Navios Maritime Acquisition Corporation
Annual Report 2016

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 20-F (Mark One)☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934OR ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934OR ☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report For the transition period from to Commission file number 001-34104 Navios Maritime Acquisition Corporation(Exact name of Registrant as specified in its charter) Not Applicable(Translation of Registrant’s Name into English)Republic of Marshall Islands(Jurisdiction of incorporation or organization)7 Avenue de Grande Bretagne, Office 11B2Monte Carlo, MC 98000 Monaco(Address of principal executive offices)Todd E. MasonThompson Hine LLP335 Madison AveNew York, NY 10017Todd.Mason@thompsonhine.com(212) 908-3946(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of each class Name of each exchange on which registeredCommon Stock, par value $.0001 per share New York Stock Exchange LLCSecurities registered or to be registered pursuant toSection 12(g) of the Act. NoneSecurities for which there is a reporting obligation pursuant toSection 15(d) of the Act. None Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 150,582,990Shares of Common StockIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or (15)(d) of the Securities ExchangeAct of 1934. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such reporting requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost such files). Yes ☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large acceleratedfiler” in Rule 12b-2 of the Exchange Act. (Check one):Large Accelerated Filer ☐ Accelerated Filer ☒ Non-Accelerated Filer ☐Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ☒ International Financial Reporting Standards as issuedby the International Accounting Standards Board ☐ Other ☐If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Table of ContentsTABLE OF CONTENTS PART I 3 Item 1. Identity of Directors, Senior Management and Advisers 3 Item 2. Offer Statistics and Expected Timetable 3 Item 3. Key Information 3 Item 4. Information on the Company 42 Item 4A. Unresolved Staff Comments 67 Item 5. Operating and Financial Review and Prospects 67 Item 6. Directors, Senior Management and Employees 98 Item 7. Major Stockholders and Related Party Transactions 104 Item 8. Financial Information 115 Item 9. Listing Details 117 Item 10. Additional Information 117 Item 11. Quantitative and Qualitative Disclosures about Market Risks 132 Item 12. Description of Securities Other than Equity Securities 133 PART II 134 Item 13. Defaults, Dividend Arrearages and Delinquencies 134 Item 14. Material Modifications to the Rights of Shareholders and Use of Proceeds 134 Item 15. Controls and Procedures 134 Item 16A. Audit Committee Financial Expert 135 Item 16B. Code of Ethics 135 Item 16C. Principal Accountant Fees and Services 135 Item 16D. Exemptions from the Listing Standards for Audit Committees 136 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 136 Item 16F. Change in Registrant’s Certifying Accountant 136 Item 16G. Corporate Governance 136 Item 16H. Mine Safety Disclosures 136 Item 17. Financial Statements 136 Item 18. Financial Statements 136 Item 19. Exhibits 136 Signatures 142 EX-4.54 EX-8.1 EX-12.1 EX-12.2 EX-13.1 EX-15.1 EX-15.2 EX-15.3 EX-15.4 Table of ContentsFORWARD-LOOKING STATEMENTSThis Annual Report should be read in conjunction with the financial statements and accompanying notes included herein.Statements included in this Annual Report on Form 20-F (this “Annual Report”) which are not historical facts (including our statements concerningplans and objectives of management for future operations or economic performance, or assumptions related thereto) are forward-looking statements. Inaddition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such statementsinclude, in particular, statements about our plans, strategies, business prospects, changes and trends in our business, and the markets in which we operate asdescribed in this Annual Report. In some cases, you can identify the forward-looking statements by the use of words such as “may,” “could,” “should,”“would,” “expect,” “plan,” “anticipate,” “intend,” “forecast,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue” or the negative of theseterms or other comparable terminology.Forward-looking statements appear in a number of places and include statements with respect to, among other things: • our ability to maintain or develop new and existing customer relationships with major refined product importers and exporters, major crude oilcompanies and major commodity traders, including our ability to enter into long-term charters for our vessels; • our ability to successfully grow our business and our capacity to manage our expanding business; • future levels of cash flow and levels of dividends, as well as our future cash dividend policy; • our current and future business and growth strategies and other plans and objectives for future operations; • our future operating and financial results, including the amount of fixed hire and profit share that we may receive; • our ability to identify and consummate desirable acquisitions, dispositions, joint ventures or strategic alliances, business strategy, areas ofpossible expansion, and expected capital expenditure or operating expenses; • tanker industry trends, including charter rates and vessel values and factors affecting vessel supply and demand; • our ability to take delivery of, integrate into our fleet, and employ any newbuildings we may order in the future and the ability of shipyards todeliver vessels on a timely basis; • the aging of our vessels and resultant increases in operation and drydocking costs; • the ability of our vessels to pass classification inspection and vetting inspections by oil majors; • significant changes in vessel performance, including increased vessel breakdowns; • the creditworthiness of our charterers and the ability of our contract counterparties to fulfill their obligations to us; • our ability to repay outstanding indebtedness, to fulfill other financial obligations, to obtain additional financing and to obtain replacementcharters for our vessels, in each case, at commercially acceptable rates or at all; • potential liability from litigation and our vessel operations, including discharge of pollutants; • our track record, and past and future performance, in safety, environmental and regulatory matters; • changes in the availability and costs of funding due to conditions in the bank market, capital markets and other factors; 1Table of Contents • global economic outlook and growth and changes in general economic and business conditions; • general domestic and international political conditions, including wars, acts of piracy and terrorism; • changes in production of or demand for oil and petroleum products, either globally or in particular regions; • changes in the standard of service or the ability of our technical manager to be approved as required; • increases or decreases in domestic or worldwide oil consumption; • increases in costs and expenses, including but not limited to: crew wages, insurance, provisions, port expenses, lube oil, bunkers, repairs,maintenance and general and administrative expenses; • the adequacy of our insurance arrangements and our ability to obtain insurance and required certifications; • the expected cost of, and our ability to comply with, governmental regulations and maritime self-regulatory organization standards, as well asstandard regulations imposed by our charterers applicable to our business; • the changes to the regulatory requirements applicable to the shipping and oil transportation industry, including, without limitation, stricterrequirements adopted by international organizations, such as the International Maritime Organization and the European Union, or by individualcountries or charterers and actions taken by regulatory authorities and governing such areas as safety and environmental compliance; • potential liability and costs due to environmental, safety and other incidents involving our vessels; • the effects of increasing emphasis on environmental and safety concerns by customers, governments and others, as well as changes in maritimeregulations and standards; • our ability to retain key executive officers; and • our ability to leverage to our advantage, Navios Maritime Holdings Inc. (“Navios Holdings”) relationships and reputation in the shippingindustry.These and other forward-looking statements are made based upon management’s current plans, expectations, estimates, assumptions and beliefsconcerning future events impacting us and therefore involve a number of risks and uncertainties, including those risks discussed in “Item 3. KeyInformation”.The forward-looking statements, contained in this Annual Report, are based on our current expectations and beliefs concerning future developmentsand their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated.The risks, uncertainties and assumptions involve known and unknown risks and are inherently subject to significant uncertainties and contingencies,many of which are beyond our control. We caution that forward-looking statements are not guarantees and that actual results could differ materially fromthose expressed or implied in the forward-looking statements.We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which suchstatement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of thesefactors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actualresults to be materially different from those contained in any forward-looking statement. 2Table of ContentsPART I Item 1.Identity of Directors, Senior Management and AdvisersNot Applicable. Item 2.Offer Statistics and Expected TimetableNot Applicable. Item 3.Key Information A.Selected Financial DataNavios Maritime Acquisition Corporation (sometimes referred to herein as “Navios Acquisition,” the “Company,” “we” or “us”) was incorporated inthe Republic of Marshall Islands on March 14, 2008 (refer to Item 4. Information on the Company).Navios Acquisition’s selected historical financial information and operating results for the years ended December 31, 2016, 2015, 2014, 2013 and2012 is derived from the audited consolidated financial statements of Navios Acquisition. The selected consolidated statements of income for the yearsended December 31, 2016, 2015 and 2014 and the consolidated balance sheet data as of December 31, 2016 and 2015 have been derived from our auditedconsolidated financial statements included elsewhere in this Annual Report. The consolidated statements of operations data for the years ended December 31,2013 and December 31, 2012, and the consolidated balance sheet data as of December 31, 2014, 2013 and 2012, have been derived from our auditedconsolidated financial statements which are not included in this document and are available at www.sec.gov. The selected consolidated financial data shouldbe read in conjunction with “Item 5. Operating and Financial Review and Prospects”, and other financial information included elsewhere in this AnnualReport. The selected consolidated financial data is a summary of, is derived from, and is qualified by reference to, our audited consolidated financialstatements and notes thereto, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The historical dataincluded below and elsewhere in this Annual Report is not necessarily indicative of our future performance. Statement of Income Data (In thousands of U.S. dollars) Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Year endedDecember 31,2013 Year endedDecember 31,2012 Revenue $290,245 $313,396 $264,877 $202,397 $151,097 Time charter expenses (4,980) (4,492) (5,187) (6,762) (2,824) Direct vessel expenses (3,567) (1,532) (1,979) (3,096) (2,622) Management fees (entirely through related party transactions) (97,866) (95,336) (95,827) (71,392) (47,043) General and administrative expenses (17,057) (15,532) (14,588) (7,017) (3,853) Depreciation and amortization (57,617) (57,623) (67,718) (63,880) (49,644) Loss on bond and debt extinguishment — — — (33,973) — Interest income 4,767 1,683 720 315 445 Interest expenses and finance cost (75,987) (73,561) (78,610) (58,386) (49,432) Impairment loss — — (11,690) — — Gain/ (loss) on sale of vessels 11,749 5,771 22,599 (21,098) — Change in fair value of other assets — — (1,188) — — Equity in net earnings of affiliated companies 15,499 18,436 2,000 — — Other income 377 41 280 4,787 280 Other expense (2,685) (1,514) (642) (487) (202) Net income/ (loss) $62,878 $89,737 $13,047 $(58,592) $(3,798) Net income/ (loss) per share, basic $0.40 $0.57 $0.08 $(0.57) $(0.08) Net income/ (loss) per share, diluted $0.40 $0.56 $0.08 $(0.57) $(0.08) 3Table of ContentsBalance Sheet Data (at period end) Year EndedDecember 31,2016 Year EndedDecember 31,2015 Year endedDecember 31,2014 Year endedDecember 31,2013 Year endedDecember 31,2012 Current assets, including cash $107,282 $97,349 $89,528 $120,801 $71,795 Vessels, net $1,306,923 $1,441,635 $1,375,931 $1,353,131 $940,738 Total assets $1,703,619 $1,774,091 $1,697,014(1),(2) $1,633,415(1) $1,349,917(1) Long-term debt, including current portion, net ofpremium and deferred finance costs $1,095,938 $1,197,583 $1,142,002(1) $1,131,202(1) $973,359(1) Series D Convertible Preferred Stock $— $— $12,000 $12,000 $6,000 Total Stockholders’ equity $572,931 $540,871 $490,793(2) $450,822 $225,304 Puttable common stock $2,500 $6,500 $— $— $— Common stock $15 $15 $15 $13 $4 Number of shares 150,582,990 149,782,990 151,664,942 136,714,942 40,517,413 Dividends declared/ paid $31,682 $32,117 $32,619 $24,521 $9,747 Cash Flow Data Net cash provided by/ (used in) operatingactivities $92,945 $119,636 $75,985 $(29,571) $81,877 Net cash used in investing activities $43,505 $(104,510) $(145,729) $(293,740) $(205,956) Net cash (used in)/ provided by financingactivities $(141,963) $(14,814) $41,402 $363,300 $125,625 Cash dividends declared per common share $0.20 $0.20 $0.20 $0.20 $0.20 Fleet Data: Vessels at end of period 36 39 37 33 19 (1)The total assets and long-term debt, including current portion, net of premium and deferred finance costs presented in this table have been revised toreflect the adoption of ASU 2015-03.(2)The total assets and total stockholders’ equity at December 31, 2014 have been revised to account for the investments in the common units of NaviosMidstream under the equity method. B.Capitalization and indebtednessNot applicable. C.Reasons for the offer and use of proceedsNot applicable. D.Risk factors 4Table of ContentsRISK FACTORSThe following factors should be considered carefully in evaluating whether to purchase our securities. These factors should be considered inconjunction with any other information included or incorporated by reference herein, including in conjunction with forward-looking statements madeherein.Risk Factors Relating to Our BusinessIf we fail to manage our planned growth properly, we may not be able to expand our fleet successfully, which may adversely affect our overall financialposition.While we have no specific plans, we do intend to continue to expand our fleet in the future. Our growth will depend on: • locating and acquiring suitable vessels; • identifying reputable shipyards with available capacity and contracting with them for the construction of new vessels; • integrating any acquired vessels successfully with our existing operations; • enhancing our customer base; • managing our expansion; • obtaining required financing, which could include debt, equity or combinations thereof; and • Improve operating and financial system and controls.Additionally, the marine transportation and logistics industries are capital intensive, traditionally using substantial amounts of indebtedness to financevessel acquisitions, capital expenditures and working capital needs. If we finance the purchase of our vessels through the issuance of debt securities, it couldresult in: • default and foreclosure on our assets if our operating cash flow after a business combination or asset acquisition were insufficient to pay our debtobligations; • acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt securitycontained covenants that required the maintenance of certain financial ratios or reserves and any such covenant were breached without a waiveror renegotiation of that covenant; • our immediate payment of all principal and accrued interest, if any, if the debt security was payable on demand; and • our inability to obtain additional financing, if necessary, if the debt security contained covenants restricting our ability to obtain additionalfinancing while such security was outstanding.In addition, our business plan and strategy is predicated on buying vessels in a market at what we believe is near the low, but recovering phase of theperiodic cycle in what has typically been a cyclical industry. However, there is no assurance that charter rates and vessels asset values will not sink lower, orthat there will be an upswing in shipping costs or vessel asset values in the near-term or at all, in which case our business plan and strategy may not succeedin the near-term or at all. Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty experiencedin obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existinginfrastructures. We may not be successful in growing and may incur significant expenses and losses.We may face unexpected maintenance costs, which could materially adversely affect our business, financial condition and results of operations.If our vessels suffer damage or require upgrade work, they may need to be repaired at a drydocking facility. Our vessels may occasionally requireupgrade work in order to maintain their classification society rating or as a 5Table of Contentsresult of changes in regulatory requirements. In addition, our vessels will be off-hire periodically for intermediate surveys and special surveys in connectionwith each vessel’s certification by its classification society. The costs of drydock repairs are unpredictable and can be substantial and the loss of earningswhile these vessels are being repaired and reconditioned, as well as the actual cost of these repairs, would decrease our earnings. Our insurance generally onlycovers a portion of drydocking expenses resulting from damage to a vessel and expenses related to maintenance of a vessel will not be reimbursed. Inaddition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at asuitable drydocking facility on a timely basis or may be forced to move a damaged vessel to a drydocking facility that is not conveniently located to thevessel’s position. The loss of earnings while any of our vessels are forced to wait for space or to relocate to drydocking facilities that are far away from theroutes on which our vessels trade would further decrease our earnings.We rely on our technical managers to provide essential services to our vessels and run the day-to-day operations of our vessels.Pursuant to technical management agreements we are provided with services essential to the business of our vessels, including vessel maintenance,crewing, purchasing, shipyard supervision, insurance and assistance with vessel regulatory compliance, by our technical managers, including a subsidiary ofNavios Holdings. Our operational success and ability to execute our strategy will depend significantly upon the satisfactory performance of theaforementioned services by the current technical manager. The failure of our technical managers to perform these services satisfactorily and a technicalmanager affiliated with the seller from the acquisition of seven VLCCs in September 2010 (“the VLCC Acquisition”) could have a material adverse effect onour business, financial condition and results of operations.Our vessels may be subject to unbudgeted periods of off-hire, which could materially adversely affect our business, financial condition and results ofoperations.Under the terms of the charter agreements under which our vessels operate, or are expected to operate in the case of the newbuildings, when a vessel is“off-hire,” or not available for service or otherwise deficient in its condition or performance, the charterer generally is not required to pay the hire rate, and wewill be responsible for all costs (including the cost of bunker fuel) unless the charterer is responsible for the circumstances giving rise to the lack ofavailability. A vessel generally will be deemed to be off-hire if there is an occurrence preventing the full working of the vessel due to, among other things: • operational deficiencies; • the removal of a vessel from the water for repairs, maintenance or inspection, which is referred to as drydocking; • delays due to accidents or deviations from course; • occurrence of hostilities in the vessel’s flag state or in the event of piracy; • crewing strikes, labor boycotts, certain vessel detentions or similar problems; • our failure to maintain the vessel in compliance with its specifications, contractual standards and applicable country of registry and internationalregulations or to provide the required crew; or • a natural or man-made event of force majeure.Risks Relating to the Shipping Industry and the Operation of our VesselsThe cyclical nature of the tanker industry may lead to volatility in charter rates and vessel values, which could adversely affect our future earnings.Oil has been one of the world’s primary energy sources for a number of decades. The global economic growth of previous years had a significant impacton the demand for oil and subsequently on the oil trade and the 6Table of Contentsdemand for shipping oil and oil products. However, the past several years were marked by a major economic slowdown and extreme volatility which has had,and continues to have, a significant impact on world trade, including the oil trade. Global economic conditions remain fragile with significant uncertaintywith respect to recovery prospects, levels of recovery and long-term economic growth effects. In particular, the uncertainty surrounding the future of theEurozone, the economic prospects of the United States and the future economic growth of China, Brazil, Russia, India and other emerging markets are allexpected to affect demand for product and crude tankers going-forward. Demand for oil and refined petroleum products remains less than current supply as aresult of the weak global economic environment and a general global trend towards energy efficient technologies, which in combination with the limitedavailability of trade credit and deteriorating international liquidity conditions, led to decreased demand for tanker vessels, creating downward pressure oncharter rates. This economic downturn has also affected vessel values overall. Energy prices sharply declined from mid-2014 to mid-February 2016 primarilyas a result of increased oil production worldwide. In response to this increased production, demand for tankers to move oil and refined petroleum productsincreased significantly and average spot and period charter rates for product and crude tankers rose to above historically average rates, but have sincemoderated. If oil demand grows in the future, it is expected to come primarily from emerging markets which have been historically volatile, such as Chinaand India, and a slowdown in these countries’ economies may severely affect global oil demand growth, and may result in protracted, reduced consumptionof oil products and a decreased demand for our vessels and lower charter rates, which could have a material adverse effect on our business, results ofoperations, cash flows, financial condition and ability to make cash distributions. Should the Organization of the Petroleum Exporting Countries (“OPEC”)significantly reduce oil production or should there be significant declines in non-OPEC oil production, that may result in a protracted period of reduced oilshipments and a decreased demand for our vessels and lower charter rates, which could have a material adverse effect on our business, results of operations,cash flows, financial condition and ability to make cash distributions.Historically, the crude oil markets have been volatile as a result of the many conditions and events that can affect the price, demand, production andtransport of oil, including competition from alternative energy sources. Decreased demand for oil transportation may have a material adverse effect on ourrevenues, cash flows and profitability. The factors affecting the supply and demand for tankers are outside of our control, and the nature, timing and degree ofchanges in industry conditions are unpredictable. The continuing global financial crisis has intensified this unpredictability.The factors that influence demand for tanker capacity include: • demand for and supply of liquid cargoes, including petroleum and petroleum products; • developments in international trade; • waiting days in ports; • changes in oil production and refining capacity and regional availability of petroleum refining capacity; • environmental and other regulatory developments, including the adoption of any limits on the consumption of carbon-based fuels due to climatechange agreements or protocols; • global and regional economic conditions; • the distance chemicals, petroleum and petroleum products are to be moved by sea; • changes in seaborne and other transportation patterns, including changes in distances over which cargo is transported due to geographic changesin where oil is produced, refined and used; • competition from alternative sources of energy; • armed conflicts and terrorist activities; • natural or man-made disasters that affect the ability of our vessels to use certain waterways; 7Table of Contents • political developments; and • embargoes and strikes.The factors that influence the supply of tanker capacity include: • the number of newbuilding deliveries; • the scrapping rate of older vessels; • port or canal congestion; • the number of vessels that are used for storage or as floating storage offloading service vessels; • the conversion of tankers to other uses, including conversion of vessels from transporting oil and oil products to carrying drybulk cargo and thereverse conversion; • availability of financing for new tankers; • the phasing out of single-hull tankers due to legislation and environmental concerns; • the price of steel; • the number of vessels that are out of service; • national or international regulations that may effectively cause reductions in the carrying capacity of vessels or early obsolescence of tonnage;and • environmental concerns and regulations, including ballast water management and low sulphur fuel consumption regulations.Furthermore, the extension of refinery capacity in China, India and particularly the Middle East through 2018 is expected to exceed the immediateconsumption in these areas, and an increase in exports of refined oil products is expected as a result. This coupled with announced refinery closures inAustralia, Japan and Europe should increase trade in refined oil products.Historically, the tanker markets have been volatile as a result of the many conditions and factors that can affect the price, supply and demand for tankercapacity. The recent global economic crisis may further reduce demand for transportation of oil over long distances and supply of tankers that carry oil,which may materially affect our future revenues, profitability and cash flows.We believe that the current order book for tanker vessels represents a significant percentage of the existing fleet; however the percentage of the totaltanker fleet on order as a percent of the total fleet declined from 18% at the end of 2011 to 12% at the beginning of March 2017. An over-supply of tankercapacity may result in a reduction of charter hire rates. If a reduction in charter rates occurs, we may only be able to charter our vessels at unprofitable rates orwe may not be able to charter these vessels at all, which could lead to a material adverse effect on our results of operations.Spot market rates for tanker vessels are highly volatile and may decrease in the future, which may materially adversely affect our earnings in the event thatour vessels are chartered in the spot market.We may deploy at least some of our product tankers, chemical tankers and VLCCs in the spot market directly or in pools. Although spot chartering iscommon in the product, chemical, tanker and VLCC sectors, product tankers, chemical tanker and VLCC charter hire rates are highly volatile and mayfluctuate significantly based upon demand for seaborne transportation of crude oil and oil products and chemicals, as well as tanker supply. World oildemand is influenced by many factors, including international economic activity; geographic changes in oil production, processing, and consumption; oilprice levels; inventory policies of the major oil and oil trading companies; and strategic inventory policies of countries such as the United States and China.The 8Table of Contentssuccessful operation of our vessels in the spot charter market depends upon, among other things, obtaining profitable spot charters and minimizing, to theextent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. Furthermore, as charter rates for spot charters are fixed for asingle voyage that may last up to several weeks, during periods in which spot charter rates are rising, we will generally experience delays in realizing thebenefits from such increases. The spot market is highly volatile, and, in the past, there have been periods when spot rates have declined below the operatingcost of vessels. Currently, spot charter hire rates are at or above operating costs for most vessel sizes but there is no assurance that the crude oil, product andchemical tanker charter market will rise over the next several months or will not decline further. A decrease in spot rates may decrease the revenues and cashflow we derive from vessels employed in pools or on index linked charters. Such volatility in pool or index linked charters may be mitigated by anyminimum rate due to us that we negotiate with our charterers.Additionally, if the spot market rates or short-term time charter rates become significantly lower than the time charter equivalent rates that some of ourcharterers are obligated to pay us under our existing charters, the charterers may have incentive to default under that charter or attempt to renegotiate thecharter. If our charterers fail to pay their obligations, we would have to attempt to re-charter our vessels at lower charter rates, which would affect our ability tocomply with our loan covenants and operate our vessels profitably. If we are not able to comply with our loan covenants and our lenders choose to accelerateour indebtedness and foreclose their liens, we could be required to sell vessels in our fleet and our ability to continue to conduct our business would beimpaired.Certain of our VLCC vessels are contractually committed to time charters or operation in pools, with the remaining terms of these charters expiringduring the period from and including 2017 through 2018. We are not permitted to unilaterally terminate the charter agreements of the VLCC vessels due toupswings in the tanker industry cycle, when spot market voyages might be more profitable. We may also decide to sell a vessel in the future. In such a case,should we sell a vessel that is committed to a long-term charter, we may not be able to realize the full charter free fair market value of the vessel during aperiod when spot market charters are more profitable than the charter agreement under which the vessel operates. We may re-charter the VLCC vessels onlong-term charters or charter them in the spot market or place them in pools upon expiration or termination of the vessels’ current charters. Furthermore, inconnection with the initial public offering (“IPO”) of Navios Midstream, we have provided backstop commitments for a two-year period as of the redeliveryof each of the Nave Celeste, the Shinyo Ocean and the Shinyo Kannika from their original charters, at a net rate of $35,000, $38,400 and $38,025,respectively. Navios Midstream has currently entered into new charter contracts for the above vessels with third parties upon their redelivery in first quarter of2017. Those contracts provide for index linked charter rates or pool earnings, as the case may be. If the actual rates achieved are below the agreed backstoprates our results of operations and operating cash flows may suffer.An oversupply of tanker vessel capacity may lead to reductions in charter hire rates, vessel values and profitability.The market supply of tankers is affected by a number of factors, such as demand for energy resources and primarily oil and petroleum products, level ofcharter hire rates, asset and newbuilding prices, availability of financing as well as overall economic growth in parts of the world economy, including Asia,and has been increasing as a result of the delivery of substantial newbuilding orders over the last few years. We believe that the current order book for tankervessels represents a significant percentage of the existing fleet; however the percentage of the total tanker fleet on order as a percent of the total fleet declinedfrom 48% in 2008 to 12% as of the beginning of March 2017. If the capacity of new ships delivered exceeds the capacity of tankers being scrapped and lost,tanker capacity will increase. If the supply of tanker capacity increases and if the demand for tanker capacity does not increase correspondingly, charter ratesand vessel values could materially decline. If such a reduction occurs, we may only be able to recharter our vessels at reduced or unprofitable rates as theircurrent charters expire, or we may not be able to charter these vessels at all, which could lead to a material adverse effect on our results of operations. 9Table of ContentsIncreasing self-sufficiency in energy by the United States could lead to a decrease in imports of oil to that country, which to date has been one of the largestimporters of oil worldwide.“The United States is expected to be the largest contributor to non-OPEC supply growth in the medium term,” according to the 2017 annual MarketReport Series: Oil by the International Energy Agency (“IEA”). “Increased drilling, helped by cost deflation and efficiency improvements, sees the US outputexpanding by nearly 1.6 million barrels per day (“MBPD”) through 2022, even assuming stable crude oil prices of around USD60/bbl over the period.” In its2016 Medium Term Oil Market Report, the IEA said that the steep rise in shale oil and gas production is expected to push the country toward self-sufficiencyin energy. In recent years the share of total U.S. consumption met by total liquid fuel net imports, including both crude oil and products, has been decreasingsince peaking at over 60% in 2005. The US Energy Information Administration (“EIA”) statistics through 2016 show that US crude oil imports rose 7% to anaverage of 7.9 million barrels per day (“MBPD”) in 2016 2015 period, but the average imports are still below the 2005 peak of 10.1 MBPD. EIA statisticsnote that US crude oil exports rose 12% to 520,000 barrels per day in 2016 but remained a very significant increase over the most recent low of 9,100 barrelsper day exported in 2002. A slowdown in oil imports to or exports from the United States, one of the most important oil trading nations worldwide, may resultin decreased demand for our vessels and lower charter rates, which could have a material adverse effect on our business, results of operations, cash flows,financial condition and ability to make cash distributions.A number of third party owners have ordered so-called modern vessels, which offer substantial bunker savings as compared to older vessels. Increaseddemand for and supply of modern vessels could reduce demand for certain of our existing older vessels and expose us to lower vessel utilization and/ordecreased charter rates.The product tanker newbuilding order book as of March 2017 is estimated at 231 vessels or 9% of the current product tanker fleet according toClarksons Research Services Limited. The majority of these orders are based on vessel improvements such as improved propulsion system or new pointsystems, which purport to offer material bunker savings compared to older vessels, which include certain of our vessels. Such savings could result in asubstantial reduction of bunker cost for charterers compared to such vessels of ours. As the supply of such modern vessel increases and if charterers prefersuch vessels over our vessels, this may reduce demand for our existing older vessels, impair our ability to recharter such vessels at competitive rates and havea material adverse effect on our cash flows and operations.Charter rates in the crude oil tankers sector in which we operate and in the product and chemical tanker sectors of the seaborne transportation industryhave significantly declined from historically high levels in 2008 and may remain depressed or decline further in the future, which may adversely affect ourearnings.Charter rates in the crude oil, product and chemical tanker sectors have significantly declined from historically high levels in 2008 and may remaindepressed or decline further. For example, the Baltic Dirty Tanker Index declined from a high of 2,347 in July 2008 to 453 in mid-April 2009, whichrepresents a decline of approximately 81%. Since January 2015, it has traded between a low of 496 and a high of 1,088; as of March 13, 2017, it stood at850. The Baltic Clean Tanker Index fell from 1,509 in the early summer of 2008 to 345 in April 2009, or an approximate 77% decline. It has traded between alow of 346 and a high of 867 since January 2015 and stood at 646 as of March 13, 2017. Of note is that Chinese imports of crude oil have steadily increasedfrom three million barrels per day in 2008 to an all-time record of about 8.6 million barrels per day in December 2016 and the U.S. has steadily increased itstotal petroleum product exports by almost 400% to about 5.0 million barrels per day in December 2016 from one million barrels per day in January 2006. Ifthe tanker sector of the seaborne transportation industry, which has been highly cyclical, is depressed in the future at a time when we may want to sell avessel, our earnings and available cash flow may be adversely affected. We cannot assure you that we will be able to successfully charter our vessels in thefuture at rates sufficient to allow us to operate our business profitably or to meet our obligations, including payment of debt service to our lenders. Our abilityto renew the charters on vessels that we may acquire in the future, the charter rates payable under any replacement charters and vessel values will dependupon, among other things, economic conditions in the sector in which our 10Table of Contentsvessels operate at that time, changes in the supply and demand for vessel capacity and changes in the supply and demand for the seaborne transportation ofenergy resources and commodities.Any decrease in shipments of crude oil from the Arabian Gulf or West Africa may adversely affect our financial performance.The demand for VLCC oil tankers derives primarily from demand for Arabian Gulf and West African crude oil, which, in turn, primarily depends on theeconomies of the world’s industrial countries and competition from alternative energy sources. A wide range of economic, social and other factors cansignificantly affect the strength of the world’s industrial economies and their demand for Arabian Gulf and West African crude oil.Among the factors that could lead to a decrease in demand for exported Arabian Gulf and West African crude oil are: • increased use of existing and future crude oil pipelines in the Arabian Gulf or West African regions; • increased demand for crude oil in the Arabian Gulf or West African regions; • a decision by OPEC or other petroleum exporters to increase their crude oil prices or to further decrease or limit their crude oil production; • any increase in refining of crude into petroleum products for domestic consumption or export; • armed conflict or acts of piracy in the Arabian Gulf or West Africa and political or other factors; • increased oil production in other regions, such as the United States, Russia and Latin America; and • the development and the relative costs of nuclear power, natural gas, coal and other alternative sources of energy.Any significant decrease in shipments of crude oil from the Arabian Gulf or West Africa may materially adversely affect our financial performance.Delays in deliveries of any newbuilding vessels we may contract to acquire or order in the future, or our decision to cancel, or our inability to otherwisecomplete the acquisitions of any newbuildings, could harm our operating results and lead to the termination of any related charters.Any newbuildings we may contract to acquire or order in the future could be delayed, not completed or cancelled, which would delay or eliminate ourexpected receipt of revenues under any charters for such vessels. The shipbuilder or third party seller could fail to deliver the newbuilding vessel or any othervessels we acquire or order, or we could cancel a purchase or a newbuilding contract because the shipbuilder has not met its obligations, including itsobligation to maintain agreed refund guarantees in place for our benefit. For prolonged delays, the customer may terminate the time charter.Our receipt of newbuildings could be delayed, canceled, or otherwise not completed because of: • quality or engineering problems or failure to deliver the vessel in accordance with the vessel specifications; • changes in governmental regulations or maritime self-regulatory organization standards; • work stoppages or other labor disturbances at the shipyard; • bankruptcy or other financial or liquidity problems of the shipbuilder; • a backlog of orders at the shipyard; • political or economic disturbances in the country or region where the vessel is being built; 11Table of Contents • weather interference or a catastrophic event, such as a major earthquake or fire; • the shipbuilder failing to deliver the vessel in accordance with our vessel specifications; • our requests for changes to the original vessel specifications; • shortages of or delays in the receipt of necessary construction materials, such as steel; or • our inability to finance the purchase of the vessel.If delivery of any newbuild vessel acquired, or any vessel we contract to acquire in the future is materially delayed, it could materially adversely affectour results of operations and financial condition.Fifteen of the vessels in our fleet are second-hand vessels, and we may acquire more second-hand vessels in the future. The acquisition and operation ofsuch vessels may result in increased operating costs and vessel off-hire, which could materially adversely affect our earnings.As of April 4, 2017, the vessels in our fleet had an average age of approximately 6.2 years and most tanker vessels have an expected life ofapproximately 25 years. Two of our LR1 product tanker vessels, five of our MR2 product tanker vessels and our eight VLCC vessels are second-hand vessels,and we may acquire more second-hand vessels in the future. Our inspection of second-hand vessels prior to purchase does not provide us with the sameknowledge about their condition and cost of any required or anticipated repairs that we would have had if these vessels had been built for and operatedexclusively by us. Generally, we will not receive the benefit of warranties on second-hand vessels.In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Due to improvements in engine technology,older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels. Cargo insurance rates increase with the ageof a vessel, making older vessels less desirable to charterers.Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations or the addition ofnew equipment to our vessels and may restrict the type of activities in which the vessels may engage or the geographic regions in which we may operate. Wecannot predict what alterations or modifications our vessels may be required to undergo in the future. As our vessels age, market conditions may not justifythose expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.Although we have considered the age and condition of the vessels in budgeting for operating, insurance and maintenance costs, we may encounterhigher operating and maintenance costs due to the age and condition of these vessels, or any additional vessels we acquire in the future. The age of some ofour VLCC vessels may result in higher operating costs and increased vessel off-hire periods relative to our competitors that operate newer fleets, which couldhave a material adverse effect on our results of operations.Our growth depends on continued growth in demand for crude oil, refined petroleum products (clean and dirty) and bulk liquid chemicals and thecontinued demand for seaborne transportation of such cargoes.Our growth strategy focuses on expansion in the crude oil, product and chemical tanker sectors. Accordingly, our growth depends on continued growthin world and regional demand for crude oil, refined petroleum (clean and dirty) products and bulk liquid chemicals and the transportation of such cargoes bysea, which could be negatively affected by a number of factors, including: • the economic and financial developments globally, including actual and projected global economic growth; • fluctuations in the actual or projected price of crude oil, refined petroleum products or bulk liquid chemicals; 12Table of Contents • refining capacity and its geographical location; • increases in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the development of new, pipelinesystems in markets we may serve, or the conversion of existing non-oil pipelines to oil pipelines in those markets; • decreases in the consumption of oil due to increases in its price relative to other energy sources, other factors making consumption of oil lessattractive or energy conservation measures or pollution reduction measures or those intended to reduce global warming; • availability of new, alternative energy sources; and • negative or deteriorating global or regional economic or political conditions, particularly in oil-consuming regions, which could reduce energyconsumption or its growth.The refining and chemical industries may respond to the economic downturn and demand weakness by reducing operating rates, partially orcompletely closing refineries and by reducing or cancelling certain investment expansion plans, including plans for additional refining capacity, in the caseof the refining industry. Continued reduced demand for refined petroleum products and bulk liquid chemicals and the shipping of such cargoes or theincreased availability of pipelines used to transport refined petroleum products, and bulk liquid chemicals would have a material adverse effect on our futuregrowth and could harm our business, results of operations and financial condition.Our growth depends on our ability to obtain customers, for which we face substantial competition. In the highly competitive tanker industry, we may not beable to compete for charters with new entrants or established companies with greater resources, which may adversely affect our results of operations.We employ our tanker vessels in the highly competitive crude oil, product and chemical tanker sectors of the shipping industry that is capital intensiveand fragmented. Competition arises primarily from other vessel owners, including major oil companies and traders as well as independent tanker companies,some of whom have substantially greater resources and experience than us. Competition for the chartering of tankers can be intense and depends on price,location, size, age, condition and the acceptability of the vessel and its managers to the charterers. Such competition has been enhanced as a result of thedownturn in the shipping industry, which has resulted in an excess supply of vessels and reduced charter rates.Medium to long-term time charters and bareboat charters have the potential to provide income at pre-determined rates over more extended periods oftime. However, the process for obtaining longer term time charters and bareboat charters is highly competitive and generally involves a lengthy, intensiveand continuous screening and vetting process and the submission of competitive bids that often extends for several months. In addition to the quality, ageand suitability of the vessel, longer term shipping contracts tend to be awarded based upon a variety of other factors relating to the vessel operator.Competition for the transportation of crude oil, refined petroleum products and bulk liquid chemicals can be intense and depends on price, location, size,age, condition and acceptability of the vessel and our managers to the charterers.In addition to having to meet the stringent requirements set out by charterers, it is likely that we will also face substantial competition from a number ofcompetitors who may have greater financial resources, stronger reputations or experience than we do when we try to re-charter our vessels. It is also likely thatwe will face increased numbers of competitors entering in the crude oil, product and chemical tanker sectors, including in the ice class sector. Increasedcompetition may cause greater price competition, especially for medium- to long-term charters. Due in part to the highly fragmented markets, competitorswith greater resources could operate larger fleets through consolidations or acquisitions that may be able to offer better prices and fleets than ours.As a result of these factors, we may be unable to obtain customers for medium- to long-term time charters or bareboat charters on a profitable basis, if atall. Even if we are successful in employing our vessels under longer 13Table of Contentsterm time charters or bareboat charters, our vessels will not be available for trading in the spot market during an upturn in the crude oil, product and chemicaltanker market cycles, when spot trading may be more profitable. If we cannot successfully employ our vessels in profitable time charters our results ofoperations and operating cash flow could be adversely affected.The market values of tanker vessels have declined from historically high levels and may fluctuate significantly, which could cause us to breach covenantsin our credit facilities, result in the foreclosure of certain of our vessels, limit the amount of funds that we can borrow and adversely affect our ability topurchase new vessels and our operating results. Depressed vessel values could also cause us to incur impairment charges.Due to the decline in world trade and tanker charter rates, the market values of our vessels and any contracted newbuildings and of tankers generally,are currently significantly lower than they would have been prior to the downturn in the second half of 2008. Within the past year smaller product tanker yardresale prices have decreased slowly to prices lower than the average 2015 price. Vessel values may remain at current low, or lower, levels for a prolongedperiod of time and can fluctuate substantially over time due to a number of different factors, including: • prevailing level of charter rates; • general economic and market conditions affecting the shipping industry; • competition from other shipping companies; • types and sizes of vessels; • where the ship was built and as-built specifications; • lifetime maintenance record; • supply and demand for vessels; • other modes of transportation; • cost of newbuildings; • governmental or other regulations, including environmental regulations; and • technological advances; and • ability of buyers to access financing and capitalIf the market value of our vessels decreases, we may breach some of the covenants contained in the financing agreements relating to our indebtednessat the time. Our credit facilities contain covenants including maximum total net liabilities over total net assets (effective in general after delivery of thevessels), minimum net worth and value to loan ratio covenants of 137% or lower, applicable after delivery of the vessels. If we breach any such covenants inthe future and we are unable to remedy the relevant breach, our lenders could accelerate or require us to prepay a portion of our debt and foreclose on ourvessels. In addition, if the book value of a vessel is impaired due to unfavorable market conditions, we would incur a loss that could have a material adverseeffect on our business, financial condition and results of operations.In addition, as vessels grow older, they generally decline in value. We will review our vessels for impairment whenever events or changes incircumstances indicate that the carrying amount of the assets may not be recoverable.We review certain indicators of potential impairment, such as undiscounted projected operating cash flows expected from the future operation of thevessels, which can be volatile for vessels employed on short-term charters or in the spot market. Any impairment charges incurred as a result of declines incharter rates would 14Table of Contentsnegatively affect our financial condition and results of operations. In addition, if we sell any vessel at a time when vessel prices have fallen and before wehave recorded an impairment adjustment to our financial statements, the sale may be at less than the vessel’s carrying amount on our financial statements,resulting in a loss and a reduction in earnings. Conversely, if vessel values are elevated at a time when we wish to acquire additional vessels, the cost ofacquisition may increase and this could materially adversely affect our business, financial condition and results of operations.Future increases in vessel operating expenses, including rising fuel prices, could materially adversely affect our business, financial condition and results ofoperations.Under our time charter agreements, the charterer is responsible for substantially all of the voyage expenses, including port and canal charges and fuelcosts, and we are generally responsible for vessel operating expenses. Vessel operating expenses are the costs of operating a vessel, primarily consisting ofcrew wages and associated costs, insurance premiums, management fees, lubricants and spare parts and repair and maintenance costs. In particular, the cost offuel is a significant factor in negotiating charter rates. As a result, an increase in the price of fuel beyond our expectations may adversely affect ourprofitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supplyand demand for oil, actions by members of OPEC and other oil and gas producers, war, terrorism and unrest in oil producing countries and regions, regionalproduction patterns and environmental concerns and regulations.We have fixed the fees for ship management services of our owned fleet, provided by a subsidiary of Navios Holdings, through May 2018 at $6,350 perMR2 product tanker and chemical tanker vessel, $7,150 per LR1 product tanker vessel and $9,500 per VLCC vessel. Drydocking expenses under ourManagement Agreement are reimbursed at cost for all vessels.We generally receive a daily rate for the use of our vessels, which is fixed through the term of the applicable charter agreement. Our charter agreementsdo not provide for any increase in the daily hire rate in the event that vessel-operating expenses increase during the term of the charter agreement. Increases inthe fees for shipmanagement services of our vessels over the term of a charter agreement will effectively reduce our operating income and, if such increases inoperating expenses are significant, adversely affect our business, financial condition and results of operations.The crude oil, product and chemical tanker sectors are subject to seasonal fluctuations in demand and, therefore, may cause volatility in our operatingresults.The crude oil, product and chemical tanker sectors of the shipping industry have historically exhibited seasonal variations in demand and, as a result,in charter hire rates. This seasonality may result in quarter-to-quarter volatility in our operating results. The product and chemical tanker markets are typicallystronger in the fall and winter months in anticipation of increased consumption of oil and natural gas in the northern hemisphere. In addition, unpredictableweather patterns in these months tend to disrupt vessel scheduling and supplies of certain commodities. As a result, revenues are typically weaker during thefiscal quarters ended June 30 and September 30, and, conversely, typically stronger in fiscal quarters ended December 31 and March 31. Our operatingresults, therefore, may be subject to seasonal fluctuations.A decrease in the level of China’s imports of crude oil or petroleum products or a decrease in oil trade globally could have a material adverse impact onour charterers’ business and, in turn, could cause a material adverse impact on our results of operations, financial condition and cash flows.China imports significant quantities of crude oil and trades significant quantities of petroleum products. For example in 2016, China imported about354 million tons of crude oil by sea compared with crude oil imports to the United States of about 252 million tons. Our tanker vessels are deployed by ourcharterers on routes involving 15Table of Contentscrude oil and petroleum product trades in and out of emerging markets, and our charterers’ oil shipping and business revenue may be derived from theshipment of goods within and to the Asia Pacific region from various overseas export markets. Any reduction in or hindrance to China-based importers couldhave a material adverse effect on the growth rate of China’s imports and on our charterers’ business. For instance, the government of China has implementedeconomic policies aimed at reducing pollution and increasing the strategic stock piling of crude oil. Should these policies change, this may have the effect ofreducing crude oil imports or petroleum product exports and may, in turn, result in a decrease in demand for oil shipping. Additionally, though in China thereis an increasing level of autonomy and a gradual shift in emphasis to a “market economy” and enterprise reform, many of the reforms, particularly somelimited price reforms that result in the prices for certain commodities being principally determined by market forces, are unprecedented or experimental andmay be subject to revision, change or abolition. The level of imports to and exports from China could be adversely affected by changes to these economicreforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government.Although China exerts a large effect on the seaborne market for crude oil and petroleum products, any decreases in trade in those commodities by any of thecountries in other major trading regions in North America, Europe and Asia could depress time charter rates which could have a material adverse effect on ourbusiness, results of operations, financial condition and our ability to pay cash distributions to our shareholders.Our operations expose us to the risk that increased trade protectionism from China, the United States or other nations will adversely affect our business.If the global recovery is undermined by downside risks and the recent economic downturn returns, governments may turn to trade barriers to protect theirdomestic industries against foreign imports, thereby depressing the demand for shipping. Specifically, increasing trade protectionism in the markets that ourcharterers serve may cause (i) a decrease in cargoes available to our charterers in favor of Chinese charterers and Chinese owned ships and (ii) an increase inthe risks associated with importing goods to China. Any increased trade barriers or restrictions on trade, especially trade with China, would have an adverseimpact on our charterers’ business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to usand to renew and increase the number of their time charters with us. This could have a material adverse effect on our business, results of operations, financialcondition and our ability to pay cash distributions to our unitholders.The employment of our vessels could be adversely affected by an inability to clear the oil majors’ risk assessment process, and we could be in breach of ourcharter agreements with all of our tanker vessels.The shipping industry, and especially the shipment of crude oil, refined petroleum products (clean and dirty) and bulk liquid chemicals, has been, andwill remain, heavily regulated. The so-called “oil majors,” such as Exxon Mobil, BP p.l.c., Royal Dutch Shell plc., Chevron, ConocoPhillips and Total S.A.,together with a number of commodities traders, represent a significant percentage of the production, trading and shipping logistics (terminals) of crude oiland refined products worldwide. Concerns for the environment have led the oil majors to develop and implement a strict ongoing due diligence process whenselecting their commercial partners. This vetting process has evolved into a sophisticated and comprehensive risk assessment of both the vessel operator andthe vessel, including physical ship inspections, completion of vessel inspection questionnaires performed by accredited inspectors and the production ofcomprehensive risk assessment reports. In the case of term charter relationships, additional factors are considered when awarding such contracts, including: • office assessments and audits of the vessel operator; • the operator’s environmental, health and safety record; • compliance with the standards of the International Maritime Organization (the “IMO”), a United Nations agency that issues international tradestandards for shipping; • compliance with oil majors’ codes of conduct, policies and guidelines, including transparency, anti-bribery and ethical conduct requirementsand relationships with third parties; • compliance with heightened industry standards that have been set by several oil companies; 16Table of Contents • shipping industry relationships, reputation for customer service, technical and operating expertise; • shipping experience and quality of ship operations, including cost-effectiveness; • quality, experience and technical capability of crews; • the ability to finance vessels at competitive rates and overall financial stability; • relationships with shipyards and the ability to obtain suitable berths; • construction management experience, including the ability to procure on-time delivery of new vessels according to customer specifications; • willingness to accept operational risks pursuant to the charter, such as allowing termination of the charter for force majeure events; and • competitiveness of the bid in terms of overall price.Under the terms of our charter agreements, our charterers require that these vessels and the technical manager are vetted and approved to transport oilproducts by multiple oil majors. Our failure to maintain any of our vessels to the standards required by the oil majors could put us in breach of the applicablecharter agreement and lead to termination of such agreement, and could give rise to impairment in the value of our vessels.Should we not be able to successfully clear the oil majors’ risk assessment processes on an ongoing basis, the future employment of our vessels, as wellas our ability to obtain charters, whether medium- or long-term, could be adversely affected. Such a situation may lead to the oil majors’ terminating existingcharters and refusing to use our vessels in the future, which would adversely affect our results of operations and cash flows.We depend on significant customers for part of our revenue. Charterers may terminate or default on their obligations to us, which could materiallyadversely affect our results of operations and cash flow, and breaches of the charters may be difficult to enforce.We derive a significant part of our revenue from a number of charterers. For the year ended December 31, 2016, Navig8 Chemicals Shipping andTrading Co (“Navig8”), Shell Tankers Singapore Private LTD (“Shell”) and Mansel LTD (“Mansel”). accounted for 33.0%, 20.0% and 14.7%, respectively, ofour total revenue. The loss of these or any of our customers, a customer’s failure to make payments or perform under any of the applicable charters, acustomer’s termination of any of the applicable charters, the loss or damage beyond repair to any of our vessels, our failure to deliver the vessel within a fixedperiod of time or a decline in payments under the charters could have a material adverse effect on our business, results of operations and financial condition.The charter agreements for our vessels are generally governed by English law and provide for dispute resolution in English courts or London-based arbitralproceedings. There can be no assurance that we would be able to enforce any judgments against these charterers in jurisdictions where they are based or havetheir primary assets and operations. Even after a charter contract is entered, charterers may terminate charters early under certain circumstances. The events oroccurrences that will cause a charter to terminate or give the charterer the option to terminate the charter generally include a total or constructive total loss ofthe related vessel, the requisition for hire of the related vessel, the vessel becoming subject to seizure for more than a specified number of days or the failureof the related vessel to meet specified performance criteria.In addition, the ability of a charterer to perform its obligations under a charter will depend on a number of factors that are beyond our control. Thesefactors may include general economic conditions, the condition of the crude oil, product and chemical tanker sectors of the shipping industry, the charterrates received for specific types of vessels and various operating expenses. The costs and delays associated with the default by a charterer of a vessel may beconsiderable and may adversely affect our business, results of operations, cash flows and financial condition.We cannot predict whether our charterers will, upon the expiration of their charters, re-charter our vessels on favorable terms or at all. If our charterersdecide not to re-charter our vessels, we may not be able to re-charter 17Table of Contentsthem on terms similar to our current charters or at all. Even if we manage to successfully charter our vessels in the future, our charterers may go bankrupt orfail to perform their obligations under the charter agreements, they may delay payments or suspend payments altogether, they may terminate the charteragreements prior to the agreed-upon expiration date or they may attempt to renegotiate the terms of the charters. In the future, we may also employ our vesselson the spot charter market, which is subject to greater rate fluctuation than the time charter market. If we receive lower charter rates under replacement chartersor are unable to re-charter all of our vessels, our results of operations and financial condition could be materially adversely affected.The risks and costs associated with vessels increase as the vessels age.As of April 4, 2017, the vessels in our fleet had an average age of approximately 6.2 years and most tanker vessels have an expected life ofapproximately 25 years. We may acquire older vessels in the future. Older vessels are typically more costly to maintain than more recently constructedvessels due to improvements in engine technology. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable tocharterers as well. Governmental regulations, safety or other equipment standards related to the age of the vessels may require expenditures for alterations orthe addition of new equipment, to our vessels and may restrict the type of activities in which these vessels may engage. We cannot assure you that as ourvessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives. If wesell vessels, we may have to sell them at a loss, and if charterers no longer charter out vessels due to their age, it could materially adversely affect ourearnings.If we experienced a catastrophic loss and our insurance is not adequate to cover such loss, it could lower our profitability and be detrimental tooperations.The ownership and operation of vessels in international trade is affected by a number of inherent risks, including mechanical failure, personal injury,vessel and cargo loss or damage, business interruption due to political conditions in foreign countries, hostilities, piracy, terrorism, labor strikes and/orboycotts, adverse weather conditions and catastrophic marine disaster, including environmental accidents and collisions. All of these risks could result inliability, loss of revenues, increased costs and loss of reputation. We maintain hull and machinery insurance, protection and indemnity insurance, whichinclude environmental damage and pollution and war risk insurance, consistent with industry standards, against these risks on our vessels and other businessassets. However, we cannot assure you that we will be able to insure against all risks adequately, that any particular claim will be paid out of our insurance, orthat we will be able to procure adequate insurance coverage at commercially reasonable rates in the future. Our insurers also require us to pay certaindeductible amounts, before they will pay claims, and insurance policies may contain limitations and exclusions, which, although we believe will be standardfor the shipping industry, may nevertheless increase our costs and lower our profitability. Additionally, any increase in environmental and other regulationsmay also result in increased costs for, or the lack of availability of, insurance against the risks of environmental damage, pollution and other claims. Ourinability to obtain insurance sufficient to cover potential claims or the failure of insurers to pay any significant claims could lower our profitability and bedetrimental to our operations.Furthermore, even if insurance coverage is adequate to cover our losses, we may not be able to timely obtain a replacement ship in the event of a loss.We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of theprotection and indemnity associations through which we receive indemnity insurance coverage for tort liability. In addition, our protection and indemnityassociations may not have enough resources to cover claims made against them. Our payment of these calls could result in significant expenses to us, whichcould reduce our cash flows and place strains on our liquidity and capital resources. 18Table of ContentsWe are subject to various laws, regulations and conventions, including environmental and safety laws that could require significant expenditures both tomaintain compliance with such laws and to pay for any uninsured environmental liabilities including any resulting from a spill or other environmentalincident.The shipping business and vessel operation are materially affected by government regulation in the form of international conventions, national, stateand local laws, and regulations in force in the jurisdictions in which vessels operate, as well as in the country or countries of their registration. Governmentalregulations, safety or other equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations and customerrequirements or competition, may require us to make capital and other expenditures. Because such conventions, laws and regulations are often revised, wecannot predict the ultimate cost of complying with such conventions, laws and regulations, or the impact thereof on the fair market price or useful life of ourvessels. In order to satisfy any such requirements, we may be required to take any of our vessels out of service for extended periods of time, withcorresponding losses of revenues. In the future, market conditions may not justify these expenditures or enable us to operate our vessels, particularly oldervessels, profitably during the remainder of their economic lives. This could lead to significant asset write downs. In addition, violations of environmental andsafety regulations can result in substantial penalties and, in certain instances, seizure or detention of our vessels.Additional conventions, laws and regulations may be adopted that could limit our ability to do business, require capital expenditures or otherwiseincrease our cost of doing business, which may materially adversely affect our operations, as well as the shipping industry generally. For example, in variousjurisdictions, legislation has been enacted, or is under consideration, that would impose more stringent requirements on air pollution and effluent dischargesfrom our vessels. For example, the IMO periodically proposes and adopts amendments to revise the International Convention for the Prevention of Pollutionfrom Ships (“MARPOL”), such as the revision to Annex VI which came into force on July 1, 2010. The revised Annex VI implements a phased reduction ofthe sulfur content of fuel and allows for stricter sulfur limits in designated emission control areas (“ECAs”). Thus far, ECAs have been formally adopted forthe Baltic Sea area (limits SOx emissions only); the North Sea area including the English Channel (limiting SOx emissions only) and the North AmericanECA (which came into effect on August 1, 2012 limiting SOx, NOx and particulate matter emissions). In October 2016, the IMO approved the designation ofthe North Sea and the Baltic Sea as ECAs for NOx under Annex VI, which is scheduled for adoption in 2017 and would take effect in January 2021. TheUnited States Caribbean Sea ECA entered into force on January 1, 2013 and has been effective since January 1, 2014, limiting SOx, NOx and particulatematter emissions. In January 2015, the limit for fuel oil sulfur levels fell to 0.10% m/m in ECAs established to limit SOx and particulate matter emissions.After considering the issue for many years, the IMO announced on October 27, 2016 that it was proceeding with a requirement for 0.5% m/m sulfurcontent in marine fuel (down from current levels of 3.5%) outside the ECAs starting on January 1, 2020. Under Annex VI, the 2020 date was subject to reviewas to the availability of the required fuel oil. Annex VI required the fuel availability review to be completed by 2018 but was ultimately completed in2016. Therefore, by 2020, ships will be required to remove sulfur from emissions through the use of emission control equipment, or purchase marine fuel with0.5% sulfur content, which may see increased demand and higher prices due to supply constraints. Installing pollution control equipment or using lowersulfur fuel could result in significantly increased costs to our company. Similarly, MARPOL Annex VI requires Tier III standards for NOx emissions to beapplied to ships constructed and engines installed in ships operating in NOx ECAs from January 1, 2016.California has adopted more stringent low sulfur fuel requirements within California-regulated waters. In addition, the IMO, the U.S. and states withinthe U.S. have proposed or implemented requirements relating to the management of ballast water to prevent the harmful effects of foreign invasive species.In February 2004, the IMO adopted the International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the “BWMConvention”). The BWM Convention’s implementing regulations call 19Table of Contentsfor a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits, as well as otherobligations including recordkeeping requirements and implementation of a Ballast Water and Sediments Management Plan. The BWM Conventionstipulates that it will enter into force twelve months after it has been adopted by at least 30 states, the combined merchant fleets of which represent at least35% of the gross tonnage of the world’s merchant shipping. With Finland’s accession to the agreement on September 8, 2016, the 35% threshold was reached,and the BWM convention will enter into force on September 8, 2017. Thereafter, on October 19, 2016, Panama also acceded to the BWM convention, addingits 18.02% of world gross tonnage. As of March 14, 2017, the BWM Convention had 54 contracting states for 53.41% of world gross tonnage. The BWMConvention requires ships to manage ballast water in a manner that removes, renders harmless or avoids the update or discharge of aquatic organisms andpathogens within ballast water and sediment. Recently updated Ballast Water and Sediment Management Plan guidance includes more robust testing andperformance specifications. The entry of the BWM Convention and revised guidance will likely result in additional compliance costs.The operation of vessels is also affected by the requirements set forth in the International Safety Management Code (the “ISM Code”). The ISM Coderequires ship owners and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety andenvironmental protection policy setting forth instructions and procedures for safe vessel operation and describing procedures for dealing with emergencies.Further to this, the IMO has introduced the first ever mandatory measures for an international greenhouse gas reduction regime for a global industry sector.These energy efficiency measures took effect on January 1, 2013 and apply to all ships of 400 gross tonnage and above. They include the development of aship energy efficiency management plan (“SEEMP”) which is akin to a safety management plan, with which the industry will have to comply. The failure of aship owner or bareboat charterer to comply with the ISM Code and IMO measures may subject such party to increased liability, may decrease availableinsurance coverage for the affected vessels, and may result in a denial of access to, or detention in, certain ports.We operate a fleet of crude, product and chemical tankers that are subject to national and international laws governing pollution from such vessels.Several international conventions impose and limit pollution liability from vessels. An owner of a tanker vessel carrying a cargo of “persistent oil” as definedby the International Convention for Civil Liability for Oil Pollution Damage (the “CLC”) is subject under the convention to strict liability for any pollutiondamage caused in a contracting state by an escape or discharge from cargo or bunker tanks. This liability is subject to a financial limit calculated by referenceto the tonnage of the ship, and the right to limit liability may be lost if the spill is caused by the ship owner’s intentional or reckless conduct. Liability mayalso be incurred under the CLC for a bunker spill from the vessel even when she is not carrying such cargo, but is in ballast.When a tanker is carrying clean oil products that do not constitute “persistent oil” that would be covered under the CLC, liability for any pollutiondamage will generally fall outside the CLC and will depend on other international conventions or domestic laws in the jurisdiction where the spillage occurs.The same principle applies to any pollution from the vessel in a jurisdiction which is not a party to the CLC. The CLC applies in over 100 jurisdictionsaround the world, but it does not apply in the United States, where the corresponding liability laws such as the Oil Pollution Act of 1990 (the “OPA”)discussed below, are particularly stringent. For vessel operations not covered by the CLC, including those operated under our fleet, at present, internationalliability for oil pollution is governed by the International Convention on Civil Liability for Bunker Oil Pollution Damage (the “Bunker Convention”). In2001, the IMO adopted the Bunker Convention, which imposes strict liability on ship owners for pollution damage and response costs incurred incontracting states caused by discharges, or threatened discharges, of bunker oil from all classes of ships not covered by the CLC. The Bunker Conventionalso requires registered owners of ships over a certain size to maintain insurance to cover their liability for pollution damage in an amount equal to the limitsof liability under the applicable national or international limitation regime, including liability limits calculated in accordance with the Convention onLimitation of Liability for Maritime Claims 1976, as amended (the “1976 Convention”), discussed in more detail in the following paragraph. The BunkerConvention became effective in contracting states on November 21, 2008 and, as of March 14, 2017, 20Table of Contentshad 83 contracting states. In non-contracting states, liability for such bunker oil pollution typically is determined by the national or other domestic laws inthe jurisdiction where the spillage occurs.The CLC and Bunker Convention also provide vessel owners a right to limit their liability, depending on the applicable national or internationalregime. The CLC includes its own liability limits. The 1976 Convention is the most widely applicable international regime limiting maritime pollutionliability. Rights to limit liability under the 1976 Convention are forfeited where a spill is caused by a ship owner’s intentional or reckless conduct. Certainjurisdictions have ratified the IMO’s Protocol of 1996 to the 1976 Convention, referred to herein as the “Protocol of 1996.” The Protocol of 1996 provides forsubstantially higher liability limits in those jurisdictions than the limits set forth in the 1976 Convention. Finally, some jurisdictions, such as the UnitedStates, are not a party to either the 1976 Convention or the Protocol of 1996, and, therefore, a ship owner’s rights to limit liability for maritime pollution insuch jurisdictions may be uncertain.Environmental legislation in the United States merits particular mention as it is in many respects more onerous than international laws, representing ahigh-water mark of regulation with which ship owners and operators must comply, and of liability likely to be incurred in the event of non-compliance or anincident causing pollution. Such regulation may become even stricter if laws are changed as a result of the April 2010 Deepwater Horizon oil spill in the Gulfof Mexico (the “Deepwater Horizon incident”). In the United States, the OPA establishes an extensive regulatory and liability regime for the protection andcleanup of the environment from cargo and bunker oil spills from vessels, including tankers. The OPA covers all owners and operators whose vessels trade inthe United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States’ territorial sea and its 200nautical mile exclusive economic zone. Under the OPA, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly, severallyand strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costsand other damages arising from discharges or substantial threats of discharges, of oil from their vessels. In response to the Deepwater Horizon incident, theU.S. House of Representatives passed and the U.S. Senate considered but did not pass a bill to strengthen certain requirements of the OPA; similar legislationmay be introduced in the future.In addition to potential liability under the federal OPA, vessel owners may in some instances incur liability on an even more stringent basis under statelaw in the particular state where the spillage occurred. For example, California regulations prohibit the discharge of oil, require an oil contingency plan befiled with the state, require that the ship owner contract with an oil response organization and require a valid certificate of financial responsibility, all prior tothe vessel entering state waters.In recent years, the EU has become increasingly active in the field of regulation of maritime safety and protection of the environment. In some areas ofregulation the EU has introduced new laws without attempting to procure a corresponding amendment to international law. Notably, in 2005 the EU adopteda directive, as amended in 2009, on ship-source pollution, imposing criminal sanctions for pollution not only where pollution is caused by intent orrecklessness (which would be an offence under MARPOL), but also where it is caused by “serious negligence.” The concept of “serious negligence” may beinterpreted in practice to be little more than ordinary negligence. The directive could therefore result in criminal liability being incurred in circumstanceswhere it would not be incurred under international law. In February 2017, EU member states met to consider independently regulating the shipping industryunder the Emissions Trading System (“ETS”), which requires ETS-regulated businesses to report on carbon emissions and provides for a credit trading systemfor carbon allowances. On February 15, 2017, European Parliament voted in favor of a bill to include maritime shipping in the ETS by 2023 if the IMO hasnot promulgated a comparable system by 2021. If the bill becomes law, the ETS may result in additional compliance costs for our vessels.In response to the Deepwater Horizon incident, the European Union issued “Directive 2013/30/EU of the European Parliament and of the Council ofJune 12, 2013 on safety of offshore oil and gas operations.” The objective of this Directive is to reduce as far as possible the occurrence of major accidentsrelating to offshore oil 21Table of Contentsand gas operations and to limit their consequences, thus increasing the protection of the marine environment and coastal economies against pollution,establishing minimum conditions for safe offshore exploration and exploitation of oil and gas and limiting possible disruptions to Union indigenous energyproduction, and to improve the response mechanisms in case of an accident. The Directive was implemented on July 19, 2015. As far as the environment isconcerned, the UK has various new or amended regulations such as: the Offshore Petroleum Activities (Offshore Safety Directive) (Environmental Functions)Regulations 2015 (“OSDEF”), the 2015 amendments to the Merchant Shipping (Oil Pollution Preparedness, Response and Cooperation Convention)Regulations 1998 (“OPRC 1998”) and other environmental Directive requirements, specifically the Environmental Management System. The OffshorePetroleum Licensing (Offshore Safety Directive) Regulations 2015 will implement the licensing Directive requirements.Criminal liability for a pollution incident could not only result in us incurring substantial penalties or fines, but may also, in some jurisdictions,facilitate civil liability claims for greater compensation than would otherwise have been payable.We maintain insurance coverage for each owned vessel in our fleet against pollution liability risks in the amount of $1.0 billion in the aggregate forany one event. The insured risks include penalties and fines as well as civil liabilities and expenses resulting from accidental pollution. However, thisinsurance coverage is subject to exclusions, deductibles and other terms and conditions. If any liabilities or expenses fall within an exclusion from coverage,or if damages from a catastrophic incident exceed the aggregate liability of $1.0 billion for any one event, our cash flow, profitability and financial positionwould be adversely impacted.Climate change and government laws and regulations related to climate change could negatively impact our financial condition.We are and will be, directly and indirectly, subject to the effects of climate change and may, directly or indirectly, be affected by government laws andregulations related to climate change. A number of countries have adopted or are considering the adoption of regulatory frameworks to reduce greenhousegas emissions, such as carbon dioxide, methane and nitrogen oxides. In the United States, the United States Environmental Protection Agency (“EPA”) hasdeclared greenhouse gases to be dangerous pollutants and has issued greenhouse gas reporting requirements for emissions sources in certain industries (whichcurrently do not include the shipping industry). The EPA does require owners of vessels subject to MARPOL Annex VI to maintain records for nitrogenoxides standards and in-use fuel specifications.In addition, while the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United NationsFramework Convention on Climate Change (the “UNFCC”), which requires adopting countries to implement national programs to reduce greenhouse gasemissions, the IMO intends to develop limits on greenhouse gases from international shipping. It has responded to the global focus on climate change andgreenhouse gas emissions by developing specific technical and operational efficiency measures and a work plan for market-based mechanisms in 2011. Theseinclude the mandatory measures of SEEMP, outlined above, and an energy efficiency design index (“EEDI”) for new ships. The IMO is also considering itsposition on market-based measures through an expert working group. Among the numerous proposals being considered by the working group are thefollowing: a port state levy based on the amount of fuel consumed by the vessel on its voyage to the port in question; a global emissions trading schemewhich would allocate emissions allowances and set an emissions cap; and an international fund establishing a global reduction target for internationalshipping, to be set either by the UNFCCC or the IMO.At its 64th session (2012), the IMO’s Marine Environment Protection Committee (the “MEPC”) indicated that 2015 was the target year for memberstates to identify market-based measures for international shipping. At its 66th session (2014), the MEPC continued its work on developing technical andoperational measures relating to energy-efficiency measures for ships, following the entry into force of the mandatory efficiency measures on January 1, 2013.It adopted the 2014 Guidelines on the Method of Calculation of the Attained EEDI, applicable 22Table of Contentsto new ships. It further adopted amendments to MARPOL Annex VI concerning the extension of the scope of application of the EEDI to Liquefied NaturalGas (“LNG”) carriers, ro-ro cargo ships (vehicle carriers), ro-ro cargo ships, ro-ro passenger ships and cruise passengers ships with nonconventionalpropulsion. At its 67th session (2014), the MEPC adopted the 2014 Guidelines on survey and certification of the EEDI, updating the previous version toreference ships fitted with dual-fuel engines using LNG and liquid fuel oil. The MEPC also adopted amendments to the 2013 Interim Guidelines fordetermining minimum propulsion power to maintain the maneuverability of ships in adverse conditions, to make the guidelines applicable to phase 1(starting January 1, 2015) of the EEDI requirements. At its 68th session (2015), the MEPC amended the 2014 Guidelines on EEDI survey and certification aswell as the method of calculating an EEDI for new ships, the latter of which was again amended at the 70th session (2016). At its 70th session, the MEPC alsoadopted mandatory requirements for ships of 5,000 gross tonnage or greater to collect fuel consumption data for each type of fuel used, and report the data tothe flag State after the end of each calendar year.In December 2011, UN climate change talks took place in Durban and concluded with an agreement referred to as the Durban Platform for EnhancedAction. The Durban Conference did not result in any proposals specifically addressing the shipping industry’s role in climate change but the progress thathas been made by the IMO in this area was widely acknowledged throughout the negotiating bodies of the UNFCCC process and an ad hoc working groupwas established.Although regulation of greenhouse gas emissions in the shipping industry was discussed during the 2015 UN Climate Change Conference in Paris (the“Paris Conference”), the agreement reached among the 195 nations did not expressly reference the shipping industry. Following the Paris Conference, theIMO announced it would continue its efforts on this issue at the MEPC, and at its 70th session, the MEPC approved a roadmap for developing acomprehensive GHG emissions reduction strategy for ships, which includes the goal of adopting an initial strategy and emission reduction commitments in2018. The roadmap also provides for additional studies and further intersessional work, to be continued at the 71st session in 2017, with a goal of adopting arevised strategy in 2023 to include short-, mid- and long-term reduction measures and schedules for implementation.The EU announced in April 2007 that it planned to expand the EU emissions trading scheme by adding vessels, and a proposal from the EuropeanCommission (“EC”) was expected if no global regime for reduction of seaborne emissions had been agreed to by the end of 2011. As of January 31, 2013, theEC had stopped short of proposing that emissions from ships be included in the EU’s emissions-trading scheme. However, on October 1, 2012, it announcedthat it would propose measures to monitor, verify and report on greenhouse-gas emissions from the shipping sector. On June 28, 2013, the EC adopted acommunication setting out a strategy for progressively including greenhouse gas emissions from maritime transport in the EU’s policy for reducing its overallGHG emissions. The first step proposed by the EC was an EU Regulation (as defined below) to an EU-wide system for the monitoring, reporting andverification of carbon dioxide emissions from large ships starting in 2018. The EU Regulation (2015/757) was adopted on April 29, 2015 and took effect onJuly 1, 2015, with monitoring, reporting and verification requirements beginning on January 1, 2018. This Regulation may be seen as indicative of anintention to maintain pressure on the international negotiating process. The EC also adopted an Implementing Regulation, which entered into force inNovember 2016, setting templates for monitoring plans, emissions reports and compliance documents pursuant to Regulation 2015/757.We cannot predict with any degree of certainty what effect, if any, possible climate change and government laws and regulations related to climatechange will have on our operations, whether directly or indirectly. However, we believe that climate change, including the possible increase in severeweather events resulting from climate change, and government laws and regulations related to climate change may affect, directly or indirectly, (i) the cost ofthe vessels we may acquire in the future, (ii) our ability to continue to operate as we have in the past, (iii) the cost of operating our vessels, and (iv) insurancepremiums, deductibles and the availability of coverage. As a result, our financial condition could be negatively impacted by significant climate change andrelated governmental regulation, and that impact could be material. 