Director fail to receive the authorization of the General

Meeting of Participants or, in certain permissible cases, the Chairman of the Company

before concluding any of the above-listed transactions, then such transactions shall be

deemed null and void from the moment of making, expenditure, alienation, etc. As

previously mentioned, we have not been provided with copies of any authorizationsissued by the GMP with respect to any agreements that exceed the above-mentioned

thresholds and, therefore, we are unable to verify whether proper authorization was

granted for the conclusion of the Companys significant agreements.

Moreover, we were not provided with any copies of the Directors orders or

instructions issued within the limits of his authorities in accordan

Documents

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