23Table of ContentsWe are subject to vessel security regulations and we incur costs to comply with adopted regulations. We may be subject to costs to comply with similarregulations that may be adopted in the future in response to terrorism.Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002,the Maritime Transportation Security Act of 2002 (the “MTSA”) came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. CoastGuard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of theUnited States. Similarly, in December 2002, amendments to the International Convention for the Safety of Life at Sea (the “SOLAS”) created a new chapter ofthe convention dealing specifically with maritime security. The new chapter went into effect in July 2004, and imposes various detailed security obligationson vessels and port authorities, most of which are contained in the International Ship and Port Facilities Security Code (the “ISPS Code”). Among the variousrequirements are: • on-board installation of automatic information systems (“AIS”), to enhance vessel-to-vessel and vessel-to-shore communications; • on-board installation of ship security alert systems; • the development of vessel security plans; and • compliance with flag state security certification requirements.The U.S. Coast Guard regulations, intended to be aligned with international maritime security standards, exempt non-U.S. vessels from MTSA vesselsecurity measures, provided such vessels have on board a valid International Ship Security Certificate (“ISSC”) that attests to the vessel’s compliance withSOLAS security requirements and the ISPS Code. We will implement the various security measures addressed by the MTSA, SOLAS and the ISPS Code andtake measures for our vessels or vessels that we charter to attain compliance with all applicable security requirements within the prescribed time periods.Although management does not believe these additional requirements will have a material financial impact on our operations, there can be no assurance thatthere will not be an interruption in operations to bring vessels into compliance with the applicable requirements and any such interruption could cause adecrease in charter revenues. Furthermore, additional security measures could be required in the future that could have significant financial impact on us.The cost of vessel security measures has also been affected by the escalation in recent years in the frequency and seriousness of acts of piracy againstships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area. Attacks of this kind have commonly resulted in vessels and theircrews being detained for several months, and being released only on payment of large ransoms. Substantial loss of revenue and other costs may be incurred asa result of such detention. Although we insure against these losses to the extent practicable, the risk remains of uninsured losses which could significantlyaffect our business. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably thosecontained in the BMP3 industry standard. A number of flag states have signed the 2009 New York Declaration, which expresses commitment to BestManagement Practices in relation to piracy and calls for compliance with them as an essential part of compliance with the ISPS Code.Our international activities increase the compliance risks associated with economic and trade sanctions imposed by the United States, the European Unionand other jurisdictions.Our international operations and activities could expose us to risks associated with trade and economic sanctions prohibitions or other restrictionsimposed by the United States or other governments or organizations, including the United Nations, the European Union and its member countries. Undereconomic and trade sanctions laws, governments may seek to impose modifications to, prohibitions/restrictions on business practices and activities, andmodifications to compliance programs, which may increase compliance costs, and, in the event of a violation, may subject us to fines and other penalties. 24Table of ContentsIranDuring the last few years, the scope of sanctions imposed against the government of Iran and persons engaging in certain activities or doing certainbusiness with and relating to Iran was expanded by a number of jurisdictions, including the United States, the European Union and Canada. In 2010, the U.S.enacted the Comprehensive Iran Sanctions Accountability and Divestment Act (“CISADA”), which expanded the scope of the former Iran Sanctions Act. Thescope of U.S. sanctions against Iran were expanded subsequent to CISADA by, among other U.S. laws, the National Defense Authorization Act of 2012 (the“2012 NDAA”), the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), Executive Order 13662, and the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”). The foregoing laws, among other things, expanded the application of prohibitions to non-U.S. companies, such as ourcompany, and introduced limits on the ability of companies and persons to do business or trade with Iran when such activities relate to specific activitiessuch as investment in Iran, the supply or export of refined petroleum or refined petroleum products to Iran, the supply and delivery of goods to Iran whichcould enhance Iran’s petroleum or energy sectors, and the transportation of crude oil from Iran to countries which do not enjoy Iran crude oil sanctionswaivers (our tankers called in Iran but did not engage in the prohibited activities specifically identified by these sanctions). U.S. economic sanctions on Iranfall into two general categories: “Primary” sanctions, which prohibit U.S. companies and their foreign branches, U.S. citizens, U.S. permanent residents,persons within the territory of the United States from engaging in all direct and indirect trade and other transactions with Iran without U.S. governmentauthorization, and “secondary” sanctions, which are mainly nuclear-related sanctions. While most of the nuclear-related sanctions with respect to Iran(including, inter alia, CISADA, ITRA, and IFCA) were lifted on January 16, 2016 through the implementation of the Joint Comprehensive Plan of Action(“JCPOA”) entered into between the permanent members of the United Nations Security Council (China, France, Russia, the United Kingdom and the UnitedStates) and Germany, there are still certain limitations in place with which we need to comply. The primary sanctions with which U.S. persons or transactionswith a U.S. nexus must comply are still in force and have not been lifted or relaxed, except in a very limited fashion. Additionally, the sanctions lifted underthe JCPOA could be reimposed (“snapped back”) at any time if Iran violates the JCPOA.After the lifting of most of the nuclear-related sanctions on January 16, 2016, EU sanctions remain in place in relation to the export of arms andmilitary goods listed in the EU common military list, missiles-related goods and items that might be used for internal repression. The main nuclear-related EUsanctions which remain in place include restrictions on: i.Graphite and certain raw or semi-finished metals such as corrosion-resistant high-grade steel, iron, aluminium and alloys, titanium and alloys andnickel and alloys (as listed in Annex VIIB to EU Regulation 267/2012 as updated by EU Regulation 2015/1861 (the “EU Regulation”); ii.Goods listed in the Nuclear Suppliers Group list (listed in Annex I to the EU Regulation); iii.Goods that could contribute to nuclear-related or other activities inconsistent with the JCPOA (as listed in Annex II to the EU Regulation); and iv.Software designed for use in nuclear/military industries (as listed in Annex VIIA to the EU Regulation).Dealing with the above is no longer prohibited, but prior authorization must be obtained first and is granted on a case-by-case basis. The remainingrestrictions apply to the sale, supply, transfer or export, directly or indirectly to any Iranian person/for use in Iran, as well as the provision of technicalassistance, financing or financial assistance in relation to the restricted activity. Certain individuals and entities remain sanctioned and the prohibition tomake available, directly or indirectly, economic resources or assets to or for the benefit of sanctioned parties remains. “Economic resources” is widely definedand it remains prohibited to provide vessels for a fixture from which a sanctioned party (or parties related to a sanctioned party) directly or indirectly benefits.It is therefore still necessary to carry out due diligence on the parties and cargoes involved in fixtures involving Iran. 25Table of ContentsRussia/UkraineAs a result of the crisis in Ukraine and the annexation of Crimea by Russia in 2014, both the U.S. and EU have implemented sanctions against certainpersons and entities.The EU has imposed travel bans and asset freezes on certain persons and entities pursuant to which it is prohibited to make available, directly orindirectly, economic resources or assets to or for the benefit of the sanctioned parties. Certain Russian ports including Kerch Commercial Seaport; SevastopolCommercial Seaport and Port Feodosia are subject to the above restrictions. Other entities are subject to sectoral sanctions which limit the provision of loansor credit to the listed entities. In addition, various restrictions on trade have been implemented which, amongst others, include a prohibition on the importinto the EU of goods originating in Crimea or Sevastopol as well as restrictions on trade in certain dual-use and military items and restrictions in relation tovarious items of technology associated with the oil industry for use in deep water exploration and production, Arctic oil exploration and production or shaleoil projects in Russia. As such, it is important to carry out due diligence on the parties and cargoes involved in fixtures relating to Russia.The U.S. has imposed sanctions against certain designated Russian entities and individuals (“U.S. Russian Sanctions Targets”). These sanctions blockthe property and all interests in property of the U.S. Russian Sanctions Targets. This effectively prohibits U.S. persons from engaging in any economic orcommercial transactions with the U.S. Russian Sanctions Targets unless the same are authorized by the U.S. Treasury Department. Similar to EU sanctions,U.S. sanctions also entail restrictions on certain exports from the United States to Russia. While the prohibitions of these sanctions are not directly applicableto us, we have compliance measures in place to guard against transactions with U.S. Russian Sanctions Targets which may involve the United States or U.S.persons and thus implicate prohibitions. The United States also maintains prohibitions on imports from Crimea, and it has also tightened restrictions onexports of certain goods and technology to Russia.Other U.S. Economic Sanctions TargetsIn addition to Iran and certain Russian entities and individuals, as indicated above, the United States maintains economic sanctions against Syria,Sudan, Cuba, North Korea, and sanctions against entities and individuals (such as entities and individuals in the foregoing targeted countries, designatedterrorists, narcotics traffickers) whose names appear on the List of SDNs and Blocked Persons maintained by the U.S. Treasury Department (collectively,“Sanctions Targets”). We are subject to the prohibitions of these sanctions to the extent that any transaction or activity we engage in involves SanctionsTargets and a U.S. person or otherwise has a nexus to the United States.Other E.U. Economic Sanctions TargetsThe EU also maintains sanctions against Syria, Sudan, North Korea and certain other countries and against individuals listed by the EU. Theserestrictions apply to our operations and as such, to the extent that these countries may be involved in any business it is important to carry out checks toensure compliance with all relevant restrictions and to carry out due diligence checks on counterparties and cargoes.ComplianceAlthough we believe that we are in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain suchcompliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subjectto changing interpretations, and the law may change. Moreover, despite, for example, relevant provisions in charter parties forbidding the use of our vesselsin trade that would violate economic sanctions, our charterers may nevertheless violate applicable sanctions and embargo laws and regulations as a result ofactions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation and be imputed to us. In addition, 26Table of Contentsgiven our relationship with Navios Midstream and Navios Holdings, we cannot give any assurance that an adverse finding against Navios Midstream orNavios Holdings by a governmental or legal authority or others with respect to the matters discussed herein or any future matter related to regulatorycompliance by Navios Midstream, Navios Holdings or ourselves will not have a material adverse impact on our business, reputation or the market price ortrading of our common stock.We are constantly monitoring developments in the United States, the European Union and other jurisdictions that maintain economic sanctions againstIran, other countries, and other sanctions targets, including developments in implementation and enforcement of such sanctions programs. Expansion ofsanctions programs, embargoes and other restrictions in the future (including additional designations of countries and persons subject to sanctions), ormodifications in how existing sanctions are interpreted or enforced, could prevent our vessels from calling in ports in sanctioned countries or could limittheir cargoes. If any of the risks described above materialize, it could have a material adverse impact on our business and results of operations.To reduce the risk of violating economic sanctions, we have a policy of compliance with applicable economic sanctions laws and have implementedand continue to implement and diligently follow compliance procedures to avoid economic sanctions violations.We could be materially adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and anti-corruption laws in otherapplicable jurisdictions.As an international shipping company, we may operate in countries known to have a reputation for corruption. The U.S. Foreign Corrupt Practices Actof 1977 (the “FCPA”) and other anti-corruption laws and regulations in applicable jurisdictions generally prohibit companies registered with the SEC andtheir intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Under the FCPA, U.S.companies may be held liable for some actions taken by strategic or local partners or representatives. Legislation in other countries includes the U.K. BriberyAct of 2010 (the “U.K. Bribery Act”) which is broader in scope than the FCPA because it does not contain an exception for facilitation payments. We and ourcustomers may be subject to these and similar anti-corruption laws in other applicable jurisdictions. Failure to comply with legal requirements could exposeus to civil and/or criminal penalties, including fines, prosecution and significant reputational damage, all of which could materially and adversely affect ourbusiness and results of operations, including our relationships with our customers, and our financial results. Compliance with the FCPA, the U.K. Bribery Actand other applicable anti-corruption laws and related regulations and policies imposes potentially significant costs and operational burdens on us. Moreover,the compliance and monitoring mechanisms that we have in place including our Code of Ethics and our anti-bribery and anti-corruption policy, may notadequately prevent or detect all possible violations under applicable anti-bribery and anti-corruption legislation. However, we believe that the procedures wehave in place to prevent bribery are adequate and that they should provide a defense in most circumstances to a violation or a mitigation of applicablepenalties, at least under the U.K. Bribery Act.Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.International shipping is subject to various security and customs inspections and related procedures in countries of origin and destination. Inspectionprocedures can result in the seizure of contents of vessels, delays in the loading, offloading or delivery and the levying of customs, duties, fines and otherpenalties.It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Furthermore, changes to inspectionprocedures could also impose additional costs and obligations on our future customers and may, in certain cases, render the shipment of certain types of cargoimpractical. Any such changes or developments may have a material adverse effect on our business, financial condition, and results of operations. 27Table of ContentsA failure to pass inspection by classification societies could result in our vessels becoming unemployable unless and until they pass inspection, resulting ina loss of revenues from such vessels for that period and a corresponding decrease in operating cash flows.The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classificationsociety certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and withSOLAS. A vessel must undergo an annual survey, an intermediate survey and a special survey. In lieu of a special survey, a vessel’s machinery may be on acontinuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be drydockedevery two to three years for inspection of the underwater parts of such vessel. If any of our vessels fail any annual survey, intermediate survey, or specialsurvey, the vessel may be unable to trade between ports and, therefore, would be unemployable, potentially causing a negative impact on our revenues due tothe loss of revenues from such vessel until it was able to trade again.We are subject to inherent operational risks that may not be adequately covered by our insurance.The operation of ocean-going vessels in international trade is inherently risky. Although we carry insurance for our fleet against risks commonlyinsured against by vessel owners and operators, including hull and machinery insurance, war risks insurance and protection and indemnity insurance (whichinclude environmental damage and pollution insurance), all risks may not be adequately insured against, and any particular claim may not be paid. We donot currently maintain off-hire insurance, which would cover the loss of revenue during extended vessel off-hire periods, such as those that occur during anunscheduled drydocking due to damage to the vessel from accidents. Other events that may lead to off-hire periods include natural or man-made disasters thatresult in the closure of certain waterways and prevent vessels from entering or leaving certain ports. Accordingly, any extended vessel off-hire, due to anaccident or otherwise, could have a material adverse effect on our business. Any claims covered by insurance would be subject to deductibles, and since it ispossible that a large number of claims may be brought, the aggregate amount of these deductibles could be material.We may be unable to procure adequate insurance coverage at commercially reasonable rates in the future. For example, more stringent environmentalregulations have led in the past to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmentaldamage or pollution. A catastrophic oil spill or marine disaster could exceed our insurance coverage, which could harm our business, financial condition andoperating results. Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance more difficult for us to obtain. Inaddition, the insurance that may be available to us may be significantly more expensive than our existing coverage. We do not carry strike insurance.Even if our insurance coverage is adequate to cover our losses, we may not be able to timely obtain a replacement vessel in the event of a loss.Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our fleet. Our insurance policies also containdeductibles, limitations and exclusions which can result in significant increased overall costs to us.The operation of ocean-going vessels entails the possibility of marine disasters, including damage or destruction of a vessel due to accident, the loss of avessel due to piracy, terrorism or political conflict, damage or destruction of cargo and similar events that are inherent operational risks of the tankerindustry and may cause a loss of revenue from affected vessels and damage to our business reputation and condition, which may in turn lead to loss ofbusiness.The operation of ocean-going vessels entails certain inherent risks that may adversely affect our business and reputation. Our vessels and their cargoesare at risk of being damaged or lost due to events such as: • damage or destruction of a vessel due to marine disaster such as a collision; • the loss of a vessel due to piracy and terrorism; 28Table of Contents • cargo and property losses or damage as a result of the foregoing or less drastic causes such as human error, mechanical failure and bad weather; • environmental accidents as a result of the foregoing; • business interruptions and delivery delays caused by mechanical failure, human error, acts of piracy, war, terrorism, political action in variouscountries, labor strikes, potential government expropriation of our vessels or adverse weather conditions; and • other events and circumstances.In addition, increased operational risks arise as a consequence of the complex nature of the crude oil, product and chemical tanker industry, the natureof services required to support the industry, including maintenance and repair services, and the mechanical complexity of the tankers themselves. Comparedto other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision or other cause, due tothe high flammability and high volume of the oil transported in tankers. Damage and loss could also arise as a consequence of a failure in the servicesrequired to support the industry, for example, due to inadequate dredging. Inherent risks also arise due to the nature of the product transported by our vessels.Any damage to, or accident involving, our vessels while carrying crude oil could give rise to environmental damage or lead to other adverse consequences.Each of these inherent risks may also result in death or injury to persons, loss of revenues or property, higher insurance rates, damage to our customerrelationships, delay or rerouting.Any of these circumstances or events could substantially increase our costs. For example, the costs of replacing a vessel or cleaning up environmentaldamage could substantially lower our revenues by taking vessels out of operation permanently or for periods of time. Furthermore, the involvement of ourvessels in a disaster or delays in delivery, damage or the loss of cargo may harm our reputation as a safe and reliable vessel operator and cause us to losebusiness. Our vessels could be arrested by maritime claimants, which could result in the interruption of business and decrease revenue and lower profitability.Some of these inherent risks could result in significant damage, such as marine disaster or environmental incidents, and any resulting legal proceedingsmay be complex, lengthy, costly and, if decided against us, any of these proceedings or other proceedings involving similar claims or claims for substantialdamages may harm our reputation and have a material adverse effect on our business, results of operations, cash flow and financial position. In addition, thelegal systems and law enforcement mechanisms in certain countries in which we operate may expose us to risk and uncertainty. Further, we may be requiredto devote substantial time and cost defending these proceedings, which could divert attention from management of our business. Crew members, tortclaimants, claimants for breach of certain maritime contracts, vessel mortgagees, suppliers of goods and services to a vessel, shippers of cargo and otherpersons may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages, and in many circumstances a maritime lien holder mayenforce its lien by “arresting” a vessel through court processes. Additionally, in certain jurisdictions, such as South Africa, under the “sister ship” theory ofliability, a claimant may arrest not only the vessel with respect to which the claimant’s lien has arisen, but also any “associated” vessel owned or controlledby the legal or beneficial owner of that vessel. If any vessel ultimately owned and operated by us is “arrested,” this could result in a material loss of revenues,or require us to pay substantial amounts to have the “arrest” lifted.Any of these factors may have a material adverse effect on our business, financial conditions and results of operations.The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.We expect that our vessels will call in ports in South America and other areas where smugglers attempt to hide drugs and other contraband on vessels,with or without the knowledge of crew members. To the extent our 29Table of Contentsvessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we mayface governmental or other regulatory claims which could have an adverse effect on our business, results of operations, cash flows and financial condition.Acts of piracy on ocean-going vessels have increased in frequency and magnitude, which could adversely affect our business.The shipping industry has historically been affected by acts of piracy in regions such as the South China Sea, the Indian Ocean, the Gulf of Aden offthe coast of Somalia and the Red Sea. Although the frequency of sea piracy worldwide has decreased in recent years, sea piracy incidents continue to occur,particularly in the Gulf of Aden and towards the Mozambique Channel in the North Indian Ocean and increasingly in the Gulf of Guinea. A significantexample of the heightened level of piracy came in February 2011 when the M/V Irene SL, a crude oil tanker in the Arabian Sea which was not affiliated withus, was captured by pirates in the Arabian Sea while carrying crude oil estimated to be worth approximately $200 million. In December 2009, the NaviosApollon, a vessel owned by Navios Maritime Partners L.P. (“Navios Partners”), was seized by pirates 800 miles off the coast of Somalia while transportingfertilizer from Tampa, Florida to Rozi, India and was released on February 27, 2010. In January 2014, the Nave Atropos, a vessel owned by us, came underattack from a pirate action group in international waters off the coast of Yemen and in February 2016, the Nave Jupiter, a vessel also owned by us, came underattack from pirate action groups on her way out from her loading terminal about 50 nautical miles off Bayelsa, Nigeria. In both instances, the crew and theon-board security team successfully implemented the counter piracy action plan and standard operating procedures to deter the attack with no consequencesto the vessels or their crew. These piracy attacks have resulted in regions (in which our vessels are deployed) being characterized by insurers as “war risk”zones or Joint War Committee “war and strikes” listed areas. Premiums payable for insurance coverage could increase significantly and insurance coveragemay be more difficult to obtain. Crew costs, including those due to employing onboard security guards, could increase in such circumstances. While the useof security guards is intended to deter and prevent the hijacking of our vessels, it could also increase our risk of liability for death or injury to persons ordamage to personal property. In addition, while we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterermay dispute this and withhold charter hire until the vessel is released. A charterer may also claim that a vessel seized by pirates was not “on-hire” for a certainnumber of days and it is therefore entitled to cancel the charter party, a claim that we would dispute. We may not be adequately insured to cover losses fromthese incidents, which could have a material adverse effect on us. In addition, detention hijacking as a result of an act of piracy against our vessels, anincrease in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition, results of operationsand cash flows. Acts of piracy on ocean-going vessels could adversely affect our business and operations.Political and government instability, terrorist attacks, increased hostilities or war could lead to further economic instability, increased costs anddisruption of our business.We conduct most of our operations outside of the United States. In particular, we derive our revenues from shipping oil and oil products frompolitically unstable regions and our business, results of operations, cash flows, financial condition and ability to make cash distributions may be adverselyaffected by the effects of political instability, terrorist or other attacks, war or international hostilities. Terrorist attacks, such as the attacks in the UnitedStates on September 11, 2001, the attacks in London on July 7, 2005, in Paris on January 7, 2015 and November 13, 2015, and the bombings in Spain onMarch 11, 2004, along with the recent conflicts in Iraq, Afghanistan, Syria, Yemen, Ukraine and other current and future conflicts, and the continuingresponse of the United States and other countries to these attacks, as well as the threat of future terrorist attacks, continue to cause uncertainty in the worldfinancial markets, including the energy markets. Continuing hostilities in the Middle East may lead to additional armed conflicts or to further acts ofterrorism and civil disturbance in the United States or elsewhere, which could result in increased volatility and turmoil in the financial markets and maycontribute further to economic instability. Current and future conflicts and terrorist attacks may adversely affect our business, operating results, financialcondition, ability to raise capital and future growth. Terrorist 30Table of Contentsattacks on vessels, such as the October 2002 attack on the M/V Limburg, a VLCC not related to us, may in the future also negatively affect our operations andfinancial condition and directly impact our vessels or our customers.In addition, oil facilities, shipyards, vessels, pipelines and oil and gas fields could be targets of future terrorist attacks. Any such attacks could lead to,among other things, bodily injury or loss of life, vessel or other property damage, increased vessel operational costs, including insurance costs, and theinability to transport oil and other refined products to or from certain locations. Terrorist attacks, war or other events beyond our control that adversely affectthe distribution, production or transportation of oil and other refined products to be shipped by us could entitle our customers to terminate our chartercontracts, which would harm our cash flow and our business.Furthermore, our operations may be adversely affected by changing or adverse political and governmental conditions in the countries where ourvessels are flagged or registered and in the regions where we otherwise engage in business. Any disruption caused by these factors may interfere with theoperation of our vessels, which could harm our business, financial condition and results of operations. Our operations may also be adversely affected byexpropriation of vessels, taxes, regulation, tariffs, trade embargoes, economic sanctions or a disruption of or limit to trading activities, or other adverse eventsor circumstances in or affecting the countries and regions where we operate or where we may operate in the future.Governments could requisition vessels of a target business during a period of war or emergency, resulting in a loss of earnings.A government could requisition a business’ vessels for title or hire. Requisition for title occurs when a government takes control of a vessel andbecomes her owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes her charterer at dictated charterrates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances.Requisition of one or more of our vessels would have a substantial negative effect on us as we would potentially lose all revenues and earnings from therequisitioned vessels and permanently lose the vessels. Such losses might be partially offset if the requisitioning government compensated us for therequisition, although the amount and timing of payment would be uncertain.Disruptions in world financial markets and the resulting governmental action in Europe, the United States and in other parts of the world could have amaterial adverse impact on our ability to obtain financing required to acquire vessels or new businesses. Furthermore, such a disruption would materiallyadversely affect our results of operations, financial condition and cash flows.Global financial markets and economic conditions have been severely disrupted and volatile in recent years and remain subject to significantvulnerabilities, such as the deterioration of fiscal balances and the rapid accumulation of public debt, continued deleveraging in the banking sector and alimited supply of credit. The renewed crisis in Argentina, civil unrest in Ukraine and other parts of the world, and continuing concerns relating to theEuropean sovereign debt crisis have led to increased volatility in global credit and equity markets. Several European countries, including Greece, have beenaffected by increasing public debt burdens and weakening economic growth prospects. In recent years, Standard and Poor’s Rating Services and Moody’sInvestors Service downgraded the long-term ratings of most European countries’ sovereign debt and initiated negative outlooks. Such downgrades couldnegatively affect those countries’ ability to access the public debt markets at reasonable rates or at all, materially affecting the financial conditions of banksin those countries, including those with which we maintain cash deposits and equivalents, or on which we rely on to finance our vessel and new businessacquisitions.Cash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event of non-performance by financial institutions. We maintain cash deposits and 31Table of Contentsequivalents in excess of government-provided insurance limits at banks in Greece and other European banks, which may expose us to a loss of cash depositsor cash equivalents.The credit markets worldwide and in the U.S. have experienced significant contraction, de-leveraging and reduced liquidity, and the U.S. federalgovernment, state governments and foreign governments took highly significant measures in response to such events, including the enactment of theEmergency Economic Stabilization Act of 2008 in the United States, and may implement other significant responses in the future. Additionally, uncertaintyregarding tax policy and government spending in the United States have created an uncertain environment which could reduce demand for our services.Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements. The Securities and ExchangeCommission (the “SEC”), other regulators, self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of marketemergencies, and may effect changes in law or interpretations of existing laws. Any changes to securities, tax, environmental, or other laws or regulations,could have a material adverse effect on our results of operations, financial condition or cash flows, and could cause the market price of our common stock todecline.Recently, a number of financial institutions have experienced serious financial difficulties and, in some cases, have entered bankruptcy proceedings orare in regulatory enforcement actions. These difficulties resulted, in part, from declining markets for assets held by such institutions, particularly thereduction in the value of their mortgage and asset-backed securities portfolios. These difficulties were compounded by financial turmoil affecting the world’sdebt, credit and capital markets, and the general decline in the willingness by banks and other financial institutions to extend credit, particularly to theshipping industry due to the historically low vessel earnings and values, and, in part, due to changes in overall banking regulations (for example, Basel III).As a result, the ability of banks and credit institutions to finance new projects, including the acquisition of new vessels in the future, were for a timeuncertain. Following the stress tests run by the European Central Bank (the “ECB”), revised capital ratios have been communicated to European banks. Thishas reduced the uncertainty following the difficulties of the past several years, but it has also led to changes in each bank’s lending policies and ability toprovide financing or refinancing. A recurrence of global economic weakness may adversely affect the financial institutions that provide our credit facilitiesand may impair their ability to continue to perform under their financing obligations to us, which could have an impact on our ability to fund current andfuture obligations.Furthermore, we may experience difficulties obtaining financing commitments, including commitments to refinance our existing debt as balloonpayments come due under our credit facilities, in the future if lenders are unwilling to extend financing to us or unable to meet their funding obligations dueto their own liquidity, capital or solvency issues. Due to the fact that we would possibly cover all or a portion of the cost of any new vessel acquisition withdebt financing, such uncertainty, combined with restrictions imposed by our current debt, could hamper our ability to finance vessels or new businessacquisitions.In addition, the economic uncertainty worldwide has markedly reduced demand for shipping services and has decreased shipping rates, which mayadversely affect our results of operations and financial condition. Currently, the economies of China, Japan, other Pacific Asian countries and India are themain driving force behind the development in seaborne transportation. Reduced demand from such economies has in the past driven decreased rates andvessel values and could do so in the future.In addition, as a result of the ongoing political and economic turmoil in Greece resulting from the sovereign debt crisis and the related austeritymeasures implemented by the Greek government, the operations of our managers located in Greece may be subjected to new regulations and potential shift ingovernment policies that may require us to incur new or additional compliance or other administrative costs and may require that we pay to the Greekgovernment new taxes or other fees. We also face the risk that strikes, work stoppages, civil unrest and violence within Greece may disrupt the shoresideoperations of our managers located in Greece.We could face risks attendant to changes in economic environments, changes in interest rates, tax policies, and instability in certain securities markets,among other factors. Major market disruptions and the uncertainty in 32Table of Contentsmarket conditions and the regulatory climate in the U.S., Europe and worldwide could adversely affect our business or impair our ability to borrow amountsunder any future financial arrangements. The current market conditions may last longer than we anticipate. These recent and developing economic andgovernmental factors could have a material adverse effect on our results of operations, financial condition or cash flows.Because international tank companies often generate most or all of their revenues in U.S. dollars but incur a portion of their expenses in other currencies,exchange rate fluctuations could cause us to suffer exchange rate losses, thereby increasing expenses and reducing income.We engage in worldwide commerce with a variety of entities. Although our operations may expose us to certain levels of foreign currency risk, ourtransactions are predominantly U.S. dollar-denominated. Transactions in currencies other than the functional currency are translated at the exchange rate ineffect at the date of each transaction. Expenses incurred in foreign currencies against which the U.S. dollar falls in value can increase, decreasing our income.A greater percentage of our transactions and expenses in the future may be denominated in currencies other than the U.S. dollar. As part of our overall riskmanagement policy, we will attempt to hedge these risks in exchange rate fluctuations from time to time. We may not always be successful in such hedgingactivities and, as a result, our operating results could suffer as a result of un-hedged losses incurred as a result of exchange rate fluctuations. For example, as ofDecember 31, 2016, the value of the U.S. dollar as compared to the Euro increased by approximately 3.6% compared with the respective value as ofDecember 31, 2015. A greater percentage of our transactions and expenses in the future may be denominated in currencies other than the U.S. dollar.Labor interruptions and problems could disrupt our business.Certain of our vessels are manned by masters, officers and crews that are employed by third parties. If not resolved in a timely and cost-effectivemanner, industrial action or other labor unrest could prevent or hinder our operations from being carried out normally and could have a material adverseeffect on our business, results of operations, cash flow and financial condition.Risks Relating to Our VLCC VesselsThe indemnity may be inadequate to cover any damages.The Securities Purchase Agreement for the VLCC vessels acquired through the VLCC Acquisition has a cap on indemnity obligations, subject tocertain exceptions, of $58.7 million. Although we performed substantial due diligence with respect to the VLCC Acquisition, there can be no assurance thatthere will not be undisclosed liabilities or other matters not discovered in the course of such due diligence and the $58.7 million indemnity may beinadequate to cover these or other damages related to breaches of such agreement. In addition, since the return to Navios Acquisition of 217,159 shares onNovember 4, 2011 in settlement of claims relating to representation and warranties attributable to the sellers and the return of the balance of the escrow sharesto the sellers, it may be difficult to enforce an arbitration award for any amount of damages.Risks Related to Our Relationship with Navios Holdings and Its AffiliatesNavios Holdings has limited experience in the crude oil, product and chemical tanker sectors.Navios Tankers Management Inc. (the “Manager”), a wholly owned subsidiary of Navios Holdings, oversees the commercial and administrativemanagement of our entire fleet and the technical management of a portion of our fleet. Navios Holdings is a vertically-integrated seaborne shipping andlogistics company with 60 years of operating history in the shipping industry that held approximately 43.0% of our shares of common stock as of April 4,2017. Other than with respect to South American operations, Navios Holdings’ experience in the crude oil, chemical and product tanker sectors dates to 2010.Navios Holdings or the Manager may make decisions that a more experienced operator in the sector might not make. If Navios Holdings or the Manager isnot able to properly assess or ascertain a particular aspect of the crude oil, product or chemical tanker sectors, it could have a material adverse effect on ouroperations. 33Table of ContentsNavios Holdings may compete directly with us, causing certain officers to have a conflict of interest.Angeliki Frangou is an officer and director of Navios Holdings, Navios Midstream, Navios Partners and Navios Acquisition. We operate in the crudeoil, product and chemical tanker sectors of the shipping industry, and although Navios Holdings does not currently have any significant exposure in thosesectors, there is no assurance it will not enter them. If it does, we may compete directly with Navios Holdings for business opportunities.Navios Holdings, Navios Partners, Navios Midstream and Navios Acquisition share certain officers and directors who may not be able to devote sufficienttime to our affairs, which may affect our ability to conduct operations and generate revenues.Angeliki Frangou is an officer and director of Navios Holdings, Navios Midstream and Navios Acquisition, and Ms. Frangou is an officer and directorof Navios Partners. As a result, demands for our officers’ time and attention as required from Navios Acquisition, Navios Partners, Navios Midstream andNavios Holdings may conflict from time to time and her limited devotion of time and attention to our business may hurt the operation of our business.The loss of key members of our senior management team could disrupt the management of our business.We believe that our success depends on the continued contributions of the members of our senior management team, including Angeliki Frangou, ourChairman and Chief Executive Officer. The loss of the services of Ms. Frangou or one of our other executive officers or senior management members couldimpair our ability to identify and secure new charter contracts, to maintain good customer relations and to otherwise manage our business, which could havea material adverse effect on our financial performance and our ability to compete.We are dependent on a subsidiary of Navios Holdings for the commercial and administrative management of our fleet and the technical management of aportion of our fleet, which may create conflicts of interest.As we subcontract the technical and commercial management of our fleet, including crewing, maintenance and repair, to the Manager, and on aninterim basis to other third party managers, the loss of these services or the failure of the Manager to perform these services could materially and adverselyaffect the results of our operations. Although we may have rights against the Manager if it defaults on its obligations to us, you will have no recourse directlyagainst it. Further, we expect that we will need to seek approval from our respective lenders to change our commercial and technical managers. NaviosHoldings has responsibilities and relationships to owners other than Navios Acquisition that could create conflicts of interest between us and NaviosHoldings or the Manager. These conflicts may arise in connection with the provision of chartering services to us for our fleet versus carriers managed byNavios Holdings’ subsidiaries or other companies affiliated with Navios Holdings.Navios Holdings, our affiliate and a greater than 5% holder of our common stock, Angeliki Frangou, our Chairman and Chief Executive Officer, andcertain of our officers and directors collectively own a substantial interest in us, and, as a result, may influence certain actions requiring stockholder vote.As of April 4, 2017, Navios Holdings, Angeliki Frangou, our Chairman and Chief Executive Officer, and certain of our officers and directorsbeneficially own, in the aggregate, 46.8% of our issued and outstanding shares of common stock, which permits them to influence the outcome of effectivelyall matters requiring approval by our stockholders at such time, including the election of directors and approval of significant corporate transactions.Furthermore, if Navios Holdings and Ms. Frangou or an affiliate ceases to hold a minimum of 30% of our common stock, then we will be in default under ourcredit facilities. 34Table of ContentsRisks Related to Our Common Stock and Capital StructureWe are incorporated in the Republic of the Marshall Islands, a country that does not have a well-developed body of corporate law, which may negativelyaffect the ability of public stockholders to protect their interests.Our corporate affairs are governed by our amended and restated articles of incorporation and bylaws, and by the Marshall Islands BusinessCorporations Act (the “BCA”). The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However,there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors underthe law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicialprecedent in existence in certain United States jurisdictions. Stockholder rights may differ as well. While the BCA does specifically incorporate thenon-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, public stockholders mayhave more difficulty in protecting their interests in the face of actions by the management, directors or controlling stockholders than would stockholders of acorporation incorporated in a United States jurisdiction.We are incorporated under the laws of the Marshall Islands and our directors and officers are non-U.S. residents, and although you may bring an originalaction in the courts of the Marshall Islands or obtain a judgment against us, our directors or our management based on U.S. laws in the event you believeyour rights as a stockholder have been infringed, it may be difficult to enforce judgments against us, our directors or our management.We are incorporated under the laws of the Republic of the Marshall Islands and all of our assets are located outside of the United States. Our businesswill be operated primarily from our offices in Monte Carlo, Monaco. In addition, our directors and officers are non-residents of the United States, and all or asubstantial portion of the assets of these nonresidents are located outside the United States. As a result, it may be difficult or impossible for you to bring anaction against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Evenif you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict you from enforcing ajudgment against our assets or the assets of our directors and officers. Although you may bring an original action against us or our affiliates in the courts ofthe Marshall Islands based on U.S. laws, and the courts of the Marshall Islands may impose civil liability, including monetary damages, against us or ouraffiliates for a cause of action arising under Marshall Islands law, it may impracticable for you to do so given the geographic location of the Marshall Islands.Since we are a foreign private issuer, we are not subject to certain SEC regulations that companies incorporated in the United States would be subject to.We are a “foreign private issuer” within the meaning of the rules promulgated under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”). As such, we are exempt from certain provisions applicable to United States public companies including: • the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; • the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under theExchange Act; • the provisions of Regulation FD of the Exchange Act aimed at preventing issuers from making selective disclosures of material information; and • the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insiderliability for profits realized from any “short-swing” trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer’s equitysecurities within less than six months). 35Table of ContentsAccordingly, investors in our common stock may not be able to obtain all of the information of the type described above, and our stockholders maynot be afforded the same protections or information generally available to investors holding shares in public companies in the United States.Anti-takeover provisions in our amended and restated articles of incorporation could make it difficult for our stockholders to replace or remove ourcurrent board of directors or could have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the marketprice of our common stock.Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our stockholders to change thecomposition of our board of directors in any one year, preventing them from changing the composition of our management. In addition, the same provisionsmay discourage, delay or prevent a merger or acquisition that stockholders may consider favorable. These provisions include those that: • authorize our board of directors to issue “blank check” preferred stock without stockholder approval; • provide for a classified board of directors with staggered, three-year terms; • require a super-majority vote in order to amend the provisions regarding our classified board of directors with staggered, three-year terms; and • prohibit cumulative voting in the election of directors.These anti-takeover provisions could substantially impede the ability of stockholders to benefit from a change in control and, as a result, mayadversely affect the market price of our common stock and your ability to realize any potential change of control premium.Registration rights held by our initial stockholders and others may have an adverse effect on the market price of our common stock.Certain stockholders, which include Navios Holdings and certain members of the management of Navios Acquisition, Navios Holdings and NaviosPartners, are entitled to demand that we register the resale of their common stock totaling 67,320,507 shares. In addition, one third-party holder has aneffective resale registration statement with respect to 1,677,759 shares of common stock. If all of these stockholders exercise their registration rights withrespect to all of their shares of common stock, including the effective resale registration statement, there will be an additional 68,998,266 shares of commonstock eligible for trading in the public market. The presence of these additional shares may have an adverse effect on the market price of our common stock.The New York Stock Exchange may delist our securities from quotation on its exchange, which could limit your ability to trade our securities and subjectus to additional trading restrictions.Our securities are listed on the New York Stock Exchange (the “NYSE”), a national securities exchange. Although we currently satisfy the NYSEminimum listing standards, which only requires that we meet certain requirements relating to stockholders’ equity, number of round-lot holders, marketcapitalization, aggregate market value of publicly held shares and distribution requirements, we cannot assure you that our securities will continue to belisted on NYSE in the future.If NYSE delists our securities from trading on its exchange, we could face significant material adverse consequences, including: • a limited availability of market quotations for our securities; • a limited amount of news and analyst coverage for us; • a decreased ability for us to issue additional securities or obtain additional financing in the future; 36Table of Contents • limited liquidity for our stockholders due to thin trading; and • loss of our tax exemption under Section 883 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), loss of preferential capitalgain tax rates for certain dividends received by certain non-corporate U.S. holders and loss of “mark-to-market” election by U.S. holders in theevent we are treated as a passive foreign investment company (“PFIC”).Risks Related to Our IndebtednessWe have substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect our financial health and our ability toobtain financing in the future, react to changes in our business and make debt service payments.We have substantial indebtedness, and we may also increase the amount of our indebtedness in the future. The terms of our credit facilities and otherinstruments and agreements governing our indebtedness do not prohibit us from doing so. Our substantial indebtedness could have important consequencesfor our stockholders.Because of our substantial indebtedness: • our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, vessel or other acquisitions orgeneral corporate purposes may be impaired in the future; • if new debt is added to our debt levels after the vessel acquisition, the related risks that we now face would increase and we may not be able tomeet all of our debt obligations; • a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, therebyreducing the funds available to us for other purposes, and there can be no assurance that our operations will generate sufficient cash flow toservice this indebtedness; • we will be exposed to the risk of increased interest rates because our borrowings under the credit facilities will be at variable rates of interest; • it may be more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; • we may be at a competitive disadvantage compared to our competitors with less debt or comparable debt at more favorable interest rates and, as aresult, we may not be better positioned to withstand economic downturns; • our ability to refinance indebtedness may be limited or the associated costs may increase; and • our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited, or we may be preventedfrom carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business.Highly leveraged companies are significantly more vulnerable to unanticipated downturns and setbacks, whether directly related to their business orflowing from a general economic or industry condition, and therefore are more vulnerable to a business failure or bankruptcy.The agreements and instruments governing our indebtedness and other obligations do or will contain restrictions, limitations and obligations that couldsignificantly impact our ability to operate our business and adversely affect our stockholders.The agreements and instruments governing our indebtedness and other commitments we enter into, including certain credit lines to our affiliates,impose certain operating and financial restrictions on us. 37Table of ContentsAmong other restrictions, these restrictions and our other obligations and commitments may limit our ability to: • incur or guarantee additional indebtedness or issue certain preferred stock; • create liens on our assets; • make investments; • engage in mergers and acquisitions or sell all or substantially all of our properties or assets; • redeem or repurchase capital stock, pay dividends or make other restricted payments and investments; • make capital expenditures; • change the management of our vessels or terminate the management agreements we have relating to our vessels; • enter into long-term charter arrangements without the consent of the lender; • transfer or sell any of our vessels; • enter into certain transactions with our affiliates; and • reduce our cash available for growth and other purposes.Therefore, we will need to seek permission from our lenders in order to engage in some corporate and commercial actions that we believe would be inthe best interest of our business, and a denial of permission may make it difficult for us to successfully execute our business strategy or effectively competewith companies that are not similarly restricted. Our lenders’ interests may be different from our interests, and we cannot guarantee that we will be able toobtain our lenders’ permission when needed. This may prevent us from taking actions that are in our best interest. Any future credit agreement may includesimilar or more restrictive restrictions.Additionally, we have entered into an agreement with Navios Holdings, pursuant to which we have provided Navios Holdings with a credit facility ofup to $70.0 million. As of December 31, 2016, the amount drawn under this facility was $50.0 million. The draw downs on the facility will limit the fundsavailable for other purposes.Our credit facilities contain requirements that the value of the collateral provided pursuant to the credit facilities must equal or exceed by a certainpercentage the amount of outstanding borrowings under the credit facilities and that we maintain a minimum liquidity level. In addition, our credit facilitiescontain additional restrictive covenants, including a minimum net worth requirement and maximum total net liabilities over net assets requirement. It is anevent of default under our credit facilities if such covenants are not complied with or if Navios Holdings, Ms. Angeliki Frangou, our Chairman and ChiefExecutive Officer, and their respective affiliates cease to hold a minimum percentage of our issued stock. In addition, the indenture governing the notes alsocontains certain provisions obligating us in certain instances to make offers to purchase outstanding notes with the net proceeds of certain sales or otherdispositions of assets or upon the occurrence of an event of loss with respect to a mortgaged vessel, as defined in the indenture. Our ability to comply with thecovenants and restrictions contained in our agreements and instruments governing our indebtedness may be affected by economic, financial and industryconditions and other factors beyond our control. If we are unable to comply with these covenants and restrictions, our indebtedness could be accelerated. Ifwe are unable to repay indebtedness, our lenders could proceed against the collateral securing that indebtedness. In any such case, we may be unable toborrow under our credit facilities and may not be able to repay the amounts due under our agreements and instruments governing our indebtedness. Thiscould have serious consequences on our financial condition and results of operations and could cause us to become bankrupt or insolvent. Our ability tocomply with these covenants in future periods will also depend substantially on the value of our assets, our charter rates, our success at keeping our costs lowand our ability to successfully implement our overall business strategy. Any future credit agreement or amendment or debt instrument may contain similar ormore restrictive covenants. 38Table of ContentsOur ability to generate the significant amount of cash needed to service our other indebtedness and our ability to refinance all or a portion of ourindebtedness or obtain additional financing depends on many factors beyond our control.Our ability to make scheduled payments on or to refinance our obligations under, our indebtedness will depend on our financial and operatingperformance, which, in turn, will be subject to prevailing economic and competitive conditions and to financial and business factors, many of which may bebeyond our control.We will use cash to pay the principal and interest on our indebtedness. These payments limit funds otherwise available for working capital, capitalexpenditures, vessel acquisitions and other purposes. As a result of these obligations, our current liabilities may exceed our current assets. We may need totake on additional indebtedness as we expand our fleet, which could increase our ratio of indebtedness to equity. The need to service our indebtedness maylimit funds available for other purposes and our inability to service indebtedness in the future could lead to acceleration of our indebtedness and foreclosureon our owned vessels.Our credit facilities mature on various dates through 2022 and our ship mortgage notes mature on November 15, 2021. In addition, borrowings undercertain of the credit facilities have amortization requirements prior to final maturity. We cannot assure you that we will be able to refinance any of ourindebtedness or obtain additional financing, particularly because of our anticipated high levels of indebtedness and the indebtedness incurrence restrictionsimposed by the agreements governing our indebtedness, as well as prevailing market conditions.We could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our indebtedness service andother obligations. Our credit facilities, the indenture governing our notes and any future indebtedness may restrict our ability to dispose of assets and use theproceeds from any such dispositions. If we do not reinvest the proceeds of asset sales in our business (in the case of asset sales of no collateral with respect tosuch indebtedness) or in new vessels or other related assets that are mortgaged in favor of the lenders under our credit facilities (in the case of assets sales ofcollateral securing), we may be required to use the proceeds to repurchase senior indebtedness. We cannot assure you we will be able to consummate anyasset sales, or if we do, what the timing of the sales will be or whether the proceeds that we realize will be adequate to meet indebtedness service obligationswhen due.Most of our credit facilities require that we maintain loan to collateral value ratios in order to remain in compliance with the covenants set forththerein. If the value of such collateral falls below such required level, we would be required to either prepay the loans or post additional collateral to theextent necessary to bring the value of the collateral as compared to the aggregate principal amount of the loan back to the required level. We cannot assureyou that we will have the cash on hand or the financing available to prepay the loans or have any unencumbered assets available to post as additionalcollateral. In such case, we would be in default under such credit facility and the collateral securing such facility would be subject to foreclosure by theapplicable lenders.An increase or continuing volatility in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability, earnings andcash flow.Amounts borrowed under our term loan facilities fluctuate with changes in LIBOR. LIBOR has been volatile, with the spread between LIBOR and theprime lending rate widening significantly at times. We may also incur indebtedness in the future with variable interest rates. As a result, an increase in marketinterest rates would increase the cost of servicing our indebtedness and could materially reduce our profitability, earnings and cash flows. The impact of suchan increase would be more significant for us than it would be for some other companies because of our substantial indebtedness. Because the interest ratesborne by our outstanding indebtedness may fluctuate with changes in LIBOR, if this volatility were to continue, it could affect the amount of interest payableon our debt, which in turn, could have an adverse effect on our profitability, earnings and cash flow. 39Table of ContentsThe international nature of our operations may make the outcome of any bankruptcy proceedings difficult to predict.We are incorporated under the laws of the Republic of the Marshall Islands and our subsidiaries are also incorporated under the laws of the Republic ofthe Marshall Islands, the Cayman Islands, Hong Kong and certain other countries other than the United States, and we conduct operations in countries aroundthe world. Consequently, in the event of any bankruptcy, insolvency or similar proceedings involving us or one of our subsidiaries, bankruptcy laws otherthan those of the United States could apply. We have limited operations in the United States. If we become a debtor under the United States bankruptcy laws,bankruptcy courts in the United States may seek to assert jurisdiction over all of our assets, wherever located, including property situated in other countries.There can be no assurance, however, that we would become a debtor in the United States or that a United States bankruptcy court would be entitled to, oraccept, jurisdiction over such bankruptcy case or that courts in other countries that have jurisdiction over us and our operations would recognize a UnitedStates bankruptcy court’s jurisdiction if any other bankruptcy court would determine it had jurisdiction.We may be unable to raise funds necessary to finance the change of control repurchase offer required by the indenture governing our notes.If we experience specified changes of control, we would be required to make an offer to repurchase all of our outstanding notes (unless otherwiseredeemed) at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the repurchase date. The occurrence ofspecified events that could constitute a change of control will constitute a default under our credit facilities. There are also change of control events thatwould constitute a default under the credit facilities that would not be a change of control under the indenture. In addition, our credit facilities prohibit thepurchase of notes by us in the event of a change of control, unless and until such time as the indebtedness under our credit facilities is repaid in full. As aresult, following a change of control event, we would not be able to repurchase notes unless we first repay all indebtedness outstanding under our creditfacilities and any of our other indebtedness that contains similar provisions; or obtain a waiver from the holders of such indebtedness to permit us torepurchase the notes. We may be unable to repay all of that indebtedness or obtain a waiver of that type. Any requirement to offer to repurchase outstandingnotes may therefore require us to refinance our other outstanding debt, which we may not be able to do on commercially reasonable terms, if at all. Inaddition, our failure to purchase the notes after a change of control in accordance with the terms of the indenture would constitute an event of default underthe indenture, which in turn would result in a default under our credit facilities.Our inability to repay the indebtedness under our credit facilities will constitute an event of default under the indenture governing our notes, whichcould have materially adverse consequences to us. In the event of a change of control, we cannot assure you that we would have sufficient assets to satisfy allof our obligations under our credit facilities and the notes. Our future indebtedness may also require such indebtedness to be repurchased upon a change ofcontrol.We may require additional financing to acquire vessels or businesses or to exercise vessel purchase options, to finance any planned growth, and suchfinancing may not be available.In the future, we may be required to make substantial cash outlays to exercise options or to acquire vessels or business and will need additionalfinancing to cover all or a portion of the purchase prices. We may seek to cover the cost of such items with new debt collateralized by the vessels to beacquired, if applicable, but there can be no assurance that we will generate sufficient cash or that debt financing will be available. Moreover, the covenants inour credit facilities, the indenture or other debt may make it more difficult to obtain such financing by imposing restrictions on what we can offer ascollateral. 40Table of ContentsTax RisksU.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S.holders.We will be treated as a “passive foreign investment company,” (“PFIC”), for U.S. federal income tax purposes if either (1) at least 75% of our grossincome for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of our assets produce or are held for theproduction of those types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchangeof investment property and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct ofa trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.” U.S. stockholders of aPFIC may be subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive fromthe PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.Based on our current and projected methods of operations, and an opinion of counsel, we believe that we were not a PFIC for the 2011 through 2016taxable years (we were treated as a PFIC for the 2008 through 2010 taxable years), and we do not believe that we will be a PFIC for 2017 and subsequenttaxable years. For post-2010 taxable years, our U.S. counsel, Thompson Hine LLP, is of the opinion that (1) the income we receive from the time charteringactivities and assets engaged in generating such income should not be treated as passive income or assets, respectively, and (2) so long as our income fromtime charters exceeds 25.0% of our gross income for each taxable year after our 2010 taxable year and the value of our vessels contracted under time chartersexceeds 50.0% of the average value of our assets for each taxable year after our 2010 taxable year, we should not be a PFIC for any taxable year after our2010 taxable year. This opinion is based on representations and projections provided to our counsel by us regarding our assets, income and charters, and itsvalidity is conditioned on the accuracy of such representations and projections.We may have to pay tax on United States source income, which would reduce our earnings.Under the Code, 50% of the gross transportation income of a vessel-owning or chartering corporation, such as us and our subsidiaries, that isattributable to transportation that either begins or ends, but that does not both begin and end, in the United States is characterized as U.S. SourceInternational Transportation Income and such U.S. Source International Transportation Income is generally subject to a 4% U.S. federal income tax withoutallowance for deduction or, if such U.S. Source International Transportation Income is effectively connected with the conduct of a trade or business in theUnited States, U.S. federal corporate income tax (presently imposed at up to a 35.0% rate) as well as a branch profits tax (presently imposed at a 30.0% rate oneffectively connected earnings), unless the non-U.S. corporation qualifies for exemption from tax under Section 883 of the Code and the treasury regulationspromulgated thereunder (“Treasury Regulations”). In general, the exemption from U.S. federal income taxation under Section 883 of the Code provides that ifa non-U.S. corporation satisfies the requirements of Section 883 of the Code and the Treasury Regulations, it will not be subject to the net basis and branchprofit taxes or the 4% gross basis tax on its U.S. Source International Transportation Income.We expect that we and each of our vessel-owning subsidiaries have qualified for this statutory tax exemption and we will take this position for U.S.federal income tax return reporting purposes for our 2016 taxable year. However, the delisting of our securities from quotation on the NYSE (or other factualcircumstances beyond our control) could cause us to lose the benefit of this tax exemption and thereby become subject to U.S. federal income tax on our U.S.Source International Transportation Income. See “— Risks Related to our Common Stock and Capital Structure—The New York Stock Exchange may delistour securities from quotation on its exchange, which could limit your ability to trade our securities and subject us to additional trading restrictions.”If we or our vessel-owning subsidiaries are not entitled to this exemption under Section 883 for any taxable year, we or our subsidiaries would besubject for those years to a 4% U.S. federal income tax (without allowance 41Table of Contentsfor deduction) on our U.S. Source International Transportation Income. The imposition of this taxation could have a negative effect on our business andwould result in decreased earnings.Other Tax JurisdictionsIn accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companieshaving established an office in Greece are subject to duties towards the Greek state which are calculated on the basis of the relevant vessels’ tonnage. Thepayment of said duties exhausts the tax liability of the foreign ship owning company and the relevant manager against any tax, duty, charge or contributionpayable on income from the exploitation of the foreign flagged vessel. In case that tonnage tax and/or similar taxes/duties are paid to the vessel’s flag state,these are deducted from the amount of the duty to be paid in Greece. Item 4.Information on the Company A.History and development of Navios AcquisitionNavios Acquisition was formed on March 14, 2008 under the laws of the Republic of the Marshall Islands and has its principal offices located at 7Avenue de Grande Bretagne, Office 11B2, Monte Carlo, MC 98000 Monaco. Our agent for service is Trust Company of the Marshall Islands, Inc., located atTrust Company Complex, Ajeltake Island, P.O. Box 1405, Majuro, Marshall Islands MH96960.Navios Acquisition owns a large fleet of modern crude oil, refined petroleum product and chemical tankers providing world-wide marine transportationservices. The Company’s strategy is to charter its vessels to international oil companies, refiners and large vessel operators under long, medium and short-term charters. The Company is committed to providing quality transportation services and developing and maintaining long-term relationships with itscustomers.On July 1, 2008, Navios Acquisition completed its IPO. On May 28, 2010, Navios Acquisition consummated the vessel acquisition which constitutedits initial business combination. Following such transaction, Navios Acquisition commenced its operations as an operating company.As of December 31, 2016, Navios Holdings had 43.4% of the voting power and 46.1% of the economic interest in Navios Acquisition.Equity TransactionsPreferred StockOn March 30, 2011, pursuant to an Exchange Agreement Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it heldfor 1,000 non-voting Series C Convertible Preferred Stock of Navios Acquisition. Each holder of shares of Series C Convertible Preferred Stock shall beentitled at their option at any time, after March 31, 2013 to convert all or any of the outstanding shares of Series C Convertible Preferred Stock into a numberof fully paid and non-assessable shares of Common Stock determined by multiplying each share of Series C Convertible Preferred Stock to be converted by7,676, subject to certain limitations. Upon the declaration of a common stock dividend, the holders of the Series C Convertible Preferred Stock are entitled toreceive dividends on the Series C Convertible Preferred Stock in an amount equal to the amount that would have been received in the number of shares ofCommon Stock into which the Shares of Series C Convertible Preferred Stock held by each holder thereof could be converted. For the purpose of calculatingearnings / (loss) per share this preferred stock is treated as in-substance common stock and is allocated income / (losses) and considered in the dilutedcalculation.On September 17, 2010, Navios Acquisition issued 3,000 shares of the Company’s authorized Series A Convertible Preferred Stock to an independentthird party as a consideration for certain consulting and advisory 42Table of Contentsfees related to the VLCC acquisition. The preferred stock has no voting rights, is only convertible into shares of common stock and does not participate individends until such time as the shares are converted into common stock. The Series A shares of preferred stock were fully converted to common stock thatwas issued on March 11, 2016.On October 29, 2010, Navios Acquisition issued 540 shares of the Company’s authorized Series B Convertible Preferred Stock to the seller of the twoLR1 product tankers. The preferred stock contained a 2% per annum dividend payable quarterly starting on January 1, 2011 and upon declaration by theCompany’s Board commenced payment on March 31, 2011. The preferred stock did not have any voting rights. On June 30, 2015, 162 shares of Series BConvertible Preferred Stock (being 30% of the 540 shares originally issued), with nominal value of $10 per share, were mandatorily converted into 64,800shares of common stock at a conversion ratio of 1:25. On October 27, 2015, the remaining 378 shares of Series B Convertible Preferred Stock (being 70% ofthe 540 shares originally issued), with nominal value of $10 per share, were converted into 108,000 shares of common stock at a conversion ratio of 1:35.The Company was authorized to issue up to 10,000,000 shares of $0.0001 par value preferred stock in total with such designations, voting and otherrights and preferences as may be determined from time to time by the Board of Directors.As of December 31, 2016, the Company’s issued and outstanding preferred stock consisted of the 1,000 Series C Convertible Preferred Stock. As ofDecember 31, 2015, the Company’s issued and outstanding preferred stock consisted of the 1,000 Series C Convertible Preferred Stock and the 3,000 Series AConvertible Preferred Stock.On each of August 31, 2012, October 31, 2012, February 13, 2013 and April 24, 2013, Navios Acquisition issued 300 shares of its authorized Series DConvertible Preferred Stock (nominal and fair value $3,000) to a shipyard, in partial settlement of the purchase price of each of the newbuilding LR1 producttankers, Nave Cassiopeia, Nave Cetus, Nave Atropos and Nave Rigel. The preferred stock includes a 6% per annum dividend payable quarterly, starting oneyear after delivery of each vessel. The Series D Convertible Preferred Stock mandatorily converted into shares of common stock 30 months after issuance at aprice per share of common stock equal to $10.00. The holder of the preferred stock shall have the right to convert such shares of preferred stock into commonstock prior to the scheduled maturity dates at a price of $7.00 per share of common stock. The Series D Convertible Preferred Stock does not have any votingrights. Navios Acquisition is obligated to redeem the Series D Convertible Preferred Stock (or converted common shares) at their nominal value of $10.00 atthe holder’s option. Beginning 18 months and no later than 60 months after the issuance of the preferred stock, the holder can exercise the option to requestthe redemption of up to 250 shares of preferred stock (or such number that has been converted to common shares) on a quarterly basis.The fair value was determined using a combination of the Black-Scholes model and discounted projected cash flows for the conversion option and put,respectively. The model used takes into account the credit spread of Navios Acquisition, the volatility of its stock, as well as the price of its stock at theissuance date. The convertible preferred stock was classified as temporary equity (i.e., apart from permanent equity) as a result of the redemption feature uponexercise of the put option granted to the holder of the preferred stock.During 2015, Navios Acquisition redeemed, at certain dates through the holder’s put option, 400 shares of the Series D Convertible Preferred Stock andpaid cash of $4.0 million in total to the holder upon redemption.In addition at certain dates in 2015, 800 shares of Series D Convertible Preferred Stock were mandatorily converted into 800,000 shares of commonstock. In conjunction with these conversions, the 800,000 shares of common stock were reclassified to puttable common stock within temporary equity, as aresult of an embedded put option of the holder for up to 30 months after the conversion date. 43Table of ContentsAs of each of December 31, 2016 and December 31, 2015, no shares of Series D Convertible Preferred Stock were outstanding.Common Stock and puttable common stockOn February 20, 2014, Navios Acquisition completed the public offering of 14,950,000 shares of its common stock at $3.85 per share, raising grossproceeds of $57.6 million. These figures include 1,950,000 shares sold pursuant to the underwriters’ option, which was exercised in full. Total net proceeds ofthe above transactions, net of agents’ costs of $3.0 million and offering costs of $0.3 million, amounted to $54.3 million.On June 30, 2015, 162 shares of Series B Convertible Preferred Stock were converted into 64,800 shares of common stock.On October 27, 2015, 378 shares of Series B Convertible Preferred Stock were mandatorily converted into 108,000 shares of common stock.As discussed above, during 2015, 800 shares of Series D Convertible Preferred Stock were mandatorily converted into 800,000 shares ofputtable common stock. In addition, in certain dates during 2015, Navios Acquisition redeemed, through the holder’s put option, 150,000 shares of theputtable common stock and paid cash of $1.5 million in total to the holder upon redemption.Under the share repurchase program, for up to $50.0 million, approved and authorized by the Board of Directors, Navios Acquisition has repurchased2,704,752 shares for a total cost of approximately $9.9 million, as of December 31, 2015. The share repurchase program expired in December 2016.On March 11, 2016, 1,200,000 shares of common stock were issued subsequent to the conversion of 3,000 shares of Series A Convertible PreferredStock.During 2016, Navios Acquisition redeemed, through the holder’s put option, 400,000 shares of the puttable common stock and paid cash of$4.0 million to the holder upon redemption.As of December 31, 2016, the Company was authorized to issue 250,000,000 shares of $0.0001 par value common stock of which, 150,582,990 wereissued and outstanding. As of December 31, 2016, 250,000 shares of puttable common stock were outstanding.On January 17, 2017, Navios Acquisition redeemed, through the holder’s put option, 100,000 shares of the puttable common stock and paid cash of$1.0 million to the holder upon redemption.Vessel Deliveries, Acquisitions and SalesAcquisition of vessels2015On January 8, 2015, Navios Acquisition took delivery of the Nave Sextans, a newbuilding, 49,999 dwt, MR2 product tanker, from an unaffiliated thirdparty for a total cost of $33.4 million. Cash paid was $17.8 million and $15.6 million was transferred from vessel deposits.On February 11, 2015, Navios Acquisition took delivery of the Nave Velocity, a newbuilding, 49,999 dwt, MR2 product tanker, from an unaffiliatedthird party for a total cost of $39.2 million. Cash paid was $12.6 million and $26.6 million was transferred from vessel deposits.On November 6, 2015, Navios Acquisition took delivery of the Nave Spherical, a 2009-built, 297,188 dwt VLCC, from an unaffiliated third party for atotal cost of $69.2 million. 44Table of ContentsOn December 2, 2015, Navios Acquisition took delivery of the Nave Photon, a 2008-built, 297,395 dwt VLCC from an unaffiliated third party for atotal cost of $65.2 million.Disposal of vessels2016On January 27, 2016, Navios Acquisition sold the Nave Lucida to an unaffiliated third party for net cash proceeds of $18.4 million. The gain on sale ofthe vessel, upon write-off of the unamortized dry-docking, was $2.3 million.On October 4, 2016, Navios Acquisition sold the Nave Universe to an unaffiliated third party for net cash proceeds of $35.8 million. As of June 30,2016, the vessel was classified as held for sale as the relevant criteria for the classification were met. The gain on sale of the vessel was $4.8 million.On November 15, 2016, Navios Acquisition sold the Nave Constellation to an unaffiliated third party for net cash proceeds of $35.8 million. As ofJune 30, 2016, the vessel was classified as held for sale as the relevant criteria for the classification were met. The gain on sale of the vessel was $4.6 million.2015On June 18, 2015, Navios Midstream exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste, a 2003-built of298,717 dwt VLCC, and the C. Dream, a 2000 built VLCC of 298,570 dwt, from Navios Acquisition for an aggregate sale price of $100.0 million. The saleprice consisted of $73.0 million cash consideration and the issuance of 1,592,920 Subordinated Series A Units to Navios Acquisition. B.Business OverviewIntroductionNavios Acquisition owns a large fleet of modern crude oil, refined petroleum product and chemical tankers providing worldwide marine transportationservices. Our strategy is to charter our vessels to international oil companies, refiners and large vessel operators under long, medium and short-term charters.We are committed to providing quality transportation services and developing and maintaining long-term relationships with our customers. We believe thatthe Navios brand will allow us to take advantage of increasing global environmental concerns that have created a demand in the petroleum products/crudeoil seaborne transportation industry for vessels and operators that are able to conform to the stringent environmental standards currently being imposedthroughout the world. 45Table of ContentsNavios Acquisition’s FleetAs of April 4, 2017, our fleet consisted of a total of 36 double-hulled tanker vessels, aggregating approximately 3.9 million deadweight tons, or dwt.The fleet includes eight VLCC tankers (over 200,000 dwt per ship), which transport crude oil, eight Long Range 1 (“LR1”) product tankers (60,000-79,999dwt per ship), 18 Medium Range 2 (“MR2”) product tankers (30,000-59,999 dwt per ship) and two chemical tankers (25,000 dwt per ship), which transportrefined petroleum products and bulk liquid chemicals. All our vessels are currently chartered-out to high-quality counterparties, including affiliates of Shell,Navig8 and Mansel, with an average remaining charter period of approximately one year. As of April 4, 2017, we had charters covering 84.3% of availabledays in 2017 and 23.0% of available days in 2018. Vessels Type Built/DeliveryDate DWT Net CharterRate(1) Profit Sharing ExpirationDate(2)Owned Vessels Nave Polaris Chemical Tanker 2011 25,145 Floating Rate(8) None June 2017Nave Cosmos Chemical Tanker 2010 25,130 Floating Rate(8) None June 2017Nave Velocity MR2 Product Tanker 2015 49,999 $13,825 None July 2017 $11,850(19) 50%/50% July 2018Nave Sextans MR2 Product Tanker 2015 49,999 $16,294 None January 2018Nave Pyxis MR2 Product Tanker 2014 49,998 $16,294 None February 2018Nave Luminosity MR2 Product Tanker 2014 49,999 $14,072 50%/50% September 2017 $11,850(19) 50%/50% September 2018Nave Jupiter MR2 Product Tanker 2014 49,999 $15,306 50%/50% May 2017 $11,850(19) 50%/50% May 2018Bougainville MR2 Product Tanker 2013 50,626 $16,296(5) 100% September 2017Nave Alderamin MR2 Product Tanker 2013 49,998 $12,675(16) None February 2018Nave Bellatrix MR2 Product Tanker 2013 49,999 $12,838(17) None December 2017Nave Capella MR2 Product Tanker 2013 49,995 $12,739(11) None June 2017Nave Orion MR2 Product Tanker 2013 49,999 $12,675(18) None March 2018Nave Titan MR2 Product Tanker 2013 49,999 $15,306 50%/50% June 2017Nave Aquila MR2 Product Tanker 2012 49,991 $11,356(3) None May 2017Nave Atria MR2 Product Tanker 2012 49,992 $14,813 50%/50% July 2017Nave Orbit MR2 Product Tanker 2009 50,470 $17,750(14) None November 2017Nave Equator MR2 Product Tanker 2009 50,542 $17,000 None October 2017Nave Equinox MR2 Product Tanker 2007 50,922 $11,603(15) ice-transitpremium(4) November 2017Nave Pulsar MR2 Product Tanker 2007 50,922 $15,306 50%/50% andice-transitpremium(4) April 2017 $$11,973/12,344 50%/50% andice-transitpremium(22) January 2018/October 2018Nave Dorado MR2 Product Tanker 2005 47,999 $12,245(20) None January 2018Nave Atropos LR1 Product Tanker 2013 74,695 Floating Rate(13) None October 2019Nave Rigel LR1 Product Tanker 2013 74,673 $18,022 50%/50% August 2019Nave Cassiopeia LR1 Product Tanker 2012 74,711 Floating Rate(13) None February 2019Nave Cetus LR1 Product Tanker 2012 74,581 $18,022 50%/50% April 2019Nave Estella LR1 Product Tanker 2012 75,000 $13,260(21) None March 2018Nave Andromeda LR1 Product Tanker 2011 75,000 $12,640(6) None June 2017Nave Ariadne LR1 Product Tanker 2007 74,671 $17,775 50%/50% May 2018Nave Cielo LR1 Product Tanker 2007 74,671 $17,775 50%/50% May 2018Nave Buena Suerte(10) VLCC 2011 297,491 Floating Rate(12) None August 2017Nave Quasar VLCC 2010 297,376 Floating Rate(7) None March 2018Nave Synergy VLCC 2010 299,973 Floating Rate(7) None February 2018Nave Galactic VLCC 2009 297,168 Floating Rate(9) None September 2017Nave Spherical VLCC 2009 297,188 $41,475 None November 2017Nave Neutrino(10) VLCC 2003 298,287 $37,520 None September 2017Nave Electron(10) VLCC 2002 305,178 Floating Rate(7) None December 2017Nave Photon VLCC 2008 297,395 $40,488 None December 2017 46Table of Contents (1)Net time charter-out rate per day (net of commissions), presented in USD.(2)Estimated dates assuming the midpoint of the redelivery period by charterers, including owner’s extension options not declared yet.(3)Charterer’s option to extend the charter for 6 months at $12,344 net per day.(4)Profit sharing based on a formula which incorporates a premium when vessels are trading in ice. The premium for Nave Pulsar is based on pool results.For the Nave Equinox the premium is $1,481 net per day for the first 12 months and $1,728 net per day for the six month optional period.(5)Rate can reach a maximum of $21,302 net per day calculated based on a formula. Both rate and ceiling increase by 2% annually.(6)Charterer’s option to extend the charter for six months at $13,134 net per day and another six months at $14,615 net per day.(7)Rate based on VLCC pool earnings.(8)Rate based on chemical tankers pool earnings.(9)Rate is based upon daily BITR TD3. Navios Acquisition will receive 100% of the index rate up to $41,969 net per day, 90% of the index rate from$41,969 net per day to $44,438 net per day and 50% of any amount in excess of $44,438 net per day. The contract provides for a minimum rate of$29,625 net per day and $27,156 net per day for the last nine months of the contract.(10)Navios Acquisition has granted an option to Navios Midstream to purchase the vessel from Navios Acquisition at fair market value. The options areextended for an additional two-year period expiring on November 18, 2018.(11)Charterer’s option to extend for six months at $13,825 net per day.(12)Rate is based upon daily BITR TD3. Navios Acquisition will receive 100% of the index rate up to $41,969 net per day, 90% up until $44,438 net perday and 50% of any amount in excess of $44,438 net per day. The contract provides a minimum rate of $19,750 net per day.(13)Rate based on LR1 pool earnings.(14)Charterer’s option to extend for two years at $20,500 net per day.(15)Charterer’s option to extend for six months at $13,084 net per day.(16)Charterer’s option to extend the charter for one year at $13,650 net per day.(17)Charterer’s option to extend the charter for one year at $14,319 net per day.(18)Charterer’s option to extend the charter for one year at $13,894 net per day.(19)Charterer’s option to extend the charter for one year at $13,331 net per day.(20)Charterer’s option to extend the charter for six months at $13,529 net per day.(21)Charterer’s option to extend the charter for one year at $14,625 net per day.(22)The premium for Nave Pulsar when vessel is trading on ice is $1,975 net per day. Charterer’s option to extend the charter for one year at $13,455 netper day.Competitive StrengthsWe believe that the following strengths will allow us to maintain a competitive advantage within the international shipping market: • Modern, High—Quality Fleet. We own a large fleet of modern, high–quality double–hull tankers that are designed for enhanced safety and lowoperating costs. We believe that the increased enforcement of stringent environmental standards currently being imposed throughout the worldhas resulted in a shift in major charterers’ preference towards greater use of modern double–hull vessels. We also have a large proportion ofyoung product and chemical tankers in our fleet. Since our inception, we have committed to and have fully financed investments of over$2.1 billion, including investments of approximately $0.8 billion in newbuilding constructions. As of April 4, 2017, our fleet had an average ageof approximately 6.2 years. We believe that owning and maintaining a modern, high–quality fleet reduces off–hire time and operating costs,improves safety and environmental performance and provides us with a competitive advantage in securing employment for our vessels. 47Table of Contents • Operating Visibility Through Contracted Revenues. All of the vessels that we have taken delivery of as of April 4, 2017, are chartered out withan average remaining charter period of approximately one year, and we believe our existing charter coverage provides us with predictable,contracted revenues and operating visibility. As of April 4, 2017, we had charters covering 84.3% of available days in 2017 and 23.0% ofavailable days in 2018. The charter arrangements for our eight VLCC tankers, eight contracted LR1 tankers, 18 MR2 product tankers and twochemical tankers are expected to generate $159.1 million in 2017, and $32.5 million in 2018 of aggregate contracted net charter revenue,exclusive of any profit sharing. • Diversified Fleet. Our diversified fleet, which includes VLCC, product and chemical tankers, allows us to serve our customers’ internationalcrude oil, petroleum product and liquid bulk chemical transportation needs. VLCC tankers transport crude oil and operate on primarily long–haul trades from the Arabian Gulf or West Africa to the Far East, North America and Europe. Product tankers transport a large number of differentrefined oil products, such as naphtha, gasoline, kerosene, jetfuel and gasoil, and principally operate on short– to medium–haul routes. Chemicaltankers transport primarily organic and inorganic chemicals, vegetable oils and animal fats. We believe that our fleet of vessels servicing thecrude oil, product and chemical tanker transportation sectors provides us with more balanced exposure to oil and commodities and more diverseopportunities to generate revenues than would a focus on any single shipping sector. • High Quality Counterparties. Our strategy is to charter our vessels to international oil companies, refiners and large vessel operators under long,medium and short–term charters. We are committed to providing safe and quality transportation services and developing and maintaining long–term relationships with our customers, and we believe that our modern fleet will allow us to charter–out our vessels to what management views ashigh–quality counterparties and for long periods of time. Our current charterers include: Shell, one of the largest global groups of energy andpetrochemical companies, operating in over 90 countries; Navig8, a company that controls a substantial fleet of product tankers; Vitol, a majoroil trader, trading over 5 million barrels of crude and product per day, Chevron, one of the world’s leading integrated energy companies andSaudi Aramco, the state owned oil company of the Kingdom of Saudi Arabia. • An Experienced Management Team and a Strong Brand. We have an experienced management team that we believe is well regarded in theshipping industry. The members of our management team have considerable experience in the shipping and financial industries. We also believethat we will be able to leverage the management structure at our affiliate, Navios Holdings, which benefits from a reputation for reliability andperformance and operational experience in both the tanker and drybulk markets. Our management team is led by Angeliki Frangou, ourChairman and Chief Executive Officer, who has over 25 years of experience in the shipping industry. Ms. Frangou is also the Chairman & ChiefExecutive Officer of Navios Holdings, Navios Partners and Navios Midstream and has been a Chief Executive Officer of various shipping andfinance companies in the past. Ms. Frangou is a member of a number of recognized shipping committees. We believe that our well respectedmanagement team and strong brand may present us with market opportunities not afforded to other industry participants.Business StrategyWe seek to generate predictable and growing cash flow through the following: • Strategically Manage Sector Exposure. We operate a fleet of crude carriers and product and chemical tankers, which we believe provides us withdiverse opportunities with a range of producers and consumers. As we grow our fleet, we expect to adjust our relative emphasis among the crudeoil, product and chemical tanker sectors according to our view of the relative opportunities in these sectors. We believe that having a mixed fleetof tankers provides the flexibility to adapt to changing market conditions and will allow us to capitalize on sector–specific opportunitiesthrough varying economic cycles. 48Table of Contents • Enhance Operating Visibility With Charter-Out Strategy. We believe that we are a safe, cost-efficient operator of modern and well-maintainedtankers. We also believe that these attributes, together with our strategy of proactively working towards meeting our customers’ chartering needs,will contribute to our ability to attract leading charterers as customers and to our success in obtaining attractive long-term charters. We will alsoseek profit sharing arrangements in our time charters, to provide us with potential incremental revenue above the contracted minimum charterrates. Depending on the then applicable market conditions, we intend to deploy our vessels to leading charterers on a mix of long, medium andshort-term time charters, with a greater emphasis on long-term charters and profit sharing. We believe that this chartering strategy will afford usopportunities to capture increased profits during strong charter markets, while benefiting from the relatively stable cash flows and highutilization rates associated with longer-term time charters. As of April 4, 2017, we had charters covering 84.3% of available days in 2017 and23.0% of available days in 2018. • Actively Manage our Fleet to Maximize Return on Capital over Market Cycles. We plan to actively manage the size and composition of our fleetthrough opportunistic acquisitions and dispositions as part of our effort to achieve above-market returns on capital for our vessel assets. UsingNavios Holdings’ global network of relationships and extensive experience in the maritime transportation industry, coupled with its commercial,financial and operational expertise, we plan to opportunistically grow our fleet through the timely and selective acquisition of high-qualitynewbuilding or secondhand vessels when we believe those acquisitions will result in attractive returns on invested capital and increased cashflow. We also intend to engage in opportunistic dispositions where we can achieve attractive values for our vessels as we assess the market cycle.We believe our diverse and versatile fleet, combined with the experience and long- standing relationships of Navios Holdings with participantsin the maritime transportation industry, position us to identify and take advantage of attractive acquisition opportunities. • Leverage the Experience, Brand, Network and Relationships of Navios Holdings. We intend to capitalize on the global network of relationshipsthat Navios Holdings has developed during its long history of investing and operating in the marine transportation industry. This includesdecades-long relationships with leading charterers, financing sources and key shipping industry players. When charter markets and vessel pricesare depressed and vessel financing is difficult to obtain we believe the relationships and experience of Navios Holdings and its managementenhances our ability to acquire young, technically advanced vessels at cyclically low prices and employ them under attractive charters withleading charterers. Navios Holdings’ long involvement and reputation for reliability in the Asia Pacific region have also allowed it to developprivileged relationships with many of the largest institutions in Asia. Through its established reputation and relationships, Navios Holdings hashad access to opportunities not readily available to most other industry participants that lack Navios Holdings’ brand recognition, credibilityand track record. • Benefit from Navios Holdings’ Risk Management Practices and Corporate Managerial Support. Risk management requires the balancing of anumber of factors in a cyclical and potentially volatile environment. In part, this requires a view of the overall health of the market, as well as anunderstanding of capital costs and returns. Navios Holdings actively engages in assessing financial and other risks associated with fluctuatingmarket rates, fuel prices, credit risks, interest rates and foreign exchange rates. Navios Holdings closely monitors credit exposure to charterers andother counterparties and has established policies designed to ensure that contracts are entered into with counterparties that have appropriatecredit history. Navios Holdings has strict guidelines and policies that are designed to evaluate credit exposure. We believe that NaviosAcquisition benefits from these established policies. • Sustain a Competitive Cost Structure. Pursuant to our management agreement with the Manager, a wholly owned subsidiary of Navios Holdings,the Manager coordinates and oversees the commercial, technical and administrative management of our fleet. The current technical managers ofsome of the VLCC vessels, affiliates of the seller of the vessels acquired as part of the VLCC Acquisition are 49Table of Contents technical ship management companies that have provided technical management to the VLCC vessels acquired during the VLCC Acquisitionprior to the consummation of the acquisition thereof. These technical managers will continue to provide such services for an interim period, afterwhich the technical management of our fleet is expected to be provided solely by the Manager. We believe that the Manager will be able to doso at rates competitive with those that would be available to us through independent vessel management companies. For example, pursuant toour amended management agreement with Navios Holdings, management fees of our vessels are fixed through May 2018. We believe thisexternal management arrangement will enhance the scalability of our business by allowing us to grow our fleet without incurring significantadditional overhead costs. We believe that we will be able to leverage the economies of scale of Navios Holdings and manage operating,maintenance and corporate costs. At the same time, we believe the young age and high-quality of the vessels in our fleet, coupled with NaviosHoldings’ safety and environmental record, will position us favorably within the crude oil, product and chemical tanker transportation sectorswith our customers and for future business opportunities.Our CustomersWe provide or will provide seaborne shipping services under charters with customers that we believe are creditworthy.Our major customers during 2016 were: Navig8, Shell and Mansel. For the year ended December 31, 2016, these three customers accounted for 33.0%,20.0% and 14.7%, respectively, of Navios Acquisition’s revenue.Our major customers during 2015 were: Navig8, Shell and Mansel. For the year ended December 31, 2015, these three customers accounted for 35.2%,13.6% and 10.8%, respectively, of Navios Acquisition’s revenue.Our major customers during 2014 were: Dalian Ocean Shipping Co. (“DOSCO”) and Navig8. For the year ended December 31, 2014, these twocustomers accounted for 22.4% and 28.8%, respectively, of Navios Acquisition’s revenue.Although we believe that if any one of our charters were terminated we could re-charter the related vessel at the prevailing market rate relativelyquickly, the permanent loss of a significant customer or a substantial decline in the amount of services requested by a significant customer could harm ourbusiness, financial condition and results of operations if we were unable to re-charter our vessel on a favorable basis due to then-current market conditions, orotherwise.CompetitionThe market for international seaborne crude oil transportation services is fragmented and highly competitive. Seaborne crude oil transportationservices generally are provided by two main types of operators: major oil company captive fleets (both private and state-owned) and independent ship ownerfleets. In addition, several owners and operators pool their vessels together on an ongoing basis, and such pools are available to customers to the same extentas independently owned and operated fleets. Many major oil companies and other oil trading companies also operate their own vessels and use such vesselsnot only to transport their own crude oil but also to transport crude oil for third party charterers in direct competition with independent owners and operatorsin the tanker charter market. Competition for charters is intense and is based upon price, location, size, age, condition and acceptability of the vessel and itsmanager. Due in part to the fragmented tanker market, competitors with greater resources could enter the tanker market and operate larger fleets throughacquisitions or consolidations and may be willing or able to accept lower prices than us, which could result in our achieving lower revenues from our vessels.See “Risk Factors—Our growth depends on our ability to obtain customers, for which we face substantial competition. In the highly competitive tankerindustry, we may not be able to compete for charters with new entrants or established companies with greater resources, which may adversely affect our resultsof operations.” 50Table of ContentsTime ChartersA time charter is a contract for the use of a vessel for a fixed period of time at a specified daily rate. Under a time charter, the vessel owner providescrewing and other services related to the vessel’s operation, the cost of which is included in the daily rate and the customer is responsible for substantially allof the vessel voyage costs. Most of the vessels in our fleet are hired out under time charters, and we intend to continue to hire out our vessels under timecharters. The following discussion describes the material terms common to all of our time charters.Base Hire Rate“Base hire rate” refers to the basic payment from the customer for the use of the vessel. The hire rate is generally payable monthly, in advance on thefirst day of each month, in U.S. Dollars as specified in the charter.Off-hireWhen the vessel is “off-hire,” the charterer generally is not required to pay the base hire rate, and we are responsible for all costs. Prolonged off-hiremay lead to vessel substitution or termination of the time charter. A vessel generally will be deemed off-hire if there is a loss of time due to, among otherthings: • operational deficiencies; drydocking for repairs, maintenance or inspection; equipment breakdowns; or delays due to accidents, crewing strikes,certain vessel detentions or similar problems; or • the shipowner’s failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew.Under some of our charters, the charterer is permitted to terminate the time charter if the vessel is off-hire for an extended period, which is generallydefined as a period of 90 or more consecutive off-hire days.TerminationWe are generally entitled to suspend performance under the time charters covering our vessels if the customer defaults in its payment obligations.Under some of our time charters, either party may terminate the charter in the event of war in specified countries or in locations that would significantlydisrupt the free trade of the vessel. Some of our time charters covering our vessels require us to return to the charterer, upon the loss of the vessel, all advancespaid by the charterer but not earned by us.Pooling ArrangementsFor vessels operating in pooling arrangements, the Company earns a portion of total revenues generated by the pool, net of expenses incurred by thepool. The amount allocated to each pool participant vessel, including the Company’s vessels, is determined in accordance with an agreed-upon formula,which is determined by the margins awarded to each vessel in the pool based on the vessel’s age, design and other performance characteristics. Revenueunder pooling arrangements is accounted for on the accrual basis and is recognized when an agreement with the pool exists, price is fixed, service is providedand the collectability is reasonably assured.ExpensesManagement fees: Pursuant to the Management Agreement dated May 28, 2010 and as amended in May 2012 and May 2014, the Manager providedcommercial and technical management services to Navios Acquisition’s vessels for a fixed daily fee of: (a) $6,000 per MR2 product tanker and chemicaltanker vessel; (b) $7,000 per LR1 product tanker vessel; and (c) $9,500 per VLCC, through May 2016. 51Table of ContentsPursuant to an amendment to the Management Agreement dated as of May 19, 2016, Navios Acquisition fixed the fees for commercial and technicalship management services of its fleet for two additional years from May 29, 2016, through May 2018, at a daily fee of: (a) $6,350 per MR2 product tankerand chemical tanker vessel; (b) $7,150 per LR1 product tanker vessel; and (c) $9,500 per VLCC.Dry docking expenses are reimbursed by Navios Acquisition at cost.Total management fees for each of the years ended December 31, 2016, 2015 and 2014 amounted to $97.9 million, $95.3 million and $95.8 million,respectively.General and administrative expenses: On May 28, 2010, Navios Acquisition entered into an Administrative Services Agreement with NaviosHoldings, pursuant to which Navios Holdings provides certain administrative management services to Navios Acquisition which include: bookkeeping,audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client andinvestor relations and other services. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision of theseservices. In May 2014, Navios Acquisition extended the duration of its existing Administrative Services Agreement with Navios Holdings, until May 2020.For each of the years ended December 31, 2016, 2015 and 2014 the expense arising from administrative services rendered by Navios Holdingsamounted to $9.4 million, $7.6 million and $7.3 million, respectively.Management of Ship Operations, Administration and SafetyNavios Holdings provides, through a wholly owned subsidiary, expertise in various functions critical to our operations. Pursuant to the ManagementAgreement and an Administrative Services Agreement with Navios Holdings, we have access to human resources, financial and other administrativefunctions, including: • bookkeeping, audit and accounting services; • administrative and clerical services; • banking and financial services; and • client and investor relations.Technical management services are also provided, including: • commercial management of the vessel; • vessel maintenance and crewing; • purchasing and insurance; and • shipyard supervision.For more information on the Management Agreement and the Administrative Services Agreement we have with Navios Holdings, please read “Item 7.— Major Stockholders and Related Party Transactions”.Oil Company Tanker Vetting ProcessTraditionally there have been relatively few charterers in the oil transportation business and that part of the industry has been undergoingconsolidation. The so called “oil majors,” such as Exxon Mobil, BP p.l.c., Royal Dutch Shell plc., Chevron, ConocoPhillips and Total S.A., together with afew smaller companies, represent a significant percentage of the production, trading and, especially, seaborne transportation of crude oil and refinedpetroleum products worldwide. Concerns about the environment have led oil majors to develop and implement a strict due diligence process, known asvetting, when selecting vessels and considering their managers. Vetting 52Table of Contentshas evolved into a sophisticated and comprehensive assessment of both the vessel and the vessel manager. While numerous factors are considered andevaluated prior to a commercial decision, the oil majors, through their association, Oil Companies International Marine Forum (OCIMF), have developed twobasic tools: the Ship Inspection Report program, which is known as SIRE, and the Tanker Management & Self Assessment program, which is known asTMSA. The former is a physical ship inspection based upon a thorough vessel inspection questionnaire and performed by accredited OCIMF inspectors,resulting in a report being logged on SIRE, while the latter is a recent addition to the risk assessment tools used by the oil majors. Based upon commercialrisk, there are three levels of assessment used by oil majors: • terminal use, which clears a vessel to call at one of the oil major’s terminals; • voyage charter, which clears the vessel for a single voyage; and • period charter, which clears the vessel for use for an extended period of time.The depth and complexity of each of these levels of assessment varies. Each charter agreement for our vessels requires that the applicable vessel have avalid SIRE report (less than six months old) in the OCIMF website as recommended by OCIMF. In addition, under the terms of the charter agreements, thecharterers require that our vessels and their technical managers be vetted and approved to transport crude oil or refined petroleum products (as applicable).The technical manager is responsible for obtaining and maintaining the vetting approvals required to successfully charter our vessels.Governmental and Other RegulationsSources of applicable rules and standardsShipping is one of the world’s most heavily regulated industries, and, in addition, it is subject to many industry standards. Government regulationsignificantly affects the ownership and operation of vessels. These regulations consist mainly of rules and standards established by international conventions,but they also include national, state, and local laws and regulations in force in jurisdictions where vessels may operate or are registered, and which arecommonly more stringent than international rules and standards. This is the case particularly in the United States and, increasingly, in Europe.A variety of governmental and private entities subject vessels to both scheduled and unscheduled inspections. These entities include local portauthorities (the U.S. Coast Guard, harbor masters or equivalent entities), classification societies, flag state administration (country vessel of registry), andcharterers, particularly terminal operators. Certain of these entities require vessel owners to obtain permits, licenses, and certificates for the operation of theirvessels. Failure to maintain necessary permits or approvals could require a vessel owner to incur substantial costs or temporarily suspend operation of one ormore of its vessels.Heightened levels of environmental and quality concerns among insurance underwriters, regulators, and charterers continue to lead to greaterinspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmentalconcerns have created a demand for vessels that conform to stricter environmental standards. Vessel owners are required to maintain operating standards forall vessels that will emphasize operational safety, quality maintenance, continuous training of officers and crews and compliance with U.S. and internationalregulations.Ship safety regulationThe International Maritime Organization, or IMO, has adopted a number of international conventions concerned with ship safety and with preventing,reducing or controlling pollution from ships. These fall into two main categories, consisting firstly of those concerned generally with ship safety standards,and secondly of those specifically concerned with measures to prevent pollution. 53Table of ContentsIn the former category the primary international instrument is the Safety of Life at Sea Convention of 1974, as amended, or SOLAS, together with theregulations and codes of practice that form part of its regime. Much of SOLAS is not directly concerned with preventing pollution, but some of its safetyprovisions are intended to prevent pollution as well as promote safety of life and preservation of property. These regulations have been and continue to beregularly amended as new and higher safety standards are introduced with which we are required to comply.An amendment of SOLAS introduced the International Safety Management (ISM) Code, which has been effective since July 1998. Under the ISM Codethe party with operational control of a vessel is required to develop an extensive safety management system that includes, among other things, the adoptionof a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures forresponding to emergencies. The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificateevidences compliance by a vessel’s management with code requirements for a safety management system. No vessel can obtain a certificate unless itsmanager has been awarded a document of compliance, issued by the flag state for the vessel, under the ISM Code. Noncompliance with the ISM Code andother IMO regulations, such as the mandatory ship energy efficiency management plan (“SEEMP”) which is akin to a safety management plan and came intoeffect on January 1, 2013, may subject a ship owner to increased liability, may lead to decreases in available insurance coverage for affected vessels, and mayresult in the denial of access to, or detention in, some ports. For example, the United States Coast Guard and European Union authorities have indicated thatvessels not in compliance with the ISM Code will be prohibited from trading in ports in the United States and European Union. Each vessel’s certificateevidencing compliance with the ISM Code and the ISPS Code, described below, must be periodically renewed and compliance must be periodically verified.Security RegulationsSince the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. In 2002, MarineTransportation Security Act (“MTSA”) came into effect. To implement certain portions of the MTSA, in 2003, the U.S. Coast Guard issued regulationsrequiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in2002, amendments to SOLAS imposed various detailed security obligations on vessels and port authorities, most of which are contained in the InternationalShip and Port Facility Security Code (“ISPS Code”). Among the various requirements are: • on-board installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications; • on-board installation of ship security alert systems; • the development of vessel security plans; and • compliance with flag state security certification requirements.The U.S. Coast Guard regulations, intended to be aligned with international maritime security standards, exempt non-U.S. vessels from MTSA vesselsecurity measures, provided such vessels had on board, by July 1, 2004, a valid International Ship Security Certificate (“ISSC”) that attests to the vessel’scompliance with SOLAS security requirements and the ISPS Code.International regulations to prevent pollution from shipsIn the second main category of international regulation, the primary instrument is the International Convention for the Prevention of Pollution fromShips, or MARPOL, which imposes environmental standards on the shipping industry set out in Annexes I-VI of MARPOL. These contain regulations for theprevention of pollution by oil (Annex I), by noxious liquid substances in bulk (Annex II), by harmful substances in packaged 54Table of Contentsforms within the scope of the International Maritime Dangerous Goods Code (Annex III), by sewage (Annex IV), by garbage (Annex V), and by air emissions(Annex VI).These regulations have been and continue to be regularly amended as new and more stringent standards of pollution prevention are introduced withwhich we are required to comply. For example, MARPOL Annex VI, together with the NOx Technical Code established thereunder, sets limits on sulfur oxideand nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances, such as chlorofluorocarbons. It alsoincludes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on emissions. Originallyadopted in September 1997, Annex VI came into force in May 2005 and was amended in October 2008 (as was the NOx Technical Code) to provide forprogressively more stringent limits on such emissions from 2010 onwards. The revised Annex VI provides, in particular, for a reduction of the global sulfurcap. After considering the issue for many years, the IMO announced on October 27, 2016 that it was proceeding with a requirement for 0.5% m/m sulfurcontent in marine fuel (down from current levels of 3.5%) outside the ECAs starting on January 1, 2020. Under Annex VI, the 2020 date was subject to reviewas to the availability of the required fuel oil. Annex VI required the fuel availability review to be completed by 2018 but was ultimately completed in 2016.Therefore, by 2020, ships will be required to remove sulfur from emissions through the use of emission control equipment, or purchase marine fuel with 0.5%sulfur content, which may see increased demand and higher prices due to supply constraints. Installing pollution control equipment or using lower sulfur fuelcould result in significantly increased costs to our company. Similarly Annex VI requires Tier III standards for NOx emissions to be applied to shipsconstructed and engines installed in ships operating in NOx ECAs from January 1, 2016. We anticipate incurring costs to comply with these more stringentstandards by implementing measures such as fuel switching, vessel modification adding distillate fuel storage capacity, or addition of exhaust gas cleaningscrubbers, and may require installation and operation of further control equipment at significantly increased cost.The revised Annex VI further allows for designation, in response to proposals from member parties, of Emission Control Areas (ECAs) that imposeaccelerated and/or more stringent requirements for control of sulfur oxide, particulate matter, and nitrogen oxide emissions. Thus far, ECAs have beenformally adopted for the Baltic Sea area (limits SOx emissions only); the North Sea area including the English Channel (limiting SOx emissions only) and theNorth American ECA (which came into effect from August 1, 2012 limiting SOx, NOx and particulate matter emissions). In October 2016, the IMO approvedthe designation of the North Sea and Baltic Sea as ECAs for NOx under Annex VI as well, which is scheduled for adoption in 2017 and would take effect inJanuary 2021. The United States Caribbean Sea ECA entered into force on January 1, 2013 and has been effective since January 1, 2014, limiting SOx, NOxand particulate matter emissions. For the currently-designated ECAs, much lower sulfur limits on fuel oil content are being phased in (0.1% from January 1,2015).At its 66th Session, the IMO’s Marine Environment Protection Committee (the “MEPC”) adopted amendments (effective September 2015) to AnnexVI, regulation 13, regarding NOx and the date for the implementation of the “Tier III” standards within ECAs. These amendments provide, inter alia, that suchstandards, applicable on January 1, 2016, apply to marine diesel engines installed on ships which operate in the North American ECA or the U.S. CaribbeanSea ECA and to installed marine diesel engines which operate in other ECAs which might be designated in the future for Tier III NOx control. At MEPC 69,Annex VI was also amended to require recordkeeping requirements to demonstrate compliance with the NOX Tier III ECA.At its 64th session (2012), the MEPC indicated that 2015 was the target year for member states to identify market-based measures for internationalshipping. At its 66th session (2014), the MEPC continued its work on developing technical and operational measures relating to energy-efficiency measuresfor ships, following the entry into force of the mandatory efficiency measures on January 1, 2013. It adopted the 2014 Guidelines on the Method ofCalculation of the Attained EEDI, applicable to new ships. It further adopted amendments to MARPOL Annex VI concerning the extension of the scope ofapplication of the EEDI to Liquified Natural Gas (“LNG”) carriers, ro-ro cargo ships (vehicle carriers), ro-ro cargo ships, ro-ro passenger ships and cruisepassengers ships with nonconventional propulsion. At its 67th session (2014), the MEPC adopted the 2014 55Table of ContentsGuidelines on survey and certification of the EEDI, updating the previous version to reference ships fitted with dual-fuel engines using LNG and liquid fueloil. The MEPC also adopted amendments to the 2013 Interim Guidelines for determining minimum propulsion power to maintain the maneuverability ofships in adverse conditions, to make the guidelines applicable to phase 1 (starting January 1, 2015) of the EEDI requirements. At its 68th session (2015), theMEPC amended the 2014 Guidelines on EEDI survey and certification as well as the method of calculating of EEDI for new ships, the latter of which wasagain amended at the 70th session (2016). At its 70th session, the MEPC adopted mandatory requirements for ships of 5,000 gross tonnage or greater tocollect fuel consumption data for each type of fuel used, and report the data to the flag State after the end of each calendar year.The revised Annex I to the MARPOL Convention entered into force in January 2007. It incorporates various amendments to the MARPOL Conventionand imposes construction requirements for oil tankers delivered on or after January 1, 2010. On August 1, 2007, Regulation 12A (an amendment to Annex I)came into force imposing performance standards for accidental oil fuel outflow and requiring oil fuel tanks to be located inside the double-hull in all shipswith an aggregate oil fuel capacity of 600 cubic meters and above, and which are delivered on or after August 1, 2010, including ships for which the buildingcontract is entered into on or after August 1, 2007 or, in the absence of a contract, for which keel is laid on or after February 1, 2008. We intend that all of ournewbuild tanker vessels, if any, will comply with Regulation 12A.Greenhouse gas emissionsIn February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change entered into force. Pursuant to the KyotoProtocol, adopting countries are required to implement national programs to reduce emissions of certain gases, generally referred to as greenhouse gases,which are suspected of contributing to global warming. Currently, the greenhouse gas emissions from international shipping do not come under the KyotoProtocol.In December 2011, UN climate change talks took place in Durban and concluded with an agreement referred to as the Durban Platform for EnhancedAction. In preparation for the Durban Conference, the International Chamber of Shipping (“ICS”) produced a briefing document, confirming the shippingindustry’s commitment to cut shipping emissions by 20% by 2020, with significant further reductions thereafter. The ICS called on the participants in theDurban Conference to give the IMO a clear mandate to deliver emissions reductions through market-based measures, for example a shipping industryenvironmental compensation fund. Notwithstanding the ICS’s request for global regulation of the shipping industry, the Durban Conference did not result inany proposals specifically addressing the shipping industry’s role in climate change.Although regulation of greenhouse gas emissions in the shipping industry was discussed during the 2015 UN Climate Change Conference in Paris (the“Paris Conference”), the agreement reached among the 195 nations did not expressly reference the shipping industry. Following the Paris Conference, theIMO announced it would continue its efforts on this issue at the MEPC, and at its 70th session, the MEPC approved a Roadmap for developing acomprehensive GHG emissions reduction strategy for ships, which includes the goal of adopting an initial strategy and emission reduction commitments in2018. The Roadmap also provides for additional studies and further intersessional work, to be continued at the 71st session in 2017, with a goal of adopting arevised strategy in 2023 to include short-, mid- and long-term reduction measures and schedules for implementation.The E.U. announced in April 2007 that it planned to expand the European Union emissions trading scheme by adding vessels, and a proposal from theEuropean Commission was expected if no global regime for reduction of seaborne emissions had been agreed by the end of 2011. As of January 31, 2013, theCommission stopped short of proposing that emissions from ships be included in the EU’s emissions-trading scheme (“ETS”). However, on October 1, 2012,it announced that it would propose measures to monitor, verify and report on greenhouse gas emissions from the shipping sector. 56Table of ContentsOn June 28, 2013, the EC adopted a communication setting out a strategy for progressively including greenhouse gas emissions from maritimetransport in the EU’s policy for reducing its overall GHG emissions. The first step proposed by the EC was an EU Regulation to an EU-wide system for themonitoring, reporting and verification of carbon dioxide emissions from large ships starting in 2018. The Regulation was adopted on April 29, 2015 and tookeffect on July 1, 2015, with monitoring, reporting and verification requirements beginning on January 1, 2018. This Regulation may be seen as indicative ofan intention to maintain pressure on the international negotiating process.Other international regulations to prevent pollutionIn addition to MARPOL, other more specialized international instruments have been adopted to prevent different types of pollution or environmentalharm from ships. In February 2004, the IMO adopted an International Convention for the Control and Management of Ships’ Ballast Water and Sediments, orthe BWM Convention. The BWM Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements,to be replaced in time with mandatory concentration limits, as well as other obligations including recordkeeping requirements and implementation of aBallast Water and Sediments Management Plan.The BWM Convention stipulates that it will enter into force twelve months after it has been adopted by at least 30 states, the combined merchant fleetsof which represent at least 35% of the gross tonnage of the world’s merchant shipping. With Finland’s accession to the Agreement on September 8, 2016, the35% threshold was reached, and the BWM convention will enter into force on September 8, 2017. Thereafter, on October 19, 2016, Panama also acceded tothe BWM convention, adding its 18.02% of world gross tonnage. As of March 14, 2017, the BWM Convention had 54 contracting states for 53.41% of worldgross tonnage. The BWM Convention requires ships to manage ballast water in a manner that removes, renders harmless or avoids the uptake or discharge ofaquatic organisms and pathogens within ballast water and sediment. Recently updated Ballast Water and Sediment Management Plan guidance includesmore robust testing and performance specifications. The entry of the BWM Convention and revised guidance will likely result in additional compliancecosts.European regulationsEuropean regulations in the maritime sector are in general based on international law. However, since the Erika incident in 1999, the EuropeanCommunity has become increasingly active in the field of regulation of maritime safety and protection of the environment. It has been the driving forcebehind a number of amendments of MARPOL (including, for example, changes to accelerate the time-table for the phase-out of single hull tankers, and toprohibit the carriage in such tankers of heavy grades of oil), and if dissatisfied either with the extent of such amendments or with the time-table for theirintroduction it has been prepared to legislate on a unilateral basis. It should be noted, for instance, that the EU has its own regime as far as ship emissions areconcerned and whilst it does in some respects reflect the IMO regime, this is not always the case. As far as sulfur dioxide emissions are concerned, forexample, the EU regulation has not just caught up with the IMO limits for sulfur in ECAs, but it continues to have certain elements that exceed IMOregulations (e.g., as of January 1, 2015, EU Member States must ensure that ships in the Baltic, the North Seam and the English Channel are using gas oilswith a sulfur content of no more than 0.10%).In some instances where it has done so, international regulations have subsequently been amended to the same level of stringency as that introduced inEurope, but the risk is well established that EU regulations may from time to time impose burdens and costs on shipowners and operators which are additionalto those involved in complying with international rules and standards. In December 2016, the EU signed into law the National Emissions Ceiling (“NEC”)Directive, which entered into force on December 31, 2016. The NEC must be implemented by individual members states through particular laws in each stateby June 30, 2018. The NEC aims to set stricter emissions limits on SO2, ammonia, non-methane volatile organic compounds, NOx and fine particulate(PM2.5) by setting new upper limits for emissions of these pollutants, starting in 2020. While the 57Table of ContentsNEC is not specifically directed toward the shipping industry, the EU specifically mentions the shipping industry in its announcement of the NEC as acontributor to emissions of PM2.5, SO2 and NOx. Implementation of new laws by member states to reduce emissions may ultimately result in increased coststo us to comply with the more stringent standards.In some areas of regulation the EU has introduced new laws without attempting to procure a corresponding amendment of international law. Notably, itadopted in 2005 a directive on ship-source pollution, imposing criminal sanctions for pollution not only where this is caused by intent or recklessness (whichwould be an offense under MARPOL), but also where it is caused by “serious negligence.” The directive could therefore result in criminal liability beingincurred in circumstances where it would not be incurred under international law. Experience has shown that in the emotive atmosphere often associated withpollution incidents, retributive attitudes towards ship interests have found expression in negligence being alleged by prosecutors and found by courts.Moreover, there is skepticism that the notion of “serious negligence” is likely to prove any narrower in practice than ordinary negligence. Criminal liabilityfor a pollution incident could not only result in us incurring substantial penalties or fines but may also, in some jurisdictions, facilitate civil liability claimsfor greater compensation than would otherwise have been payable.United States environmental regulations and laws governing civil liability for pollutionEnvironmental legislation in the United States merits particular mention as it is in many respects more onerous than international laws, representing ahigh-water mark of regulation with which shipowners and operators must comply, and of liability likely to be incurred in the event of non-compliance or anincident causing pollution.U.S. federal legislation, including notably the Oil Pollution Act of 1990, or OPA, establishes an extensive regulatory and liability regime for theprotection and cleanup of the environment from oil spills, including cargo or bunker oil spills from tankers. OPA affects all owners and operators whosevessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States’ territorialsea and its 200 nautical mile exclusive economic zone. Under OPA, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly,severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment andclean-up costs and other damages arising from discharges or substantial threats of discharges, of oil from their vessels. In addition to potential liability underOPA as the relevant federal legislation, vessel owners may in some instances incur liability on an even more stringent basis under state law in the particularstate where the spillage occurred.Title VII of the Coast Guard and Maritime Transportation Act of 2004, or the CGMTA, amended OPA to require the owner or operator of any non-tankvessel of 400 gross tons or more, that carries oil of any kind as a fuel for main propulsion, including bunkers, to prepare and submit a response plan for eachvessel on or before August 8, 2005. The implementing regulations took effect on October 30, 2013. The vessel response plans must include detailedinformation on actions to be taken by vessel personnel to prevent or mitigate any discharge or substantial threat of such a discharge of ore from the vessel dueto operational activities or casualties.OPA liability limits are periodically adjusted for inflation, and the U.S. Coast Guard issued a final rule on November 19, 2015 to reflect increases in theConsumer Price Index. With this adjustment, OPA currently limits liability of the responsible party for single-hull tank vessels over 3,000 gross tons to thegreater of $3,500 per gross ton or $25.846 million (this amount is reduced to $7.05 million if the vessel is less than 3,000 gross tons). For tank vessels over3,000 gross tons, other than a single-hull vessel, liability is limited to $2,200 per gross ton or $18.8 million (or $4.7 million for a vessel less than 3,000 grosstons), whichever is greater. Under the OPA, these liability limits do not apply if an incident was directly caused by violation of applicable United Statesfederal safety, construction or operating regulations or by a responsible party’s gross negligence or willful misconduct, or if the responsible party fails orrefuses to report the incident or to cooperate and assist in connection with oil removal activities. 58Table of ContentsIn response to the Deepwater Horizon incident in the Gulf of Mexico, in 2010 the U.S. Congress proposed, but did not formally adopt, legislation toamend OPA to mandate stronger safety standards and increased liability and financial responsibility for offshore drilling operations. While Congressionalactivity on this topic is expected to continue to focus on offshore facilities rather than on vessels generally, it cannot be known with certainty what form anysuch new legislative initiatives may take.In addition, the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, which applies to the discharge of hazardoussubstances (other than oil) whether on land or at sea, contains a similar liability regime and provides for cleanup, removal and natural resource damages.Liability under CERCLA is limited to the greater of $300 per gross ton, or $5.0 million for vessels carrying any hazardous substances as cargo, or$0.5 million for vessels not carrying hazardous substances as cargo or residue, unless the incident is caused by gross negligence, willful misconduct, or aviolation of certain regulations, in which case liability is unlimited.Similarly, in response to the Deepwater Horizon incident, the European Union has issued “Directive 2013/30/EU of the European Parliament and of theCouncil of June 12, 2013 on safety of offshore oil and gas operations.” The objective of this Directive is to reduce as far as possible the occurrence of majoraccidents relating to offshore oil and gas operations and to limit their consequences, thus increasing the protection of the marine environment and coastaleconomies against pollution, establishing minimum conditions for safe offshore exploration and exploitation of oil and gas and limiting possible disruptionsto Union indigenous energy production, and to improve the response mechanisms in case of an accident. Member states must implement the Directive byJuly 19, 2015. As far as the environment is concerned, the UK has various new or amended regulations such as: the Offshore Petroleum Activities (OffshoreSafety Directive) (Environmental Functions) Regulations 2015 (OSDEF), the 2015 amendments to the Merchant Shipping (Oil Pollution Preparedness,Response and Cooperation Convention) Regulations 1998 (OPRC 1998) and other environmental Directive requirements, specifically the EnvironmentalManagement System. The Offshore Petroleum Licensing (Offshore Safety Directive) Regulations 2015 will implement the licensing Directive requirements.We currently maintain, for each of our owned vessels, insurance coverage against pollution liability risks in the amount of $1.0 billion per incident.The insured risks include penalties and fines as well as civil liabilities and expenses resulting from accidental pollution. However, this insurance coverage issubject to exclusions, deductibles and other terms and conditions. If any liabilities or expenses fall within an exclusion from coverage, or if damages from acatastrophic incident exceed the $1.0 billion limitation of coverage per incident, our cash flow, profitability and financial position could be adverselyimpacted.Under OPA, an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient tocover the vessel in the fleet having the greatest maximum liability under OPA. Under the self-insurance provisions, the shipowner or operator must have a networth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicableamount of financial responsibility. We have complied with the U.S. Coast Guard regulations by providing a certificate of responsibility from third partyentities that are acceptable to the U.S. Coast Guard evidencing sufficient self-insurance.The U.S. Coast Guard’s regulations concerning certificates of financial responsibility provide, in accordance with OPA, that claimants may bring suitdirectly against an insurer or guarantor that furnishes certificates of financial responsibility. In the event that such insurer or guarantor is sued directly, it isprohibited from asserting any contractual defense that it may have had against the responsible party and is limited to asserting those defenses available to theresponsible party and the defense that the incident was caused by the willful misconduct of the responsible party. Certain organizations, which had typicallyprovided certificates of financial responsibility under pre-OPA laws, including the major protection and indemnity organizations, have declined to furnishevidence of insurance for vessel owners and operators if they are subject to direct actions or required to waive insurance policy defenses. This requirementmay have the effect of limiting the availability of the type of 59Table of Contentscoverage required by the Coast Guard and could increase our costs of obtaining this insurance as well as the costs of our competitors that also require suchcoverage.OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within theirboundaries, and some states’ environmental laws impose unlimited liability for oil spills. In some cases, states which have enacted such legislation have notyet issued implementing regulations defining vessels owners’ responsibilities under these laws.The United States Clean Water Act (“CWA”) prohibits the discharge of oil or hazardous substances in U.S. navigable waters and imposes strict liabilityin the form of penalties for unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages andcomplements the remedies available under CERCLA. The EPA regulates the discharge of ballast water and other substances incidental to the normaloperation of vessels in U.S. waters using a Vessel General Permit (VGP) system pursuant to the CWA, in order to combat the risk of harmful organisms that cantravel in ballast water carried from foreign ports and to minimize the risk of water pollution through numerous specified effluent streams incidental to thenormal operation of vessels. Compliance with the conditions of the VGP is required for commercial vessels 79 feet in length or longer (other than commercialfishing vessels.) On March 28, 2013 the EPA adopted the 2013 VGP which took effect on December 19, 2013. The 2013 VGP is valid for five years. This new2013 VGP imposes a numeric standard to control the release of non-indigenous invasive species in ballast water discharges. On October 5, 2015, the U.S.Court of Appeals for the Second Circuit found the EPA was arbitrary and capricious in issuing the ballast water provisions of the VGP, finding the EPA failedto adequately explain why stricter technology-based effluent standards should not be applied. The court instructed the EPA to reconsider these issues butheld the 2013 VGP remains in effect until the EPA addresses the issues. If the EPA establishes more stringent numeric standards for ballast water discharges,we may incur costs to modify our vessels to comply with new standards. In addition, through the CWA certification provisions that allow U.S. states to placeadditional conditions on use of the VGP within state waters, a number of states have proposed or implemented a variety of stricter ballast water requirementsincluding, in some states, specific treatment standards.Compliance with new U.S. federal and state requirements could require the installation of equipment on our vessels to treat ballast water before it isdischarged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, and/or otherwise restrict ourvessels from entering U.S. waters. Coast Guard regulations require commercial ships operating in U.S. waters to manage ballast water by meeting certainrequirements, which include using a U.S. type-approved Ballast Water Management System (“BWMS”), temporarily using a foreign-type BWMS that hasbeen accepted by the Coast Guard, using ballast water obtained from a U.S. Public Water System, discharge ballast water into a shore-side facility or notdischarge ballast water within 12 nautical miles. Vessel owners/operators may request an extension to the compliance deadline by showing that, despite allefforts, it cannot comply with one of the approved systems or compliance methods. There are numerous foreign-approved Ballast Water Treatment Systems(“BWTS”) in the Coast Guard’s list of approved Alternate Management Systems. Importantly, on December 2, 2016, the Marine Safety Center issued the firstCoast Guard type approved Ballast Water Management System (“BWMS”), called the Optimarin Ballast System (there are currently type-approved BWTSfrom three manufacturers). With this issuance, it may become more difficult to receive compliance extensions and thus could result in significant costs toinstall an approved BWTS; however, existing extensions will continue to be honored through the stated extension date. Failure to comply with U.S. ballastwater regulations, including installation of BWTS by September 8, 2017, could result in civil or criminal fines or penalties.The Federal Clean Air Act (“CAA”) requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other aircontaminants. Our vessels are subject to CAA vapor control and recovery standards (“VCS”) for cleaning fuel tanks and conducting other operations inregulated port areas, and to CAA emissions standards for so-called “Category 3” marine diesel engines operating in U.S. waters. In April 2010, EPA adoptedregulations implementing the provision of MARPOL Annex VI regarding emissions from Category 3 marine diesel engines. Under these regulations, bothU.S. and foreign-flagged ships must comply 60Table of Contentswith the applicable engine and fuel standards of Annex VI, including the stricter North America ECA standards which took effect in August 2012, when theyenter U.S. ports or operate in most internal U.S. waters including the Great Lakes. Annex VI requirements are discussed in greater detail above under“International regulations to prevent pollution from ships.” We may incur costs to install control equipment on our vessels to comply with the new standards.Also under the CAA, since 1990 the U.S. Coast Guard has regulated the safety of VCSs that are required under EPA and state rules. Our vesselsoperating in regulated port areas have installed VCSs that are compliant with EPA, state and U.S. Coast Guard requirements. On July 16, 2013, the U.S. CoastGuard adopted regulations that made its VCS requirements more compatible with new EPA and State regulations, reflected changes in VCS technology, andcodified existing U.S. Coast Guard guidelines. We intend to comply with all applicable state and U.S. federal regulations in the ports where our vessels call.International laws governing civil liability to pay compensation or damagesWe operate a fleet of crude, product and chemical tankers that are subject to national and international laws governing pollution from such vessels.Several international conventions impose and limit pollution liability from vessels. An owner of a tanker vessel carrying a cargo of “persistent oil” as definedby the International Convention for Civil Liability for Oil Pollution Damage (the “CLC”) is subject under the convention to strict liability for any pollutiondamage caused in a contracting state by an escape or discharge from cargo or bunker tanks. This liability is subject to a financial limit calculated by referenceto the tonnage of the ship, and the right to limit liability may be lost if the spill is caused by the shipowner’s intentional or reckless conduct. Liability mayalso be incurred under the CLC for a bunker spill from the vessel even when she is not carrying such cargo, but is in ballast.When a tanker is carrying clean oil products that do not constitute “persistent oil” that would be covered under the CLC, liability for any pollutiondamage will generally fall outside the CLC and will depend on other international conventions or domestic laws in the jurisdiction where the spillage occurs.The same principle applies to any pollution from the vessel in a jurisdiction which is not a party to the CLC. The CLC applies in over 100 jurisdictionsaround the world, but it does not apply in the United States, where the corresponding liability laws such as the OPA discussed above, are particularlystringent.In 2001, the IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, which imposesstrict liability on shipowners for pollution damage in jurisdictional waters of ratifying states caused by discharges of “bunker oil.” The Bunker Conventiondefines “bunker oil” as “any hydrocarbon mineral oil, including lubricating oil, used or intended to be used for the operation or propulsion of the ship, andany residues of such oil.” The Bunker Convention also requires registered owners of ships over a certain size to maintain insurance for pollution damage inan amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated inaccordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended, or the 1976 Convention). The Bunker Conventionentered into force on November 21, 2008, and as of March 8, 2016, had 82 contracting states. In other jurisdictions liability for spills or releases of oil fromships’ bunkers continues to be determined by the national or other domestic laws in the jurisdiction where the events or damages occur.Outside the United States, national laws generally provide for the owner to bear strict liability for pollution, subject to a right to limit liability underapplicable national or international regimes for limitation of liability. The most widely applicable international regime limiting maritime pollution liabilityis the 1976 Convention. Rights to limit liability under the 1976 Convention are forfeited where a spill is caused by a shipowners’ intentional or recklessconduct. Some states have ratified the 1996 LLMC Protocol to the 1976 Convention, which provides for liability limits substantially higher than those setforth in the 1976 Convention to apply in such states. Finally, some jurisdictions are not a party to either the 1976 Convention or the 1996 LLMC Protocol,and, therefore, shipowners’ rights to limit liability for maritime pollution in such jurisdictions may be uncertain. 61Table of ContentsInspection by Classification SocietiesEvery sea going vessel must be “classed” by a classification society. The classification society certifies that the vessel is “in class,” signifying that thevessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of thevessel’s country of registry and the international conventions of which that country is a member. In addition, where surveys are required by internationalconventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, actingon behalf of the authorities concerned. The classification society also undertakes, on request, other surveys and checks that are required by regulations andrequirements of the flag state or port authority. These surveys are subject to agreements made in each individual case or to the regulations of the countryconcerned. For maintenance of the class, regular and extraordinary surveys of hull, machinery (including the electrical plant) and any special equipmentclassed are required to be performed as follows: • Annual Surveys: For ocean-going ships, annual surveys are conducted for the hull and the machinery (including the electrical plant) and, whereapplicable, for special equipment classed, at intervals of 12 months from the date of commencement of the class period indicated in thecertificate. • Intermediate Surveys: Extended annual surveys are referred to as intermediate surveys and typically are conducted two and a half years aftercommissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey. • Class Renewal Surveys: Class renewal surveys, also known as special surveys, are carried out for the ship’s hull, machinery (including theelectrical plant), and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the specialsurvey, the vessel is thoroughly examined, including audio-gauging, to determine the thickness of its steel structure. Should the thickness befound to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one yeargrace period for completion of the special survey under certain conditions. Substantial amounts of money may have to be spent for steel renewalsto pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending onwhether a grace period was granted, a shipowner has the option of arranging with the classification society for the vessel’s integrated hull ormachinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle.Risk of Loss and Liability InsuranceGeneralThe operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, and cargo loss or damage andbusiness interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility ofmarine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. TheOPA, which imposes virtually unlimited liability upon owners, operators and demise charterers of any vessel trading in the United States exclusive economiczone for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators trading in the UnitedStates market. While we believe that our present insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specificclaim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.Hull and Machinery InsuranceWe have obtained marine hull and machinery and war risk insurance, which include coverage of the risk of actual or constructive total loss, for all ofour owned vessels. Each of the owned vessels is covered for up to at 62Table of Contentsleast fair market value, with deductibles of $0.1 million per Handymax and Panamax tanker vessel and $0,25 million per VLCC tanker. We have alsoextended our war risk insurance to include war loss of hire for any loss of time to the vessel, including for physical repairs, caused by a warlike incident andpiracy seizure for up to 270 days of detention / loss of time. There are no deductibles for the war risk insurance or the war loss of hire cover.We have arranged, as necessary, increased value insurance for our vessels. With the increased value insurance, in case of total loss of the vessel, we willbe able to recover the sum insured under the increased value policy in addition to the sum insured under the hull and machinery policy. Increased valueinsurance also covers excess liabilities that are not recoverable in full by the hull and machinery policies by reason of underinsurance. We do not expect tomaintain loss of hire insurance for our vessels. Loss of hire insurance covers business interruptions that result in the loss of use of a vessel.Protection and Indemnity InsuranceProtection and indemnity insurance is expected to be provided by mutual protection and indemnity associations, or P&I Associations, who indemnifymembers in respect of discharging their tortious, contractual or statutory third-party legal liabilities arising from the operation of an entered ship. Suchliabilities include but are not limited to third-party liability and other related expenses from injury or death of crew, passengers and other third parties, loss ordamage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances, andsalvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended byprotection and indemnity mutual associations and always provided in accordance with the applicable associations’ rules and members’ agreed upon termsand conditions.Navios Acquisition’s fleet is currently entered for protection and indemnity insurance with International Group associations where, in line with allInternational Group Clubs, coverage for oil pollution is limited to $1.0 billion per event. The 13 P&I Associations that comprise the International Groupinsure approximately 95% of the world’s commercial tonnage and have entered into a pooling agreement to collectively reinsure each association’sliabilities. Each vessel that Navios Acquisition acquires will be entered with P&I Associations of the International Group. Under the International Groupreinsurance program for the current policy year, each P&I club in the International Group is responsible for the first $10.0 million of every claim. In everyclaim the amount in excess of $10.0 million and up to $80.0 million is shared by the clubs under the pooling agreement. Any claim in excess of$80.0 million is reinsured by the International Group in the international reinsurance market under the General Excess of Loss Reinsurance Contract. Thispolicy currently provides an additional $2.0 billion of coverage for non-oil pollution claims. Further to this, an additional reinsurance layer has been placedby the International Group for claims up to $1.0 billion in excess of $2.08 billion, i.e., $3.08 billion in total. For passengers and crew claims the overall limitis $3.0 billion for any one event with any one vessel with a sub-limit of $2.0 billion for passengers. With the exception of pollution, passenger or crew claims,should any other P&I claim exceed Group reinsurance limits, the provisions of all International Group Club’s overspill claim rules will operate and membersof any International Group Club will be liable for additional contributions in accordance with such rules. To date, there has never been an overspill claim, orone even nearing this level.As a member of a P&I Association, which is a member of the International Group, Navios Acquisition will be subject to calls payable to theassociations based on the individual fleet record, the associations’ overall claim records as well as the claim records of all other members of the individualassociations, and members of the pool of P&I Associations comprising the International Group. The P&I Associations’ policy year commences onFebruary 20th. Calls are levied by means of Estimated Total Premiums (“ETP”) and the amount of the final installment of the ETP varies according to theactual total premium ultimately required by the club for a particular policy year. Members have a liability to pay supplementary calls which might be leviedby the board of directors of the club if the ETP is insufficient to cover amounts paid out by the club. 63Table of ContentsShould a member leave or entry cease with any of the associations, at the Club’s Managers discretion, they may be also be liable to pay release calls orprovide adequate security for the same amount. Such calls are levied in respect of potential outstanding Club/Member liabilities on open policy years andinclude but are not limited to liabilities for deferred calls and supplementary calls.Uninsured RisksNot all risks are insured and not all risks are insurable. The principal insurable risks which nonetheless remain uninsured across our fleet are “loss ofhire” and “strikes,” except in cases of loss of hire due to war or a piracy event. Specifically, Navios Acquisition does not insure these risks because the costsare regarded as disproportionate. These insurances provide, subject to a deductible, a limited indemnity for hire that would not be receivable by theshipowner for reasons set forth in the policy. Should a vessel on time charter, where the vessel is paid a fixed hire day by day, suffer a serious mechanicalbreakdown, the daily hire will no longer be payable by the charterer. Under some circumstances, an event of force majeure may also permit the charterer toterminate the time charter or suspend payment of charter hire. The purpose of the loss of hire insurance is to secure the loss of hire during such periods. In thecase of strikes insurance, if a vessel is being paid a fixed sum to perform a voyage and the ship becomes strike bound at a loading or discharging port, theinsurance covers the loss of earnings during such periods.Exchange ControlsUnder Marshall Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictionsthat affect the remittance of dividends, interest or other payments to non-resident holders of Navios Acquisition’s securities.FacilitiesWe have offices at 7 Avenue de Grande Bretagne, Office 11B2, Monte Carlo, MC 98000 Monaco. We believe that our office facilities are suitable andadequate for our business as it is presently conducted. We presently occupy office space provided by Navios Holdings. Navios Holdings has agreed that itwill make such office space, as well as certain office and secretarial services, available to us, as may be required by us from time to time.Crewing and StaffThe Manager crews its vessels primarily with Greek, Filipino, Romanian, Russian and Ukrainian officers and Filipino seamen. The Manager isresponsible for selecting its Greek officers. For other nationalities, officers and seamen are referred to us by local crewing agencies. Navios Acquisitionrequires that all of its seamen have the qualifications and licenses required to comply with international regulations and shipping conventions.Administrative ServicesOn May 28, 2010, Navios Acquisition entered into an Administrative Services Agreement with Navios Holdings, initially set to expire on May 28,2015 that has been extended to May 2020, pursuant to which Navios Holdings provides certain administrative management services to Navios Acquisitionwhich include: bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services,advisory services, client and investor relations and other services. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connectionwith the provision of these services. See “Item 7B-Related Party Transactions — the Administrative Services Agreement.”Legal ProceedingsThe Company is involved in various disputes and arbitration proceedings arising in the ordinary course of business. Provisions have been recognizedin the financial statements for all such proceedings where the 64Table of ContentsCompany believes that a liability may be probable, and for which the amounts are reasonably estimable, based upon facts known at the date of the financialstatements were prepared. In the opinion of the management, the ultimate disposition of these matters individually and in aggregate will not materially affectthe Company’s financial position, results of operations or liquidity.On April 1, 2016, Navios Holdings was named as a defendant in a putative shareholder derivative lawsuit brought by two alleged shareholders ofNavios Acquisition purportedly on behalf of nominal defendant, Navios Acquisition, in the United States District Court for the Southern District of NewYork, captioned Metropolitan Capital Advisors International Ltd., et al. v. Navios Maritime Holdings, Inc. et al., No. 1:16-cv-02437. The lawsuit challengedthe March 9, 2016 loan agreement between Navios Holdings and Navios Acquisition pursuant to which Navios Acquisition agreed to provide a $50.0 millioncredit facility (the “Revolver”) to Navios Holdings.On April 14, 2016, Navios Holdings and Navios Acquisition announced that the Revolver had been cancelled, and that no borrowings had been madeunder the Revolver. In June 2016, the parties reached an agreement resolving the plaintiffs’ application for attorneys’ fees and expenses which was approvedby an order of the Court. The litigation was dismissed upon notice of the order being provided to Navios Acquisition’s shareholders via the inclusion of theorder as an attachment to a Navios Acquisition Form 6-K and the payment of $0.8 million by Navios Acquisition in satisfaction of the plaintiffs’ request forattorneys’ fees and expenses. A copy of the order was provided as an exhibit to Navios Acquisition’s Form 6-K filed with the Securities and ExchangeCommission on June 9, 2016. 65Table of ContentsC.Organizational StructureThe table below lists the Company’s wholly-owned subsidiaries as of December 31, 2016. Navios Maritime Acquisition Corporationand Subsidiaries: Nature Country ofIncorporationCompany Name Aegean Sea Maritime Holdings Inc. Sub-Holding Company Marshall Is.Amorgos Shipping Corporation Vessel-Owning Company Marshall Is.Andros Shipping Corporation Vessel-Owning Company Marshall Is.Antikithira Shipping Corporation Vessel-Owning Company Marshall Is.Antiparos Shipping Corporation Vessel-Owning Company Marshall Is.Amindra Navigation Co. Sub-Holding Company Marshall Is.Crete Shipping Corporation Vessel-Owning Company Marshall Is.Folegandros Shipping Corporation Vessel-Owning Company Marshall Is.Ikaria Shipping Corporation Vessel-Owning Company Marshall Is.Ios Shipping Corporation Vessel-Owning Company Cayman Is.Kithira Shipping Corporation Vessel-Owning Company Marshall Is.Kos Shipping Corporation Vessel-Owning Company Marshall Is.Mytilene Shipping Corporation Vessel-Owning Company Marshall Is.Navios Maritime Acquisition Corporation Holding Company Marshall Is.Navios Acquisition Finance (U.S.) Inc. Co-Issuer DelawareRhodes Shipping Corporation Vessel-Owning Company Marshall Is.Serifos Shipping Corporation Vessel-Owning Company Marshall Is.Shinyo Dream Limited Vessel-Owning Company(3) Hong KongShinyo Kannika Limited Vessel-Owning Company(3) Hong KongShinyo Kieran Limited Vessel-Owning Company(3) British Virgin IsShinyo Loyalty Limited Vessel-Owning Company(1) Hong KongShinyo Navigator Limited Vessel-Owning Company(2) Hong KongShinyo Ocean Limited Vessel-Owning Company(3) Hong KongShinyo Saowalak Limited Vessel-Owning Company(3) British Virgin Is.Sifnos Shipping Corporation Vessel-Owning Company Marshall Is.Skiathos Shipping Corporation Vessel-Owning Company Marshall Is.Skopelos Shipping Corporation Vessel-Owning Company Cayman Is.Syros Shipping Corporation Vessel-Owning Company Marshall Is.Thera Shipping Corporation Vessel-Owning Company Marshall Is.Tinos Shipping Corporation Vessel-Owning Company Marshall Is.Oinousses Shipping Corporation Vessel-Owning Company Marshall Is.Psara Shipping Corporation Vessel-Owning Company Marshall Is.Antipsara Shipping Corporation Vessel-Owning Company Marshall Is.Samothrace Shipping Corporation Vessel-Owning Company Marshall Is.Thasos Shipping Corporation Vessel-Owning Company Marshall Is.Limnos Shipping Corporation Vessel-Owning Company Marshall Is.Skyros Shipping Corporation Vessel-Owning Company Marshall Is.Alonnisos Shipping Corporation Vessel-Owning Company(4) Marshall Is.Makronisos Shipping Corporation Vessel-Owning Company(4) Marshall Is.Iraklia Shipping Corporation Vessel-Owning Company Marshall Is.Paxos Shipping Corporation Vessel-Owning Company(5) Marshall Is.Antipaxos Shipping Corporation Vessel-Owning Company Marshall Is.Donoussa Shipping Corporation Vessel-Owning Company(6) Marshall Is.Schinousa Shipping Corporation Vessel-Owning Company(7) Marshall Is.Navios Acquisition Europe Finance Inc Sub-Holding Company Marshall Is.Sikinos Shipping Corporation Vessel-Owning Company(3) Marshall Is.Kerkyra Shipping Corporation Vessel-Owning Company Marshall Is.Lefkada Shipping Corporation Vessel-Owning Company Marshall Is.Zakynthos Shipping Corporation Vessel-Owning Company Marshall Is.Leros Shipping Corporation Vessel-Owning Company Marshall Is.Kimolos Shipping Corporation Vessel-Owning Company Marshall Is.Samos Shipping Corporation Vessel-Owning Company Marshall Is.Tilos Shipping Corporation Vessel-Owning Company Marshall Is.Delos Shipping Corporation Vessel-Owning Company Marshall Is.Navios Maritime Midstream Partners GP LLC Holding Company Marshall Is. 66Table of Contents (1)Former vessel-owner of the Shinyo Splendor which was sold to an unaffiliated third party on May 6, 2014.(2)Former vessel-owner of the Shinyo Navigator which was sold to an unaffiliated third party on December 6, 2013.(3)Navios Midstream acquired all of the outstanding shares of capital stock of the vessel-owning subsidiary.(4)Each company had the rights over a shipbuilding contract of an MR2 product tanker vessel. In February 2015, these shipbuilding contracts were terminated, with no exposureto Navios Acquisition, due to the shipyard’s inability to issue a refund guarantee.(5)Former vessel-owner of the Nave Lucida which was sold to an unaffiliated third party on January 27, 2016.(6)Former vessel-owner of the Nave Universe which was sold to an unaffiliated third party on October 4, 2016(7)Former vessel-owner of the Nave Constellation which was sold to an unaffiliated third party on November 15, 2016Affiliates included in the financial statements accounted for under the equity method:In the consolidated financial statements of Navios Acquisition, Navios Europe I Inc. (“Navios Europe I”) with ownership interest of 47.5% and NaviosEurope II Inc. (“Navios Europe II”) with ownership interest of 47.5% are included as affiliates and are accounted for under the equity method, for such periodsduring which the entities were affiliates of Navios Acquisition. See Note 8 to the Notes to Consolidated Financial Statements, included elsewhere within thisAnnual Report.As of December 31, 2016, Navios Acquisition owns the 2% general partner interest in Navios Midstream totaling 420,641 general partner units, as wellas a 57.9% limited partner interest, which represents 1,242,692 common units (5.9%), 9,342,692 subordinated units (44.4%) and 1,592,920 SubordinatedSeries A Units (7.6%). In the consolidated financial statements of Navios Acquisition, Navios Midstream with ownership interest of 59.9% is included as anaffiliate. The Company analyzed its investments in Navios Midstream and concluded that it has the ability to exercise significant influence over theoperating and financial policies of Navios Midstream and, therefore all classes of units i.e., common units, the subordinated units, the subordinated Series Aunits and the general partner units of Navios Midstream are accounted for under the equity method. D.Property, plants and equipmentOther than our vessels, we do not have any other material property, plants or equipment. Item 4A.Unresolved Staff CommentsNone. Item 5.Operating and Financial Review and ProspectsOverviewWe are an owner and operator of tanker vessels focusing in the transportation of petroleum products (clean and dirty) and bulk liquid chemicals and weare incorporated in the Republic of the Marshall Islands.On May 25, 2010, we consummated the Product and Chemical Tanker Acquisition, the acquisition of 13 vessels (11 product tankers and two chemicaltankers), for an aggregate purchase price of $457.7 million, including amounts to be paid for future contracted vessels to be delivered. On September 10,2010, we consummated the VLCC Acquisition, for an aggregate purchase price of $587.0 million.On October 9, 2013, Navios Holdings, Navios Acquisition and Navios Partners established Navios Europe I and have economic interests of 47.5%,47.5% and 5.0%, respectively. Navios Europe I is engaged in the marine transportation industry through the ownership of five tankers and five containervessels. Effective November 67Table of Contents2014, Navios Holdings, Navios Acquisition and Navios Partners have voting interest of 50%, 50% and 0%, respectively. On February 21, 2017, NaviosHoldings agreed to transfer to Navios Partners its participation in Navios Revolving Loans I and Navios Term Loans I, both relating to Navios Europe I, for aconsideration of $4.1 million in cash and 13,076,923 newly issued common units of Navios Partners.On October 13, 2014, Navios Acquisition formed Navios Midstream under the laws of the Marshall Islands. Navios Maritime Midstream Partners GPLLC, or the general partner, a wholly-owned subsidiary of Navios Acquisition, was also formed on that date to act as the general partner of Navios Midstreamand received a 2.0% general partner interest in Navios Midstream. Navios Partners is an affiliate and not consolidated under Navios Holdings.On February 18, 2015, Navios Holdings, Navios Acquisition and Navios Partners established Navios Europe II and have economic interests of 47.5%,47.5% and 5.0%, respectively and voting interests of 50%, 50% and 0%, respectively. Navios Europe II is engaged in the marine transportation industrythrough the ownership of seven dry bulk and seven container vessels.Fleet DevelopmentAcquisition of vessels2015On January 8, 2015, Navios Acquisition took delivery of the Nave Sextans, a newbuilding, 49,999 dwt, MR2 product tanker, from an unaffiliated thirdparty for a total cost of $33.4 million. Cash paid was $17.8 million and $15.6 million was transferred from vessel deposits.On February 11, 2015, Navios Acquisition took delivery of the Nave Velocity, a newbuilding, 49,999 dwt, MR2 product tanker, from an unaffiliatedthird party for a total cost of $39.2 million. Cash paid was $12.6 million and $26.6 million was transferred from vessel deposits.On November 6, 2015, Navios Acquisition took delivery of the Nave Spherical, a 2009-built, 297,188 dwt VLCC, from an unaffiliated third party for atotal cost of $69.2 million.On December 2, 2015, Navios Acquisition took delivery of the Nave Photon, a 2008-built, 297,395 dwt VLCC from an unaffiliated third party for atotal cost of $65.2 million.Disposal of vessels2016On January 27, 2016, Navios Acquisition sold the Nave Lucida to an unaffiliated third party for net cash proceeds of $18.4 million. The gain on sale ofthe vessel, upon write-off of the unamortized dry-docking, was $2.3 million.On October 4, 2016, Navios Acquisition sold the Nave Universe to an unaffiliated third party for net cash proceeds of $35.8 million. As of June 30,2016, the vessel was classified as held for sale as the relevant criteria for the classification were met. The gain on sale of the vessel was $4.8 million.On November 15, 2016, Navios Acquisition sold the Nave Constellation to an unaffiliated third party for net cash proceeds of $35.8 million. As ofJune 30, 2016, the vessel was classified as held for sale as the relevant criteria for the classification were met. The gain on sale of the vessel was $4.6 million. 68Table of Contents2015On June 18, 2015, Navios Midstream exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste, a 2003-built of298,717 dwt VLCC, and the C. Dream, a 2000 built VLCC of 298,570 dwt, from Navios Acquisition for an aggregate sale price of $100.0 million. The saleprice consisted of $73.0 million cash consideration and the issuance of 1,592,920 Subordinated Series A Units to Navios Acquisition. Navios Maritime AcquisitionCorporation and Subsidiaries: Nature Country ofIncorporation 2016 2015 2014 Company Name Aegean Sea Maritime Holdings Inc. Sub-Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Amorgos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Andros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Antikithira Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Antiparos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Amindra Navigation Co. Sub-Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Crete Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Folegandros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Ikaria Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Ios Shipping Corporation Vessel-Owning Company Cayman Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Kithira Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Kos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Mytilene Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Navios Maritime Acquisition Corporation Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Navios Acquisition Finance (U.S.) Inc. Co-Issuer Delaware 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Rhodes Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Serifos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Shinyo Dream Limited Vessel-Owning Company(3) Hong Kong — 1/1 - 6/17 1/1 - 12/31 Shinyo Kannika Limited Vessel-Owning Company(3) Hong Kong — — 1/1 - 11/17 Shinyo Kieran Limited Vessel-Owning Company(3) British Virgin Is — — 1/1 - 11/17 Shinyo Loyalty Limited Vessel-Owning Company(1) Hong Kong 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Shinyo Navigator Limited Vessel-Owning Company(2) Hong Kong 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Shinyo Ocean Limited Vessel-Owning Company(3) Hong Kong — — 1/1 - 11/17 Shinyo Saowalak Limited Vessel-Owning Company(3) British Virgin Is. — — 1/1 - 11/17 Sifnos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Skiathos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Skopelos Shipping Corporation Vessel-Owning Company Cayman Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Syros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Thera Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Tinos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Oinousses Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Psara Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Antipsara Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Samothrace Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Thasos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Limnos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Skyros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Alonnisos Shipping Corporation Vessel-Owning Company(4) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Makronisos Shipping Corporation Vessel-Owning Company(4) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Iraklia Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Paxos Shipping Corporation Vessel-Owning Company(5) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Antipaxos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Donoussa Shipping Corporation Vessel-Owning Company(6) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Schinousa Shipping Corporation Vessel-Owning Company(7) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Navios Acquisition Europe Finance Inc Sub-Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Sikinos Shipping Corporation Vessel-Owning Company(3) Marshall Is. — 1/1 - 6/17 1/1 - 12/31 Kerkyra Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Lefkada Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Zakynthos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Leros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 4/4 - 12/31 Kimolos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 4/29 - 12/31 Samos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 9/15 - 12/31 Tilos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 10/9 - 12/31 — Delos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 10/9 - 12/31 — Navios Maritime Midstream Partners GP LLC Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 10/13 - 12/31 (1)Former vessel-owner of the Shinyo Splendor which was sold to an unaffiliated third party on May 6, 2014.(2)Former vessel-owner of the Shinyo Navigator which was sold to an unaffiliated third party on December 6, 2013.(3)Navios Midstream acquired all of the outstanding shares of capital stock of the vessel-owning subsidiary.(4)Each company had the rights over a shipbuilding contract of an MR2 product tanker vessel. In February 2015, these shipbuilding contracts were terminated, with no exposure toNavios Acquisition, due to the shipyard’s inability to issue a refund guarantee. 69Table of Contents(5)Former vessel-owner of the Nave Lucida which was sold to an unaffiliated third party on January 27, 2016.(6)Former vessel-owner of the Nave Universe which was sold to an unaffiliated third party on October 4, 2016 (7) Former vessel-owner of the Nave Constellation which was sold toan unaffiliated third party on November 15, 2016Our ChartersOur major customers during 2016 were: Navig8, Shell and Mansel. For the year ended December 31, 2016, these three customers accounted for 33.0%,20.0% and 14.7%, respectively, of Navios Acquisition’s revenue.Our major customers during 2015 were: Navig8, Shell and Mansel. For the year ended December 31, 2015, these three customers accounted for 35.2%,13.6% and 10.8%, respectively, of Navios Acquisition’s revenue.Our major customers during 2014 were: DOSCO and Navig8. For the year ended December 31, 2014, these two customers accounted for 22.4% and28.8%, respectively, of Navios Acquisition’s revenue.No other customers accounted for 10% or more of total revenue for any of the years presented.Our revenues are driven by the number of vessels in the fleet, the number of days during which the vessels operate and our charter hire rates, which, inturn, are affected by a number of factors, including: • the duration of the charters; • the level of spot and long-term market rates at the time of charter; • decisions relating to vessel acquisitions and disposals; • the amount of time spent positioning vessels; • the amount of time that vessels spend undergoing repairs and upgrades in drydock; • the age, condition and specifications of the vessels; and • the aggregate level of supply and demand in the tanker shipping industry.Time charters are available for varying periods, ranging from a single trip (spot charter) to long-term which may be any number of years. In general, along-term time charter assures the vessel owner of a consistent stream of revenue. Operating the vessel in the spot market affords the owner greater spot marketopportunity, which may result in high rates when vessels are in high demand or low rates when vessel availability exceeds demand. We intend to operate ourvessels in a mix of short-term and long-term charter markets. Vessel charter rates are affected by world economics, international events, weather conditions,strikes, governmental policies, supply and demand and many other factors that might be beyond our control.We could lose a customer or the benefits of a charter if: • the customer fails to make charter payments because of its financial inability, disagreements with us or otherwise; • the customer exercises certain rights to terminate the charter of the vessel; • the customer terminates the charter because we fail to deliver the vessel within a fixed period of time, the vessel is lost or damaged beyond repair,there are serious deficiencies in the vessel or prolonged periods of off-hire, or we default under the charter; or • a prolonged force majeure event affecting the customer, including damage to or destruction of relevant production facilities, war or politicalunrest prevents us from performing services for that customer.If we lose a charter, we may be unable to re-deploy the related vessel on terms as favorable to us due to the long-term nature of most charters and thecyclical nature of the industry or we may be forced to charter the vessel on the spot market at then market rates which may be less favorable than the charterthat has been terminated. The loss of any of our customers, time charters or vessels, or a decline in payments under our charters, could have a material adverseeffect on our business, results of operations and financial condition and our ability to make cash distributions in the event we are unable to replace suchcustomer, time charter or vessel. 70Table of ContentsUnder some of our time charters, either party may terminate the charter contract in the event of war in specified countries or in locations that wouldsignificantly disrupt the free trade of the vessel. Some of the time charters covering our vessels require us to return to the charterer, upon the loss of the vessel,all advances paid by the charterer but not earned by us.Vessels OperationsUnder our charters, our vessel manager is generally responsible for commercial, technical, health and safety and other management services related tothe vessels’ operation, and the charterer is responsible for bunkering and substantially all of the vessel voyage costs, including canal tolls and port charges.Pursuant to the Management Agreement dated May 28, 2010 and as amended in May 2012 and May 2014, the Manager provided commercial andtechnical management services to Navios Acquisition’s vessels for a fixed daily fee of: (a) $6,000 per MR2 product tanker and chemical tanker vessel; (b)$7,000 per LR1 product tanker vessel; and (c) $9,500 per VLCC, through May 2016.Pursuant to an amendment to the Management Agreement dated as of May 19, 2016, Navios Acquisition fixed the fees for commercial and technicalship management services of its fleet for two additional years from May 29, 2016, through May 2018, at a daily fee of: (a) $6,350 per MR2 product tankerand chemical tanker vessel; (b) $7,150 per LR1 product tanker vessel; and (c) $9,500 per VLCC.Extraordinary costs and expenses include fees and costs resulting from: • time spent on insurance and salvage claims; • time spent vetting and pre-vetting the vessels by any charterers in excess of 10 days per vessel per year; • the deductible of any insurance claims relating to the vessels or for any claims that are within such deductible range; • the significant increase in insurance premiums which are due to factors such as “acts of God” outside the control of the Manager; • repairs, refurbishment or modifications, including those not covered by the guarantee of the shipbuilder or by the insurance covering the vessels,resulting from maritime accidents, collisions, other accidental damage or unforeseen events (except to the extent that such accidents, collisions,damage or events are due to the fraud, gross negligence or willful misconduct of the Manager, its employees or its agents, unless and to theextent otherwise covered by insurance); • expenses imposed due to any improvement, upgrade or modification to, structural changes with respect to the installation of new equipmentaboard any vessel that results from a change in, an introduction of new, or a change in the interpretation of, applicable laws, at therecommendation of the classification society for that vessel or otherwise; • costs associated with increases in crew employment expenses resulting from an introduction of new, or a change in the interpretation of,applicable laws or resulting from the early termination of the charter of any vessel; • any taxes, dues or fines imposed on the vessels or the Manager due to the operation of the vessels; • expenses incurred in connection with the sale or acquisition of a vessel such as inspections and technical assistance; and • any similar costs, liabilities and expenses that were not reasonably contemplated by us and the Manager as being encompassed by or acomponent of the fixed daily fees at the time the fixed daily fees were determined. 71Table of ContentsPayment of any extraordinary fees or expenses to the Manager could significantly increase our vessel operating expenses and impact our results ofoperations.During the remaining term of the Management Agreement, we expect that we will reimburse the Manager for all of the actual operating costs andexpenses it incurs in connection with the management of our fleet.Administrative ServicesOn May 28, 2010, Navios Acquisition entered into the Administrative Services Agreement with Navios Holdings, initially set to expire on May 28,2015, pursuant to which Navios Holdings provides certain administrative management services to Navios Acquisition which include: bookkeeping, auditand accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client andinvestor relations and other services. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision of theseservices.In May 2014, Navios Acquisition extended the duration of its existing Administrative Services Agreement with Navios Holdings, until May 2020pursuant to its existing terms. A.Operating resultsTrends and Factors Affecting Our Future Results of OperationsWe believe the principal factors that will affect our future results of operations are the economic, regulatory, political and governmental conditions thataffect the shipping industry generally and that affect conditions in countries and markets in which our vessels engage in business. Other key factors that willbe fundamental to our business, future financial condition and results of operations include: • the demand for seaborne transportation services; • the ability of Navios Holdings’ commercial and chartering operations to successfully employ our vessels at economically attractive rates,particularly as our fleet expands and our charters expire; • the effective and efficient technical management of our vessels; • Navios Holdings’ ability to satisfy technical, health, safety and compliance standards of major commodity traders; and • the strength of and growth in the number of our customer relationships, especially with major commodity traders.In addition to the factors discussed above, we believe certain specific factors will impact our combined and consolidated results of operations. Thesefactors include: • the charter hire earned by our vessels under our charters; • our access to capital required to acquire additional vessels and/or to implement our business strategy; • our ability to sell vessels at prices we deem satisfactory; • our level of debt and the related interest expense and amortization of principal; and • the level of any dividend to our stockholders. 72Table of ContentsPeriod over Period ComparisonsYear Ended December 31, 2016 Compared to the Year Ended December 31, 2015The following table presents consolidated revenue and expense information for the years ended December 31, 2016 and 2015. This information wasderived from the audited consolidated financial statements of Navios Acquisition for the respective periods. (in thousands of U.S. dollars) Year endedDecember 31,2016 Year endedDecember 31,2015 Revenue $290,245 $313,396 Time charter and voyage expenses (4,980) (4,492) Direct vessel expenses (3,567) (1,532) Management fees (entirely through related party transactions) (97,866) (95,336) General and administrative expenses (17,057) (15,532) Depreciation and amortization (57,617) (57,623) Interest income 4,767 1,683 Interest expenses and finance cost (75,987) (73,561) Gain on sale of vessels 11,749 5,771 Equity in net earnings of affiliated companies 15,499 18,436 Other income 377 41 Other expense (2,685) (1,514) Net income $62,878 $89,737 Set forth below are selected historical and statistical data for Navios Acquisition for each of the years ended December 31, 2016 and 2015 that webelieve may be useful in better understanding Navios Acquisition’s financial position and results of operations. Year endedDecember 31,2016 Year endedDecember 31,2015 FLEET DATA Available days(1) 13,753 13,743 Operating days(2) 13,716 13,707 Fleet utilization(3) 99.7% 99.7% Vessels operating at period end 36 39 AVERAGE DAILY RESULTS Time Charter Equivalent (“TCE”) Rate per day(4) $20,742 $22,477 (1)Available days: Available days for the fleet are total calendar days the vessels were in Navios Acquisition’s possession for the relevant period aftersubtracting off-hire days associated with major repairs, drydocking or special surveys. The shipping industry uses available days to measure thenumber of days in a relevant period during which vessels should be capable of generating revenues.(2)Operating days: Operating days are the number of available days in the relevant period less the aggregate number of days that the vessels are off-hiredue to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in arelevant period during which vessels actually generate revenues.(3)Fleet utilization: Fleet utilization is the percentage of time that Navios Acquisition’s vessels were available for generating revenue, and is determinedby dividing the number of operating days during a relevant period by the number of available days during that period. The shipping industry uses fleetutilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are offhire for reasons other than scheduled repairs, dry dockings or special surveys.(4)TCE Rate: Time Charter Equivalent Rate per day is defined as voyage and time charter revenues less voyage expenses during a period divided by thenumber of available days during the period. The TCE Rate 73Table of Contents per day is a standard shipping industry performance measure used primarily to present the actual daily earnings generated by vessels of various types ofcharter contracts for the number of available days of the fleet.For the year ended December 31, 2016, Navios Acquisition had 13,753 available days, after it took delivery of four MR2 product tankers in 2015. Theeffect was partially mitigated by: (i) the sale of the outstanding shares of capital stock of two of its vessel-owning subsidiaries (Nave Celeste and C. Dream) toNavios Midstream (see Note 1) on June 18, 2015; and (ii) the sale of one MR2 product tanker and two chemical tankers in 2016.There were 13,743 available days in the comparative period in 2015.Revenue: Revenue for the year ended December 31, 2016 decreased by $23.2 million, or 7.4%, to $290.2 million, as compared to $313.4 million for2015. The decrease was mainly attributable to: (i) the decrease in revenue by $18.6 million due to the sale of two VLCCs in June 2015, one MR2 producttanker in January 2016 and two chemical tankers in October and November 2016; and (ii) the decrease in profit sharing by $24.5 million. The decrease waspartially mitigated by the increase in revenue following deliveries of four vessels during 2015. Available days of the fleet increased to 13,753 days for theyear ended December 31, 2016, as compared to 13,743 days for the year ended December 31, 2015. The TCE Rate decreased to $20,742 for the year endedDecember 31, 2016, from $22,477 for the year ended December 31, 2015.Time charter and voyage expenses: Time charter and voyage expenses for the year ended December 31, 2016 increased by approximately $0.5 millionto $5.0 million, as compared to $4.5 million for the year ended December 31, 2015. The increase was attributable to a $1.1 million increase in bunkers andother voyage expenses and was partially mitigated by a $0.5 million decrease in broker commission costs.Direct vessel expenses: Direct vessel expenses for the year ended December 31, 2016 increased by approximately $2.0 million to $3.6 million ascompared to $1.5 million for the year ended December 31, 2015. The increase was attributable to a: (i) $1.3 million increase in amortization of dry dock andspecial survey cost; and (ii) $0.7 million increase in expenses incurred in connection with specialized work performed on certain vessels of our fleet.Management fees: Management fees for the year ended December 31, 2016 increased by approximately $2.5 million to $97.9 million, as compared to$95.3 million for the year ended December 31, 2015. The increase was mainly attributable to the increased number of vessels and the increase in themanagement fees with effect as of May 29, 2016, described below. Pursuant to the Management Agreement, the Manager provided commercial and technicalmanagement services to Navios Acquisition’s vessels for a daily fee of: (a) $6,000 per MR2 product tanker and chemical tanker vessel; (b) $7,000 per LR1product tanker vessel; and (c) $9,500 per VLCC, through May 2016. Navios Acquisition fixed the fees for commercial and technical ship managementservices of its fleet for two additional years from May 29, 2016, through May 2018, at a daily fee of: (a) $6,350 per MR2 product tanker and chemical tankervessel; (b) $7,150 per LR1 product tanker vessel; and (c) $9,500 per VLCC.Dry docking expenses are reimbursed by Navios Acquisition, at cost.General and administrative expenses: Total general and administrative expenses for the year ended December 31, 2016 increased by approximately$1.5 million to $17.1 million compared to $15.5 million for the year ended December 31, 2015.The increase was mainly attributable to a $1.8 million increase in administrative expenses paid to Navios Holdings mainly due to the increased numberof vessels in Navios Acquisition’s fleet, partially mitigated by: (i) a $0.2 million decrease in compensation to the directors and/or officers of the Company;and (ii) a $0.2 million decrease in other general and administrative expenses, including professional, other fees and travel expenses. 74Table of ContentsFor the years ended December 31, 2016 and 2015, the expenses charged by Navios Holdings for administrative services were $9.4 million and$7.6 million, respectively. The remaining balance of $7.6 million and $7.9 million of general and administrative expenses for the years ended December 31,2016 and 2015, respectively, related to stock based compensation and compensation expense, as well as legal, consulting, travel and professional feesincluding audit fees.Depreciation and amortization: Depreciation and amortization amounted to $57.6 million for each of the years ended December 31, 2016 andDecember 31, 2015. Depreciation of a vessel is calculated using an estimated useful life of 25 years from the date the vessel was originally delivered from theshipyard.Interest income: Interest income for year ended December 31, 2016 increased by $3.1 million to $4.8 million compared to $1.7 million for the yearended December 31, 2015. The increase is mainly attributable to the increase of the interest income accrued under the revolving loans granted to NaviosHoldings, Navios Europe I and Navios Europe II.Interest expense and finance cost: Interest expense and finance cost for the year ended December 31, 2016 increased by $2.4 million to $76.0 million,as compared to $73.6 million for the year ended December 31, 2015. The increase was mainly due to the increase in the average outstanding balance of ourborrowings, which amounted to $503.6 million for the year ended December 31, 2016 as compared to $487.7 million for the year ended December 31, 2015.The weighted average interest rate for the years ended December 31, 2016 and 2015 was 6.0%. As of December 31, 2016 and 2015, the outstanding balanceunder Navios Acquisition’s total borrowings was $1,111.2 million and $1,216.6 million, respectively.Gain on sale of vessels: The gain on sale of vessels for the year ended December 31, 2016 increased by approximately $6.0 million to $11.7 million, ascompared to $5.8 million.During 2016, Navios Acquisition sold the Nave Constellation, the Nave Universe and the Nave Lucida to unaffiliated third parties for total net cashproceeds of $90.0 million. As of June 30, 2016, the Nave Constellation and the Nave Universe were classified as vessels held for sale.The gain on sale of vessels for the year ended December 31, 2015, was $5.8 million and resulted from the sale of the Nave Celeste and the C. Dream toNavios Midstream for a total sale price of $100.0 million, of which $73.0 million was paid in cash and $27.0 million was paid in a new class of unitsdesignated as Subordinated Series A Units of Navios Midstream.Equity in net earnings of affiliated companies: Equity in net earnings of affiliated companies decreased by $2.9 million to $15.5 million for the yearended December 31, 2016, as compared to $18.4 million for the same period in 2015. The decrease resulted from the decrease in equity in earnings of NaviosMidstream which amounted to $1.6 million and of Navios Europe I and of Navios Europe II which amounted to $1.3 million.Other income: Other income amounted to $0.4 million for the year ended December 31, 2016 compared to $0.04 million for the year endedDecember 31, 2015.Other expense: Other expense increased by $1.2 million to $2.7 million for the year ended December 31, 2016, as compared to $1.5 million for thesame period in 2015. 75Table of ContentsYear Ended December 31, 2015 Compared to the Year Ended December 31, 2014The following table presents consolidated revenue and expense information for the years ended December 31, 2015 and 2014. This information wasderived from the audited consolidated financial statements of Navios Acquisition for the respective periods. (in thousands of U.S. dollars) Year endedDecember 31,2015 Year endedDecember 31,2014 Revenue $313,396 $264,877 Time charter and voyage expenses (4,492) (5,187) Direct vessel expenses (1,532) (1,979) Management fees (entirely through related party transactions) (95,336) (95,827) General and administrative expenses (15,532) (14,588) Depreciation and amortization (57,623) (67,718) Interest income 1,683 720 Interest expenses and finance cost (73,561) (78,610) Impairment loss — (11,690) Gain on sale of vessels 5,771 22,599 Change in fair value of other assets — (1,188) Equity in net earnings of affiliated companies 18,436 2,000 Other income 41 280 Other expense (1,514) (642) Net income $89,737 $13,047 Set forth below are selected historical and statistical data for Navios Acquisition for each of the years ended December 31, 2015 and 2014 that webelieve may be useful in better understanding Navios Acquisition’s financial position and results of operations. Year EndedDecember 31,2015 Year EndedDecember 31,2014 FLEET DATA Available days(1) 13,743 13,227 Operating days(2) 13,707 13,193 Fleet utilization(3) 99.7% 99.7% Vessels operating at period end 39 37 AVERAGE DAILY RESULTS Time Charter Equivalent (“TCE”) Rate per day(4) $22,477 $19,633 (1)Available days: Available days for the fleet are total calendar days the vessels were in Navios Acquisition’s possession for the relevant period aftersubtracting off-hire days associated with major repairs, drydocking or special surveys. The shipping industry uses available days to measure thenumber of days in a relevant period during which vessels should be capable of generating revenues.(2)Operating days: Operating days are the number of available days in the relevant period less the aggregate number of days that the vessels are off-hiredue to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in arelevant period during which vessels actually generate revenues.(3)Fleet utilization: Fleet utilization is the percentage of time that Navios Acquisition’s vessels were available for generating revenue, and is determinedby dividing the number of operating days during a relevant period by the number of available days during that period. The shipping industry uses fleetutilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are offhire for reasons other than scheduled repairs, dry dockings or special surveys.(4)TCE Rate: Time Charter Equivalent Rate per day is defined as voyage and time charter revenues less voyage expenses during a period divided by thenumber of available days during the period. The TCE Rate 76Table of Contents per day is a standard shipping industry performance measure used primarily to present the actual daily earnings generated by vessels of various types ofcharter contracts for the number of available days of the fleet.For the year ended December 31, 2015, Navios Acquisition had 13,743 available days, after it took delivery of five MR2 product tankers and eightVLCCs during the period from January 1, 2014 until December 31, 2015. The effect was partially mitigated by; (i) the sale of the outstanding shares of capitalstock of two of its vessel-owning subsidiaries (Nave Celeste and C. Dream) to Navios Midstream (see Note 1) on June 18, 2015; (ii) the sale of the ShinyoSplendor on May 6, 2014 to an unaffiliated third party; and (iii) the sale of the outstanding shares of capital stock of four of its vessel-owning subsidiaries(Shinyo Ocean Limited, Shinyo Kannika Limited, Shinyo Kieran Limited and Shinyo Saowalak Limited) to Navios Midstream (see Note 1) on November 18,2014.There were 13,227 available days in the comparative period in 2014.Revenue: Revenue for the year ended December 31, 2015 increased by $48.5 million or 18.3% to $313.4 million, as compared to $264.9 million forthe same period in 2014. The increase was mainly attributable to: (i) the increase in revenue following deliveries of the vessels discussed above and waspartially mitigated by $73.7 million due to the sale of five VLCCs in 2014 and two VLCCs in June 2015; and (ii) the profit sharing increase by $25.4 millionto $32.1 million recognized in the year ended December 31, 2015, as compared to $6.7 million for the same period in 2014. Available days of the fleetincreased to 13,743 days for the year ended December 31, 2015, as compared to 13,227 days for the year ended December 31, 2014. The TCE Rate increasedto $22,477 for the year ended December 31, 2015, from $19,633 for the year ended December 31, 2014.Time charter and voyage expenses: Time charter and voyage expenses for the year ended December 31, 2015 decreased by approximately $0.7 millionto $4.5 million, as compared to $5.2 million for the year ended December 31, 2014. The decrease was attributable to: a (a) $1.3 million decrease in bunkers;and (b) $0.1 million decrease in voyage expenses. The decrease was partially mitigated by a $0.6 million increase in broker commission costs.Direct vessel expenses: Direct vessel expenses, comprised of the amortization of dry dock and special survey costs, of certain vessels of our fleetamounted to $1.5 million for the year ended December 31, 2015, as compared to $2.0 million for the year ended December 31, 2014.Management fees: Management fees for the year ended December 31, 2015 decreased by $0.5 million to $95.3 million, as compared to $95.8 millionfor the year ended December 31, 2014. The decrease was attributable to: (i) the decrease of $17.6 million due to the sale of five VLCCs in 2014 and twoVLCCs in June 2015, partially mitigated by the increase incurred as a result of the 13 vessels delivered since January 2014.General and administrative expenses: Total general and administrative expenses for the year ended December 31, 2015 increased by approximately$0.9 million or 6.5% to $15.5 million compared to $14.6 million for the year ended December 31, 2014. The increase was mainly attributable to a:(a) $2.8 million of cash payment authorized by the Compensation Committee of the Company; (b) $0.3 million increase in administrative expenses paid tothe Manager due to the increased number of vessels in Navios Acquisition’s fleet; (c) $0.4 million increase in other expenses, including travelling expenses;and (d) $0.4 million increase in professional and other fees; partially mitigated by $2.9 million decrease of the stock based compensation.For the years ended December 31, 2015 and 2014, the expenses charged by Navios Holdings for administrative services were $7.6 million and$7.3 million, respectively. The remaining balance of $7.9 million and $7.3 million of general and administrative expenses for the years ended December 31,2015 and 2014, respectively, related to stock based compensation and compensation expense, as well as legal, consulting, travel and professional feesincluding audit fees. 77Table of ContentsDepreciation and amortization: Depreciation and amortization decreased by approximately $10.1 million to $57.6 million for the year endedDecember 31, 2015 as compared to $67.7 million for the year ended December 31, 2014. The decrease of $10.1 million was mainly attributable to a:(i) decrease in depreciation expense of $17.8 million due to the sale of five VLCCs in 2014 and two VLCCs in June 2015; and (ii) decrease in amortization offavorable and unfavorable lease terms of $3.6 million, mainly due to the sale of the time charter-out contracts attached to the six VLCCs sold to NaviosMidstream. The decrease was partially mitigated by approximately $11.3 million due to the acquisition of the thirteen vessels discussed above. Depreciationof a vessel is calculated using an estimated useful life of 25 years from the date the vessel was originally delivered from the shipyard.Interest income: Interest income for year ended December 31, 2015 increased by $1.0 million to $1.7 million compared to $0.7 million for the yearended December 31, 2014. The increase was mainly attributable to the increase of the interest income accrued under the revolving loans granted to NaviosEurope I and Navios Europe II.Interest expense and finance cost: Interest expense and finance cost for the year ended December 31, 2015 decreased by $5.0 million to $73.6 million,as compared to $78.6 million for the year ended December 31, 2014. The decrease was due to the decrease in the average outstanding balance of ourborrowings, which amounted to $487.7 million for the year ended December 31, 2015 as compared to $575.1 million for the year ended December 31, 2014.The decrease was partially mitigated by the increase of the weighted average interest rate for the year ended December 31, 2015 to 6.0% from 5.73%, duringthe year ended December 31, 2014. As of December 31, 2015 and 2014, the outstanding balance under Navios Acquisition’s total borrowings was$1,216.6 million and $1,162.5 million, respectively.Impairment loss: As of March 31, 2014, an impairment loss of $10.7 million related to the sale of Shinyo Splendor had been recognized under the lineitem “Impairment Loss.” As of March 31, 2014, the Company had a current expectation that, more likely than not, the Shinyo Splendor would be sold beforethe end of its previously estimated useful life, and as a result performed an impairment test of the specific asset group. The carrying amount of the asset groupwas more than its undiscounted future cash flows which resulted in an impairment loss. In addition, as of March 31, 2014, management reassessed therecoverable amount of a receivable and recognized an impairment loss of $1.0 million.Gain on sale of vessels: The gain on sale of vessels for year ended December 31, 2015, was $5.8 million and resulted from the sale of the Nave Celesteand the C. Dream to Navios Midstream for a total sale price of $100.0 million, of which $73.0 million was paid in cash and $27.0 million was paid in a newclass of units designated as Subordinated Series A Units of Navios Midstream.On November 18, 2014, Navios Acquisition sold all of the outstanding shares of capital stock of four of its vessel-owning subsidiaries (Shinyo OceanLimited, Shinyo Kannika Limited, Shinyo Kieran Limited and Shinyo Saowalak Limited) to Navios Midstream (see Note 5), resulting in a gain on disposal of$23.5 million.On May 6, 2014, Navios Acquisition sold the Shinyo Splendor to an unaffiliated third party for an aggregate sale price of $20.0 million and recognizeda loss on sale of $0.9 million.Change in fair value of other assets: As of March 31, 2014, management revalued its derivative asset at $2.3 million using publicly available tradingdata and recognized a fair value loss of $1.2 million in the consolidated statements of income. The derivative was sold in the second quarter of 2014.Equity in net earnings of affiliated companies: Equity in net earnings of affiliated companies increased by $16.4 million to $18.4 million for the yearended December 31, 2015, as compared to $2.0 million for the same period in 2014. The increase resulted from the equity in earnings of Navios Midstreamwhich amounted to $14.7 million and from the equity in earnings of Navios Europe I of $0.5 million and Navios Europe II of $1.3 million. 78Table of ContentsOther income: Other income amounted to $0.04 million for the year ended December 31, 2015 compared to $0.3 million for the year endedDecember 31, 2014.Other expense: Other expense increased by $0.9 million to $1.5 million for the year ended December 31, 2015, as compared to $0.6 million for thesame period in 2014. B.Liquidity and Capital Resources and UsesOur primary short-term liquidity needs are to fund general working capital requirements, drydocking expenditures, minimum cash balancemaintenance as per our credit facility agreements and debt repayment, while our long-term liquidity needs primarily relate to expansion and investmentcapital expenditures and other maintenance capital expenditures and debt repayment. Expansion capital expenditures are primarily for the purchase orconstruction of vessels to the extent the expenditures increase the operating capacity of or revenue generated by our fleet, while maintenance capitalexpenditures primarily consist of drydocking expenditures and expenditures to replace vessels in order to maintain the operating capacity of or revenuegenerated by our fleet. We anticipate that our primary sources of funds for our short-term liquidity needs will be cash flows from operations, proceeds fromasset sales and bank borrowings which we believe that will be sufficient to meet our existing short-term liquidity needs for at least the next 12 months.Generally, our long-term sources of funds will be from cash from operations, long-term bank borrowings and other debt or equity financings. We expect thatwe will rely upon cash from operations and upon external financing sources, including bank borrowings, to fund acquisitions, expansion and investmentcapital expenditures and other commitments we have entered into. We cannot assure you that we will be able to secure adequate financing or obtainingadditional funds on favorable terms, to meet our liquidity needs. Please also refer to “Item 3.D. Risk Factors — Risks Related to Our Indebtedness.”Navios Acquisition finances its capital requirements with cash flows from operations, equity contributions from stockholders, bank loans and theissuance of the 2021 Notes. The main uses of funds have been capital expenditures for the acquisition of new vessels, expenditures incurred in connectionwith ensuring that the owned vessels comply with international and regulatory standards, repayments of bank loans and payments of dividends.Navios Acquisition may use funds to repurchase its outstanding capital stock and/or indebtedness from time to time. Repurchases may be made in theopen market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, at prices and on termsNavios Acquisition deems appropriate and subject to its cash requirements for other purposes, compliance with the covenants under Navios Acquisition’sdebt agreements, and other factors management deems relevant.Under its share repurchase program, expired in December 2016, Navios Acquisition was authorized to repurchase up to $50.0 million of its commonstock, over a two-year period.Cash flows for the year ended December 31, 2016 compared to the year ended December 31, 2015:The following table presents cash flow information for the years ended December 31, 2016 and 2015. This information was derived from the auditedconsolidated statement of cash flows of Navios Acquisition for the respective periods. (Expressed in thousands of U.S. dollars) Year EndedDecember 31,2016 Year EndedDecember 31,2015 Net cash provided by operating activities $92,945 $119,636 Net cash provided by/ (used in) investing activities 43,505 (104,510) Net cash used in financing activities (141,963) (14,814) Change in cash and cash equivalents $(5,513) $312 79Table of ContentsCash provided by operating activities for the year ended December 31, 2016 as compared to the year ended December 31, 2015:Net cash provided by operating activities decreased by $26.7 million to $92.9 million for the year ended December 31, 2016 as compared to net cashprovided by operating activities of $119.6 million for the same period in 2015. The decrease is analyzed as follows:The net income for the year ended December 31, 2016 was $62.9 million compared to $89.7 million for the year ended December 31, 2015. Indetermining net cash provided by operating activities for the year ended December 31, 2016, the net income was adjusted for the effect of depreciation andamortization of $57.6 million, $11.7 million gain on sale of vessels, $3.7 million for amortization and write-off of deferred finance fees and bond premium,$2.8 million for the amortization of dry dock and special survey costs, $1.4 million for earnings in affiliates, net of dividend received, $0.9 million stockbased compensation and $0.4 million gain on debt repayment.Amounts due from related parties, short-term, increased by $7.2 million to $25.0 million at December 31, 2016 from $17.8 million at December 31,2015. The increase mainly related to payment of management fees for our vessels. Please refer to the relevant discussion below, under “Related PartyTransactions”.Payment for dry dock and special survey costs incurred in the years ended December 31, 2016 and December 31, 2015 was $3.8 million and$6.6 million, respectively, and related to drydock and special survey costs incurred for certain vessels of the fleet.Accounts receivable increased by $6.7 million from $14.2 million for the year ended December 31, 2015, to $20.9 million for the year endedDecember 31, 2016. The increase was attributed to the increase in receivables due from charterers.Restricted cash from operating activities decreased by approximately $0.2 million from $1.4 million for the year ended December 31, 2015 to$1.1 million for the year ended December 31, 2016 and related to the cash held in retention accounts for the payment of interest under our credit facilities.Amounts due from related parties, long-term, excluding the amounts related to the Navios Holdings Credit Facility, increased by $12.9 million from$16.5 million for the period ended December 31, 2015, to $29.4 million for the year ended December 31, 2016, which mainly related to payment of specialsurvey and dry docking expenses for certain vessels of our fleet and the increase of $4.3 million loan granted to Navios Europe II, classified under “Cashprovided by /(used in) investing activities”. Please refer to the relevant discussion below, under “Related Party Transactions”.Accounts payable increased by $2.1 million to $4.9 million at December 31, 2016 from $2.8 million at December 31, 2015.Prepaid expenses and other current assets increased to $4.6 million for the year ended December 31, 2016 from $3.7 million for the year endedDecember 31, 2015, mainly due to reclassification of working capital advances required under certain charter contracts, under the long-term assets.Other long-term assets decreased by $1.0 million to $0.9 million for the year ended December 31, 2016 from $1.9 million for the year endedDecember 31, 2015, due to $1.0 million of working capital reclassified to current assets.Accrued expenses increased by $1.2 million to $11.0 million for the year ended December 31, 2016, from $9.8 million on December 31, 2015. Theincrease was mainly attributable to the increase of accrued voyage and other expenses. 80Table of ContentsDeferred revenue primarily relates to cash received from charterers prior to it being earned and also includes the current portion of deferred gain on saleof the Nave Celeste and the C. Dream to Navios Midstream. Deferred revenue relating to cash received from charterers was recognized as revenue over thevoyage or charter period. Deferred revenue increased by $0.9 million to $8.5 million for the year ended December 31, 2016 from $7.6 million onDecember 31, 2015.Cash provided by/ (used in) investing activities for the year ended December 31, 2016 as compared to the year ended December 31, 2015:Net cash provided by investing activities increased by $148.0 million to $43.5 million inflow at December 31, 2016 from $104.5 million outflow atDecember 31, 2015.Net cash provided by investing activities for the year ended December 31, 2016, resulted from: (i) $90.0 million net proceeds from sale of vessels; and(ii) $7.2 million from dividends received from affiliates. The increase was mitigated by a: (i) $49.3 million loan granted to Navios Holdings, net of issuancefees and costs; (ii) a $4.3 million loan granted to Navios Europe II (Navios Revolving Loans II); and (iii) a $0.1 million investment in Navios Midstream inorder to maintain the 2% general partner interest.Net cash used in investing activities for the year ended December 31, 2015, resulted from: (i) $71.2 million net proceeds from sale of vessel; and(ii) $2.6 million from dividends received from affiliates. The $73.8 million increase was mitigated by: (a) $163.8 million paid for the acquisition of vessels;(b) $7.2 million paid for investments in affiliates (from which $6.7 million related to the investment in Navios Europe II and approximately $0.6 million waspaid to Navios Midstream to acquire 32,509 general partner units in order for Navios Acquisition to maintain its 2.0% general partnership interest); and (c) a$7.3 million loan granted to Navios Europe II.Cash used in financing activities for the year ended December 31, 2016 as compared to the year ended December 31, 2015:Net cash used in financing activities increased by $127.1 million to a $142.0 million outflow at December 31, 2016 from a $14.8 million outflow inthe year ended December 31, 2015.Net cash used in financing activities for the year ended December 31, 2016, resulted from: (i) $105.5 million of loan repayments; (ii) $31.7 million ofdividends paid; (iii) a $4.0 million for the redemption of puttable common stock; and (iv) a $0.8 million increase in restricted cash.Net cash used in financing activities for the year ended December 31, 2015, resulted from: (i) $140.9 million of loan repayments; (ii) $40.1 million ofdividends paid; (iii) a $11.3 million payment to a related party with respect to capitalized expenses of certain of the Company’s vessels, while these wereunder construction; (iv) $5.5 million for the redemption of convertible shares; (v) $9.9 million for the acquisition of treasury stock, which was partially offsetby $192.9 million loan proceeds net of deferred finance fees; and a $0.1 million increase in restricted cash. 81Table of ContentsCash flows for the year ended December 31, 2015 compared to the year ended December 31, 2014:The following table presents cash flow information for the years ended December 31, 2015 and 2014. This information was derived from the auditedconsolidated statement of cash flows of Navios Acquisition for the respective periods. (Expressed in thousands of U.S. dollars) Year EndedDecember 31,2015 Year EndedDecember 31,2014 Net cash provided by operating activities $119,636 $75,985 Net cash used in investing activities (104,510) (145,729) Net cash (used in)/ provided by financing activities (14,814) 41,402 Change in cash and cash equivalents $312 $(28,342) Cash provided by operating activities for the year ended December 31, 2015 as compared to the year ended December 31, 2014:Net cash provided by operating activities increased by $43.7 million to $119.6 million for the year ended December 31, 2015 as compared to net cashprovided by operating activities of $76.0 million for the same period in 2014. The increase is analyzed as follows:The net income for the year ended December 31, 2015 was $89.7 million compared to $13.0 million for the year ended December 31, 2014. Indetermining net cash provided by operating activities for the year ended December 31, 2015, the net income was adjusted for the effect of depreciation andamortization of $57.6 million, $5.8 million gain on sale of vessels, $3.5 million for amortization and write-off of deferred finance fees and bond premium,$1.5 million for the amortization of dry dock and special survey costs, $2.4 million stock based compensation and $3.8 million for earnings in affiliates, netof dividend received.Amounts due to related parties decreased by $28.1 million from $28.1 million at December 31, 2014 to $0 at December 31, 2015. The decrease ofapproximately $28.1 million primarily resulted from a $17.8 million payment relating to operating activities, i.e., management fees and other expenses, and a$10.4 million payment related to financing activities, i.e., capitalized expenses of certain of the Company’s vessels, while these were under construction.Amounts due from related parties increased by $16.5 million to $17.8 million at December 31, 2015 from $1.4 million at December 31, 2014. Theincrease mainly related to management fees and other expenses.Payment for dry dock and special survey costs incurred in the years ended December 31, 2015 and December 31, 2014 was $6.6 million and$5.7 million, respectively.Accounts receivable decreased by $4.1 million from $18.3 million for the year ended December 31, 2014, to $14.2 million for the year endedDecember 31, 2015. The decrease was attributed to the decrease in receivables due from charterers.Restricted cash from operating activities increased by $0.04 million from $1.31 million for the year ended December 31, 2014 to $1.35 million for theyear ended December 31, 2015 and related to the cash held in retention accounts for the payment of interest under our credit facilities.Accounts payable increased by $1.2 million to $2.8 million at December 31, 2015 from $1.6 million at December 31, 2014.Prepaid expenses and other current assets decreased by $5.1 million to $3.7 million for the year ended December 31, 2015 from $8.7 million for theyear ended December 31, 2014. The total decrease in prepaid expenses and other current assets primarily resulted from: (i) a $4.5 million decrease in workingcapital advances required under certain charter contracts; and (ii) a $1.0 million decrease in inventory. The decrease of $5.5 million was partially mitigatedby a $0.4 million increase in other prepaid expenses. 82Table of ContentsOther long-term assets increased by $1.2 million to $1.9 million for the year ended December 31, 2015 from $0.7 million for the year endedDecember 31, 2014, due to $1.2 million representing advances to certain counterparties for working capital purposes reclassified from the caption “Prepaidexpenses and other current assets.”Accrued expenses decreased by $0.5 million to $9.8 million for the year ended December 31, 2015, from $10.3 million on December 31, 2014. Thedecrease was attributable to a $0.5 million decrease in accrued professional fees and expenses, $0.1 million decrease in accrued voyage expenses partiallymitigated by a $0.1 million increase in accrued interest.Deferred voyage revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as revenue over thevoyage or charter period. Deferred voyage revenue increased by $6.2 million to $7.6 million for the year ended December 31, 2015 from $1.4 million onDecember 31, 2014.Cash used in investing activities for the year ended December 31, 2015 as compared to the year ended December 31, 2014:Net cash used in investing activities decreased by $41.2 million to $104.5 million at December 31, 2015 from $145.7 million at December 31, 2014.Net cash used in investing activities for the year ended December 31, 2015, resulted from: (i) $71.2 million net proceeds from sale of vessels; and(ii) $2.6 million from dividends received from affiliates. The $73.8 million increase was mitigated by: (a) $163.8 million paid for the acquisition of vessels;(b) $7.2 million paid for investments in affiliates (from which $6.7 million relates to the investment in Navios Europe II and approximately $0.6 million waspaid to Navios Midstream to acquire 32,509 general partner units in order for Navios Acquisition to maintain its 2.0% general partnership interest); and (c) a$7.3 million loan granted to Navios Europe II.Net cash used in investing activities for the year ended December 31, 2014 resulted from: (a) $362.3 million paid for acquisitions of vessels;(b) $11.9 million paid as deposits for the acquisition of the vessels that were delivered to Navios Acquisition at various dates through February 2015; and(c) $4.5 million from a loan granted to Navios Europe I. The $378.7 million was partially mitigated by the receipt of $233.0 million of net proceeds from thesales of the Shinyo Splendor in May 2014 and the four VLCCs in November 2014.Cash (used in)/ provided by financing activities for the year ended December 31, 2015 as compared to the year ended December 31, 2014:Net cash used in financing activities decreased by $56.2 million to a $14.8 million outflow at December 31, 2015 from a $41.4 million inflow in theyear ended December 31, 2014.Net cash used in financing activities resulted from: (i) $140.9 million of loan repayments; (ii) $40.1 million of dividends paid; (iii) a $11.3 millionpayment to a related party with respect to capitalized expenses of certain of the Company’s vessels, while these were under construction; (iv) $5.5 million forthe redemption of convertible shares; and (v) $9.9 million for the acquisition of treasury stock, and was partially offset by $192.9 million loan proceeds net ofdeferred finance fees and a $0.1 million increase in restricted cash.Net cash provided by financing activities for the year ended December 31, 2014 was $41.4 million. Net cash provided by financing activities resultedfrom a $161.9 million loan proceeds net of deferred finance fees, $165.7 million loan proceeds from a related party, net of deferred finance cost, $59.6 millionproceeds from issuance of ship mortgage and senior notes, net of debt issuance costs, $54.3 million from net proceeds from equity offerings and a$17.7 million increase in restricted cash. This increase was partially offset by: (a) $216.2 million of loan repayments; (b) a $169.7 million repayment of a loanfrom a related party; and (c) dividends paid of $31.9 million. 83Table of ContentsReconciliation of EBITDA and Adjusted EBITDA to Net Cash from Operating Activities Year EndedDecember 31,2016 Year EndedDecember 31,2015 Year EndedDecember 31,2014 Expressed in thousands of U.S. dollars Net cash provided by operating activities $92,945 $119,636 $75,985 Net increase in operating assets 24,642 14,911 17,375 Net (increase)/ decrease in operating liabilities (3,272) 10,610 (7,972) Net interest cost 71,220 71,878 77,890 Amortization and write-off of deferred finance fees and bond premium (3,656) (3,495) (9,111) Gain on debt repayment 350 — — Earnings in affiliates, net of dividends received 1,438 3,821 2,000 Stock based compensation (864) (2,362) (5,254) Gain on sale of vessels 11,749 5,771 22,599 Impairment loss — — (11,690) Change in fair value of other assets — — (1,188) EBITDA 194,552 220,770 160,634 Stock based compensation 864 2,362 5,254 Gain on sale of vessels (11,749) (5,771) (22,599) Impairment loss — — 11,690 Change in fair value of other assets — — 1,188 Gain on debt repayment (350) — — Adjusted EBITDA $183,317 $217,361 $156,167 YearEndedDecember 31,2016 YearEndedDecember 31,2015 YearEndedDecember 31,2014 Net cash provided by operating activities $92,945 $119,636 $75,985 Net cash provided by/ (used in) investing activities $43,505 $(104,510) $(145,729) Net cash (used in)/ provided by financing activities $(141,963) $(14,814) $41,402 EBITDA in this document represents net income plus interest and finance costs plus depreciation and amortization and income taxes less interestincome. Adjusted EBITDA in this document represents EBITDA before stock-based compensation; gain on sale of vessels, impairment loss, gain on debtrepayment and before change in fair value of other assets.We use Adjusted EBITDA as liquidity measure and reconcile Adjusted EBITDA to net cash provided by/ (used in) operating activities, the mostcomparable U.S. GAAP liquidity measure. Adjusted EBITDA in this document is calculated as follows: net cash provided by/(used in) operating activitiesadding back, when applicable and as the case may be, the effect of: (i) net increase/(decrease) in operating assets; (ii) net (increase)/decrease in operatingliabilities; (iii) net interest cost; (iv) amortization of deferred finance cost and other related expenses; (v) provision for losses on accounts receivable;(vi) equity in net earnings of affiliated companies, net of dividends received; (vii) payments for dry dock and special survey costs; (viii) gain/(loss) on sale ofassets/subsidiaries; (ix) stock based compensation; (x) gain/(loss) on debt repayment; and (xi) impairment charges. Navios Acquisition believes that AdjustedEBITDA is the basis upon which liquidity can be assessed and present useful information to investors regarding Navios Acquisition’s ability to serviceand/or incur indebtedness, pay capital expenditures, meet working capital requirements and pay dividends. Navios Acquisition also believes that AdjustedEBITDA is used: (i) by potential lenders to evaluate potential transactions; (ii) to evaluate and price potential acquisition candidates; and (iii) by securitiesanalysts, investors and other interested parties in the evaluation of companies in our industry. 84Table of ContentsAdjusted EBITDA has limitations as analytical tool, and should not be considered in isolation or as a substitute for the analysis of NaviosAcquisition’s results as reported under U.S. GAAP. Some of these limitations are: (i) Adjusted EBITDA does not reflect changes in, or cash requirements for,working capital needs; and (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to bereplaced in the future. Adjusted EBITDA does not reflect any cash requirements for such capital expenditures. Because of these limitations, AdjustedEBITDA should not be considered as a principal indicator of Navios Acquisition’s performance. Furthermore, our calculation of Adjusted EBITDA may notbe comparable to that reported by other companies due to differences in methods of calculation.Adjusted EBITDA for the year ended December 31, 2016 decreased by approximately $34.0 million to $183.3 million from $217.4 million in the sameperiod of 2015. The decrease in Adjusted EBITDA was mainly due to a: (a) $23.2 million decrease in revenue; (b) $2.9 million decrease in equity in netearnings of affiliated companies; (c) $2.5 million increase in management fees mainly due to the increased number of vessels and the increase in themanagement fees with effect as of May 29, 2016; (d) $3.0 million increase in general and administrative expenses (excluding stock based compensation); (e)$1.2 million increase in other expense; (f) $0.7 million increase in direct vessel expenses (excluding amortization of dry dock and special survey costs); and(g) $0.5 million increase in time charter expenses.Adjusted EBITDA for the year ended December 31, 2015 increased by $61.2 million to $217.4 million from $156.2 million in the year endedDecember 31, 2014. The increase in Adjusted EBITDA was due to a: (a) $48.5 million increase in revenue; (b) $16.4 million increase in equity in net earningsof affiliated companies; (c) $0.7 million decrease in time charter expenses; and (d) $0.5 million decrease in management fees; partially mitigated by a:(i) $3.8 million increase in general and administrative expenses; (ii) $0.2 million decrease in other income; and (iii) $0.9 million increase in other expense.Long-Term Debt Obligations and Credit ArrangementsShip Mortgage Notes:8 1/8% First Priority Ship Mortgages: On November 13, 2013, the Company and its wholly owned subsidiary, Navios Acquisition Finance (US) Inc.(“Navios Acquisition Finance” and together with the Company, the “2021 Co-Issuers”) issued $610.0 million in first priority ship mortgage notes (the“Existing Notes”) due on November 15, 2021 at a fixed rate of 8.125%.On March 31, 2014, the Company completed a sale of $60.0 million of its first priority ship mortgage notes due in 2021 (the “Additional Notes,” andtogether with the Existing Notes, the “2021 Notes”). The terms of the Additional Notes are identical to the Existing Notes and were issued at 103.25% plusaccrued interest from November 13, 2013. The net cash received amounted to $59.6 million.The 2021 Co-Issuers have the option to redeem the 2021 Notes in whole or in part, at any time: (i) before November 15, 2016, at a redemption priceequal to 100% of the principal amount, plus a make-whole premium, plus accrued and unpaid interest, if any; and (ii) on or after November 15, 2016, at afixed price of 106.094% of the principal amount, which price declines ratably until it reaches par in 2019, plus accrued and unpaid interest, if any.At any time before November 15, 2016, the 2021 Co-Issuers could have redeemed up to 35% of the aggregate principal amount of the 2021 Notes withthe net proceeds of an equity offering at 108.125% of the principal amount of the 2021 Notes, plus accrued and unpaid interest, if any, so long as at least 65%of the aggregate principal amount of the Existing Notes remained outstanding after such redemption. No redemption took place.In addition, upon the occurrence of certain change of control events, the holders of the 2021 Notes will have the right to require the 2021 Co-Issuers torepurchase some or all of the 2021 Notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date. 85Table of ContentsThe 2021 Notes contain covenants which, among other things, limit the incurrence of additional indebtedness, issuance of certain preferred stock, thepayment of dividends, redemption or repurchase of capital stock or making restricted payments and investments, creation of certain liens, transfer or sale ofassets, entering in transactions with affiliates, merging or consolidating or selling all or substantially all of the 2021 Co-Issuers’ properties and assets andcreation or designation of restricted subsidiaries. The 2021 Co-Issuers were in compliance with the covenants as of December 31, 2016.The Existing Notes and the Additional Notes are treated as a single class for all purposes under the indenture including, without limitation, waivers,amendments, redemptions and other offers to purchase and the Additional Notes rank evenly with the Existing Notes. The Additional Notes and the ExistingNotes have the same CUSIP number.GuaranteesThe Company’s 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with theexception of Navios Acquisition Finance (a co-issuer of the 2021 notes). The Company’s 2021 Notes are unregistered. The guarantees of our subsidiaries thatown mortgaged vessels are senior secured guarantees and the guarantees of our subsidiaries that do not own mortgaged vessels are senior unsecuredguarantees. All subsidiaries, including Navios Acquisition Finance, are 100% owned. Navios Acquisition does not have any independent assets oroperations. Navios Acquisition does not have any subsidiaries that are not guarantors of the 2021 Notes.Credit FacilitiesCommerzbank AG, Alpha Bank A.E., and Credit Agricole Corporate and Investment Bank: Navios Acquisition assumed a loan agreement dated April 7,2010, with Commerzbank AG, Alpha Bank A.E. and Credit Agricole Corporate and Investment Bank of up to $150.0 million (divided in six equal tranches of$25.0 million each) to partially finance the construction of two chemical tankers and four product tankers. Each tranche of the facility is repayable in 12equal semi-annual installments of $0.75 million each with a final balloon payment of $16.0 million to be repaid on the last repayment date. The repayment ofeach tranche started six months after the delivery date of the respective vessel which that tranche financed. It bears interest at a rate of LIBOR plus 250 bps.The loan also requires compliance with certain financial covenants. On October 27, 2016, Navios Acquisition reduced the facility by $16.0 million throughpayment of $15.7 million in cash being the balloon instalment for one of the six tranches, achieving a nominal benefit amount of $0.4 million. As ofDecember 31, 2016, the amount of $94.3 million was outstanding. On January 27, 2017, Navios Acquisition repaid $16.0 million being the ballooninstalment for another of the remaining five tranches.BNP Paribas S.A. Bank and DVB Bank S.E.: Navios Acquisition assumed a loan agreement dated April 8, 2010, of up to $75.0 million (divided in threeequal tranches of $25.0 million each) to partially finance the purchase price of three product tankers. Each of the tranches is repayable in 12 equal semi-annual installments of $0.75 million each with a final balloon payment of $16.0 million to be repaid on the last repayment date. The repayment date of eachtranche started six months after the delivery date of the respective vessel which that tranche finances. It bears interest at a rate of LIBOR plus 250 bps. Theloan also requires compliance with certain financial covenants. As of December 31, 2016, an amount of $60.8 million was outstanding.DVB Bank S.E. and ABN AMRO Bank N.V.: On May 28, 2010, Navios Acquisition entered into a loan agreement with DVB Bank S.E. and ABN AMROBANK N.V. of up to $52.0 million (divided into two tranches of $26.0 million each) to partially finance the acquisition costs of two product tanker vessels.The repayment of each tranche started three months after the delivery date of the respective vessel and bore interest at a rate of LIBOR plus 275 bps. The loanalso required compliance with certain financial covenants. After various amendments, on November 13, 2014, the Company prepaid an amount of$18.4 million which was the entire amount outstanding under one of the two tranches using a portion of the proceeds received from Navios 86Table of ContentsMidstream’s IPO. In June 2015, the Company fully prepaid the outstanding balance under this loan facility. The repayment of the loan agreement wasaccounted for as a debt extinguishment in accordance with ASC470 Debt and the remaining unamortized balance of $0.1 million was written-off from thedeferred finance fees.Eurobank Ergasias S.A.: On October 26, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52.2 million,of which $51.6 million has been drawn (divided into two tranches of $26.1 million and $25.5 million, respectively) to partially finance the acquisition costsof two LR1 product tanker vessels. Each tranche of the facility is repayable in 32 quarterly installments of $0.35 million and $0.34 million, respectively, witha final balloon payment of $15.1 million and $14.7 million, respectively, to be repaid on the last repayment date. The repayment of each tranche started threemonths after the delivery date of the respective vessel. The loan bears interest at a rate of LIBOR plus (i) 250 bps for the period prior to the delivery date inrespect of the vessel being financed, and (ii) thereafter 275 bps. The loan also requires compliance with certain financial covenants. The amount of$38.3 million was outstanding as of December 31, 2016, under this facility.Eurobank Ergasias S.A.: On December 6, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52.0 millionout of which $46.2 million has been drawn (divided into two tranches of $23.1 million each) to partially finance the acquisition costs of two LR1 producttanker vessels. Each tranche of the facility is repayable in 32 equal quarterly installments of $0.31 million each with a final balloon payment of$13.3 million, to be repaid on the last repayment date. The repayment of each tranche started three months after the delivery date of the respective vessel. Itbears interest at a rate of LIBOR plus 300 bps. The loan also requires compliance with certain financial covenants. The amount of $36.1 million wasoutstanding as of December 31, 2016, under this facility.Norddeutsche Landesbank Girozentrale: On December 29, 2011, Navios Acquisition entered into a loan agreement with Norddeutsche LandesbankGirozentrale of up to $28.1 million to partially finance the purchase price of one MR2 product tanker vessel. The facility is repayable in 32 quarterlyinstallments of $0.39 million each with a final balloon payment of $15.6 million to be repaid on the last repayment date. The repayment started three monthsafter the delivery of the vessel and bears interest at a rate of LIBOR plus: (a) up to but not including the drawdown date of, 175 bps per annum; (b) thereafteruntil, but not including, the tenth repayment date, 250 bps per annum; and (c) thereafter 300 bps per annum. The loan also requires compliance with certainfinancial covenants. During the first quarter of 2015, the facility was fully drawn and as of December 31, 2016, an amount of $25.4 million was outstandingunder this loan agreement.DVB Bank S.E. and Credit Agricole Corporate and Investment Bank: On December 29, 2011, Navios Acquisition entered into a loan agreement withDVB Bank SE and Investment Bank of up to $56.3 million (divided into two tranches of $28.1 million each) to partially finance the purchase price of twoMR2 product tanker vessels. Each tranche of the facility is repayable in 32 quarterly installments of $0.39 million each with a final balloon payment of$15.6 million to be repaid on the last repayment date. The repayment started three months after the delivery of the respective vessel and bears interest at a rateof LIBOR plus: (a) up to but not including the drawdown date of, 175 bps per annum; (b) thereafter until, but not including, the tenth repayment date, 250bps per annum; and (c) thereafter 300 bps per annum. The loan also requires compliance with certain financial covenants. As of December 31, 2016, anamount of $48.8 million was outstanding.Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB: In November 2015, Navios Acquisition, entered into a termloan facility of up to $125.0 million (divided into five tranches) with Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda BankenAB for the: (i) financing of the purchase price of the Nave Spherical; and (ii) the refinancing of the existing facility with Deutsche Bank AG FilialeDeutschlandgescäft and Skandinaviska Enskilda Banken AB, dated July 18, 2014. Four of the five tranches of the facility are repayable in 20 quarterlyinstallments of between approximately $0.44 million and $1.9 million, each with a final balloon repayment to be made on the last repayment date. The 87Table of Contentsfifth tranche is repayable in 16 quarterly installments of between approximately $0.7 million and $0.8 million, each. The maturity date of the loan is in thefourth quarter of 2020. The credit facility bears interest at LIBOR plus 295 bps per annum.On January 27, 2016, Navios Acquisition sold the Nave Lucida to an unaffiliated third party for net cash proceeds of $18.4 million. Navios Acquisitionprepaid $12.1 million being the respective tranche of the Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB facilitythat was drawn to finance the Nave Lucida. Following the prepayment in January 2016, an amount of $0.2 million was written-off from the deferred financingcost. As of December 31, 2016, an amount of $97.6 million was outstanding under this facility.The Navios Holdings Credit Facilities: On November 11, 2014, Navios Acquisition entered into a short term credit facility with Navios Holdingspursuant to which Navios Acquisition may borrow up to $200.0 million for general corporate purposes. The loan provided for an arrangement fee of$4.0 million and bore a fixed interest of 600 bps. On November 13, 2014, the Company drew an amount of $169.7 million from the facility. The facilitymatured and was fully repaid by December 29, 2014.HSH Nordbank AG: On August 20, 2013, Navios Acquisition entered into a loan agreement with HSH Nordbank AG of up to $40.3 million (divided intwo tranches of $20.2 million each), to partially finance the acquisition of two chemical tanker vessels. Each tranche of the facility was repayable in 28quarterly installments of $0.32 million with a final balloon payment of $11.3 million to be paid on the last repayment date. The facility bore interest at a rateof LIBOR plus 320 bps. The loan also required compliance with certain financial covenants. On October 4, 2016, Navios Acquisition sold the Nave Universeto an unaffiliated third party and prepaid $16.4 million being the respective tranche of the HSH Nordbank AG facility that was drawn to finance theacquisition of the Nave Universe. On November 15, 2016, Navios Acquisition sold the Nave Constellation to an unaffiliated third party and prepaid$16.4 million being the respective tranche of the HSH Nordbank AG facility that was drawn to finance the acquisition of the Nave Constellation. Followingthese prepayments in 2016, an amount of $0.2 million was written-off from the deferred financing cost. As of December 31, 2016, no amount was outstanding.BNP Paribas S.A. Bank: On December 18, 2015, Navios Acquisition, through certain of its wholly owned subsidiaries, entered into a term loan facilityagreement of up to $44.0 million with BNP Paribas, as agent and the lenders named therein, for the partial post-delivery financing of a LR1 product tankerand a MR2 product tanker. The facility is repayable in 12 equal consecutive semi-annual installments in the amount of $2.0 million in aggregate, with a finalballoon payment of $20.0 million to be repaid on the last repayment date. The maturity date of the loan is in December 2021. The loan bears interest atLIBOR plus 230 bps per annum. As of December 31, 2016, an amount of $40.0 million was outstanding under this facility.ABN AMRO Bank N.V.: In February 2017, the Company drew $26.7 million under this new credit facility with ABN AMRO Bank N.V. which is securedwith its two chemical tankers, following the full repayment of the previous financing arrangements. The facility is repayable in four equal consecutivequarterly installments of $0.7 million each, with a final balloon payment of the balance to be repaid on the last repayment date. The maturity date of the loanis in February 2018. The loan bears interest at LIBOR plus 400 bps per annum.The loan facilities include, among other things, compliance with loan to value ratios and certain financial covenants: (i) minimum liquidity higher of$40.0 million or $1.0 million per vessel; (ii) net worth ranging from $50.0 million to $135.0 million; and (iii) total liabilities divided by total assets, adjustedfor market values to be lower than 75%. It is an event of default under the credit facilities if such covenants are not complied with, including the loan to valueratios for which the Company may provide sufficient additional security to prevent such an event. 88Table of ContentsAs of December 31, 2016, the Company was in compliance with its covenants.Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisition’s vessels and other collateral and are guaranteed byeach vessel-owning subsidiary. The credit facilities contain a number of restrictive covenants that prohibit or limit Navios Acquisition from, among otherthings: incurring or guaranteeing indebtedness; entering into affiliate transactions; changing the flag, class, management or ownership of NaviosAcquisition’s vessels; changing the commercial and technical management of Navios Acquisition’s vessels; selling Navios Acquisition’s vessels; andsubordinating the obligations under each credit facility to any general and administrative costs relating to the vessels, including the fixed daily fee payableunder the management agreement. The credit facilities also require Navios Acquisition to comply with the ISM Code and ISPS Code and to maintain validsafety management certificates and documents of compliance at all times. C.Research and development, patents and licenses, etc.Not applicable. D.Trend informationOur results of operations depend primarily on the charter hire rates that we are able to realize for our vessels, which depend on the demand and supplydynamics characterizing the tanker market at any given time. For other trends affecting our business, please see other discussions in “Item 5. Operating andFinancial Review and Prospects”. E.Off-Balance Sheet ArrangementsCharter hire payments to third parties for chartered-in vessels are treated as operating leases for accounting purposes. As of December 31, 2016, NaviosAcquisition was contingently liable to charter-in certain vessels from Navios Midstream. Please see discussion in “Item 5F. Contractual Obligations andContingencies”. F.Contractual Obligations and ContingenciesThe following table summarizes our long-term contractual obligations as of December 31, 2016: Payments due by period (Unaudited)(1) (In thousands of U.S. dollars) Less than1 year 1-3 years 3-5 years More than5 years Total Long-term debt obligations(1) $56,402 $194,198 $809,852 $50,781 $1,111,233 Total contractual obligations $56,402 $194,198 $809,852 $50,781 $1,111,233 (1)The amount identified does not include interest costs associated with the outstanding credit facilities, which are based on LIBOR, plus the costs ofcomplying with any applicable regulatory requirements and a margin ranging from 250 bps to 325 bps per annum or the $670.0 million 2021 Noteswhich have a fixed rate of 8.125%.Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe I revolving loans up to $24.1 million to fund workingcapital requirements (collectively, the “Navios Revolving Loans I”). As of December 31, 2016, the amount undrawn under the Navios Revolving Loans I was$9.1 million, of which Navios Acquisition was committed to fund $4.3 million. See Note 8 for the Investment in Navios Europe I.Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe II revolving loans up to $43.5 million to fundworking capital requirements (collectively, the “Navios Revolving 89Table of ContentsLoans II”). As of December 31, 2016, the amount undrawn under the Navios Revolving Loans II was $19.1 million, of which Navios Acquisition wascommitted to fund $9.1 million. In March 2017 the availability under the Navios Revolving Loans II was increased by $14.0 million. See Note 8 for theInvestment in Navios Europe II.On November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream. In accordance with the terms of the backstopagreements, Navios Acquisition has provided backstop commitments for a two-year period as of the redelivery of each of the Nave Celeste, the Shinyo Oceanand the Shinyo Kannika from their original charters, at a net rate of $35,000, $38,400 and $38,025, respectively. Navios Midstream has currently entered intonew charter contracts for the above vessels with third parties upon their redelivery in first quarter of 2017. Those contracts provide for index linked charterrates or pool earnings as the case may be. Backstop commitments will be triggered if the actual rates achieved are below the backstop rates.On September 19, 2016, Navios Acquisition entered into a $70.0 million secured loan facility with Navios Holdings. Please refer to the relevantdiscussion below, under “Related Party Transactions”.Critical Accounting PoliciesOur consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us tomake estimates in the application of our accounting policies based on the best assumptions, judgments and opinions of management. Following is adiscussion of the accounting policies that involve a higher degree of judgment and the methods of their application that affect the reported amount of assetsand liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results maydiffer from these estimates under different assumptions or conditions.Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results underdifferent assumptions and conditions. For a description of all of our significant accounting policies, see Note 2 to the Consolidated Financial Statements,included herein.Fair Value of Vessels: As of December 31, 2016, Navios Acquisition owned and operated a fleet of 36 vessels, with an aggregate carrying value of$1,317.1 million, including the unamortized portion of deferred drydock and special survey costs related to the vessel. On a vessel-by-vessel basis, as ofDecember 31, 2016, the carrying value of 32 of Navios Acquisition’s vessels (including the unamortized portion of deferred drydock and special survey costsrelated to the vessel) exceeds the estimated fair value of those same vessels by approximately $211.9 million in the aggregate (the unrealized loss).As of December 31, 2015, Navios Acquisition owned and operated a fleet of 39 vessels, with an aggregate carrying value of $1,452.0 million,including the unamortized portion of deferred drydock and special survey costs related to the vessel. On a vessel-by-vessel basis, as of December 31, 2015,the carrying value of 14 of Navios Acquisition’s vessels (including the unamortized portion of deferred drydock and special survey costs related to thevessel) exceeded the estimated fair value of those same vessels by approximately $37.1 million in the aggregate (the unrealized loss). 90Table of ContentsA vessel-by-vessel summary as of December 31, 2016 follows (with an * indicating those individual vessels whose carrying value exceeds its estimatedfair value, including the related time charter, if any): Vessel name Date ofAcquisition PurchasePrice CarryingValue as ofDecember 31,2016 (In millions of U.S. dollars) Nave Cielo 6/29/2010 $44.2 $32.2* Nave Ariadne 7/2/2010 $44.1 $32.1* Nave Cosmos 10/27/2010 $31.8 $25.5* Nave Polaris 1/27/2011 $31.8 $25.9* Nave Orbit 7/12/2011 $37.3 $29.8* Nave Equator 7/18/2011 $37.3 $30.0* Nave Andromeda 11/14/2011 $44.3 $37.4* Nave Estella 1/20/2012 $44.6 $36.8* Nave Atria 7/31/2012 $37.6 $31.6* Nave Cassiopeia 8/31/2012 $43.8 $37.1* Nave Cetus 10/31/2012 $44.0 $37.5* Nave Aquila 11/9/2012 $37.8 $32.2* Nave Bellatrix 1/24/2013 $38.0 $32.7* Nave Orion 3/22/2013 $38.1 $32.9* Nave Rigel 2/13/2013 $47.9 $41.2* Nave Atropos 4/24/2013 $48.2 $41.9* Nave Titan 6/10/2013 $37.1 $32.4* Nave Capella 7/9/2013 $37.2 $32.5* Nave Alderamin 9/3/2013 $37.3 $32.9* Nave Equinox 6/26/2013 $23.5 $19.9* Nave Pulsar 7/9/2013 $23.6 $20.1* Bougainville 9/30/2013 $35.6 $31.4* Nave Dorado 9/24/2013 $16.8 $15.1* Nave Jupiter 5/7/2014 $39.6 $35.9* Nave Luminosity 9/19/2014 $39.6 $36.4* Nave Pyxis 11/20/2014 $33.4 $30.9* Nave Galactic 2/4/2014 $53.5 $47.5 Nave Quasar 2/12/2014 $54.7 $50.6 Nave Buena Suerte 3/10/2014 $57.2 $53.8 Nave Neutrino 6/16/2014 $43.7 $38.4* Nave Synergy 12/09/2014 $76.9 $70.2* Nave Electron 7/21/2014 $41.2 $36.7* Nave Sextans 1/8/2015 $33.4 $31.1 Nave Velocity 2/11/2015 $39.2 $36.6* Nave Spherical 11/6/2015 $69.2 $65.8* Nave Photon 12/2/2015 $65.2 $62.1* $1,508.7 $1,317.1 Although the aforementioned excess of carrying value over fair value represents an estimate of the loss that Navios Acquisition would sustain on ahypothetical disposition of those vessels as of December 31, 2016, the recognition of the unrealized loss absent a disposition (i.e., as an impairment) wouldrequire, among other things, that a triggering event had occurred and that the undiscounted cash flows attributable to the vessel are also less than the carryingvalue of the vessel (including the unamortized portion of deferred drydock and special survey costs related to the vessel). 91Table of ContentsUse of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financialstatements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates andjudgments, including those related to uncompleted voyages, future drydock dates, the selection of useful lives for tangible assets and scrap value expectedfuture cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivable, provisions for legal disputes, andcontingencies and the valuation estimates inherent in the deconsolidation gain. Management bases its estimates and judgments on historical experience andon various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about thecarrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under differentassumptions and/or conditions.Vessels, Net: Vessels are stated at historical cost, which consists of the contract price, delivery and acquisition expenses and capitalized interest costswhile under construction. Vessels acquired in an asset acquisition or in a business combination are recorded at fair value. Subsequent expenditures for majorimprovements and upgrading are capitalized, provided they appreciably extend the life, increase the earning capacity or improve the efficiency or safety ofthe vessels. Expenditures for routine maintenance and repairs are expensed as incurred.Depreciation is computed using the straight line method over the useful life of the vessels, after considering the estimated residual value. Managementestimates the residual values of our tanker vessels based on a scrap value cost of steel times the weight of the ship noted in lightweight ton (LWT). Residualvalues are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons. Revisions of residual values affect thedepreciable amount of the vessels and affects depreciation expense in the period of the revision and future periods. The management after considering currentmarket trends for scrap rates and 10-year average historical scrap rates of the residual values of the Company’s vessels, estimates scrap value at a rate of $360per LWT. Management estimates the useful life of our vessels to be 25 years from the vessel’s original construction. However, when regulations placelimitations over the ability of a vessel to trade on a worldwide basis, its useful life is re-estimated to end at the date such regulations become effective.Impairment of long-lived Asset Group: Vessels, other fixed assets and other long-lived assets held and used by Navios Acquisition are reviewedperiodically for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fullyrecoverable. Navios Acquisition’s management evaluates the carrying amounts and periods over which long-lived assets are depreciated to determine ifevents or changes in circumstances have occurred that would require modification to their carrying values or useful lives. In evaluating useful lives andcarrying values of long-lived assets, certain indicators of potential impairment are reviewed such as, undiscounted projected operating cash flows, vesselsales and purchases, business plans and overall market conditions.Undiscounted projected net operating cash flows are determined for each asset group (consisting of the individual vessel and the intangible, if any,with respect to the time charter agreement attached to that vessel) and compared to the vessel carrying value and related carrying value of the intangible withrespect to the time charter agreement attached to that vessel or the carrying value of deposits for newbuildings; if any. Within the shipping industry, vesselsare often bought and sold with a charter attached. The value of the charter may be favorable or unfavorable when comparing the charter rate to then currentmarket rates. The loss recognized either on impairment (or on disposition) will reflect the excess of carrying value over fair value (selling price) for the vesselindividual asset group.As of March 31, 2014, the Company had a current expectation that, more likely than not, the Shinyo Splendor would be sold before the end of itspreviously estimated useful life, and, as a result, performed an impairment test of the specific asset group. The recoverability test was based on undiscountedcash flows 92Table of Contentsexpected to result from the entity’s use and eventual disposition of the asset. The significant factors and assumptions used in the undiscounted projected netoperating cash flow analysis included determining the net operating cash flows by considering the charter revenues from the existing time charter until itsexpiration, net of brokerage and address commissions and management fees and an estimate of sale proceeds from its disposal based on market valuations forsuch vessel. The carrying amount of the asset group was more than its undiscounted future cash flows. As a result, the entity failed the recoverability test (stepone) of the impairment test and proceeded with step two of the impairment analysis. An impairment loss in the amount of $10.7 million was recognized onthis asset group as the carrying amount of the asset group was not recoverable and exceeded its fair value as of March 31, 2014. The Shinyo Splendor wassold on May 6, 2014 to an unaffiliated third party for a net cash consideration of $18.3 million (refer to Note 5 “Vessels, Net”).During the fourth quarter of fiscal 2016, management concluded that, although market rates were at healthy levels during the year, however, eventsoccurred and circumstances had changed, over previous years, which indicated the potential impairment of Navios Acquisition’s long-lived assets may exist.These indicators included continued volatility in the charter market and the related impact of the tanker sector has on management’s expectation for futurerevenues. As a result, an impairment assessment of long-lived assets or identified asset groups was performed.The Company determined undiscounted projected net operating cash flows for each vessel and compared it to the vessel’s carrying value together withthe carrying value of the related intangible. The significant factors and assumptions used in the undiscounted projected net operating cash flow analysisincluded: determining the projected net operating cash flows by considering the charter revenues from existing time charters for the fixed fleet days(Company’s remaining charter agreement rates) and an estimated daily time charter equivalent for the unfixed days (based on the 10- year average historicalone year time charter rates) over the remaining economic life of each vessel, net of brokerage and address commissions, excluding days of scheduled off-hires,management fees fixed until May 2018 and thereafter assuming an annual increase of 3.0% and utilization rate of 99.7% based on the fleets historicalperformance.We determine projected cash flows for unfixed days using an estimated daily time charter rate based on the 10-year historical average (of the one-yearcharter rate for similar vessels or the 10-year average spot rate for chemical tankers since the 10-year average rates of a one-year time charter are not availablefor chemical tankers). We consider this approach to be reasonable and appropriate. However, for the purposes of presenting our investors with additionalinformation to determine how the Company’s future results of operations may be impacted, we set forth below an analysis that shows the five-year, three-yearand one-year historical averages (of the one-year charter rate for similar vessels or the average spot rate for chemical tankers) in lieu of the 10-year historicalaverage (of the one-year charter rate for similar vessels or the average spot rate for chemical tankers) and the effect the use of each of these rates would haveon the Company’s impairment analysis. December 31, 2016 December 31, 2015 Number ofvessels(*) Amount (U.S.millions)(**) Number ofvessels(*) Amount (U.S.millions)(**)5-year historical average rate — — — — 3-year historical average rate — — — — 1-year historical average rate — — — — (*)Number of vessels the carrying value of which would not have been recovered.(**)Aggregate carrying value that exceeds the estimated fair value (the unrealized loss).In connection with its impairment testing on its vessels as of December 31, 2016, the Company performed sensitivity analysis on the most sensitiveand/or subjective assumptions that have the potential to affect the outcome of the test, principally the projected charter rate used to forecast future cash flowfor unfixed days. In that regard, there would continue to be no impairment required to be recognized on any of the Company’s vessels when 93Table of Contentsassuming a decline in the 10-year average (of the one-year charter rate for similar vessels), which is the rate that the Group uses to forecast future cash flowsfor unfixed days, ranging from 18.0% to 53.0% (depending on the vessel).In addition, the Company compared the 10-year historical average (of the one-year charter rate for similar vessels) with the five-year historical average(of the one-year charter rate for similar vessels), three-year historical average (of the one-year charter rate for similar vessels), and one-year average (for similarvessels). A comparison of the 10-year historical average and the rates for five-year, three-year and one-year historical average follows (as of December 31,2016): Historical Average of One-year CharterRates(over Various Periods) vs. the 10-year Historical Average (of the One-Year Charter Rate) 5-YearAverage 3-YearAverage 1-YearAverage (% above/ (below/ or above) the 10-yearaverage) Chemicals (1.5%) 1.3% (28.7%) MR2s (9.6%) (5.1%) (9.5%) LR1s (12.1%) (1.5%) (7.0%) VLCCs (19.7%) (2.4%) (5.3%) As disclosed elsewhere, the fleet includes 32 vessels for which the carrying value exceeds the estimated fair value of those same vessels byapproximately $211.9 million in the aggregate (the unrealized loss). If testing for impairment using historical rates for five-year, three-year historical averageof the one-year charter rate (for similar vessels), and one-year charters historical average (of the one-year charter rate for similar vessels) in lieu of the 10-yearhistorical average (of the one-year charter rate for similar vessels), the Company estimates that none of its vessels, respectively, would have carrying values inexcess of their projected undiscounted future cash flows.The assessment concluded that step two of the impairment analysis was not required and no impairment of vessels, existed as of December 31, 2016, asthe undiscounted projected net operating cash flows exceeded the carrying value.In the event that impairment would occur, the fair value of the related asset would be determined and a charge would be recognized in the statements ofincome calculated by comparing the asset’s carrying value to its fair value. Fair value is estimated primarily through the use of third-party valuationsperformed on an individual vessel basis.Although management believes the underlying assumptions supporting this assessment are reasonable, if charter rate trends and the length of thecurrent market downturn vary significantly from our forecasts, management may be required to perform step two of the impairment analysis in the future thatcould expose Navios Acquisition to material impairment charges in the future.Impairment loss recognized amounted to $0, $0 and $10.7 million for the years ended December 31, 2016, 2015 and 2014, respectively.Revenue Recognition: Revenue is recorded when services are rendered, under a signed charter agreement or other evidence of an arrangement, the priceis fixed or determinable, and collection is reasonably assured. Revenue is generated from the voyage charter and the time charter of vessels.Voyage revenues for the transportation of cargo are recognized ratably over the estimated relative transit time of each voyage. Voyage expenses arerecognized as incurred. A voyage is deemed to commence when a 94Table of Contentsvessel is available for loading and is deemed to end upon the completion of the discharge of the current cargo. Estimated losses on voyages are provided forin full at the time such losses become evident. Under a voyage charter, a vessel is provided for the transportation of specific goods between specific ports inreturn for payment of an agreed upon freight per ton of cargo.Revenues from time chartering of vessels are accounted for as operating leases and are thus recognized on a straight-line basis as the average revenueover the rental periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers’ disposal for a period oftime during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Under time charters, operating costs such as for crews,maintenance and insurance are typically paid by the owner of the vessel.Profit-sharing revenues are calculated at an agreed percentage of the excess of the charterer’s average daily income (calculated on a quarterly or half-yearly basis) over an agreed amount and accounted for on an accrual basis based on provisional amounts and for those contracts that provisional accrualscannot be made due to the nature of the profit share elements, these are accounted for on the actual cash settlement. Profit sharing for the years endedDecember 31, 2016, December 31, 2015 and December 31, 2014 amounted to $7.6 million, $32.1 million and $6.7 million, respectively.Revenues are recorded net of address commissions. Address commissions represent a discount provided directly to the charterers based on a fixedpercentage of the agreed upon charter or freight rate. Since address commissions represent a discount (sales incentive) on services rendered by the Companyand no identifiable benefit is received in exchange for the consideration provided to the charterer, these commissions are presented as a reduction of revenue.Pooling arrangements: For vessels operating in pooling arrangements, the Company earns a portion of total revenues generated by the pool, net ofexpenses incurred by the pool. The amount allocated to each pool participant vessel, including the Company’s vessels, is determined in accordance with anagreed-upon formula, which is determined by the margins awarded to each vessel in the pool based on the vessel’s age, design and other performancecharacteristics. Revenue under pooling arrangements is accounted for on the accrual basis and is recognized when an agreement with the pool exists, price isfixed, service is provided and the collectability is reasonably assured. Revenue for vessels operating in pooling arrangements amounted to $50.8 million,$43.4 million and $17.0 million, for the years ended December 31, 2016, 2015 and 2014, respectively.The allocation of such net revenue may be subject to future adjustments by the pool however, such changes are not expected to be material.Investments in Equity Securities: Navios Acquisition evaluates its investment in Navios Midstream, Navios Europe I and Navios Europe II for otherthan temporary impairment (“OTTI”) on a quarterly basis. Consideration is given to (i) the length of time and the extent to which the fair value has been lessthan the carrying value, (ii) the financial condition and near-term prospects of Navios Midstream, Navios Europe I and Navios Europe II, and (iii) the intentand ability of the Company to retain its investment in Navios Midstream, Navios Europe I and Navios Europe II for a period of time sufficient to allow for anyanticipated recovery in fair value.Navios Acquisition considers whether the fair values of its equity method investments have declined below their carrying values whenever adverseevents or changes in circumstances indicate that the carrying value may not be recoverable. If we consider any such decline to be other-than-temporary(based on various factors, including historical financial results, economic and industry events resulting in changes in the affiliate’s trading performance andthe overall health of the affiliate’s industry), then we would write down the carrying amount of the investment to its estimated fair value.As of December 31, 2016, the aggregate carrying value of our investment in Navios Midstream was $184.8 million or $14.67 per unit, which representsour total ownership interest in the Partnership of 59.9%. The 95Table of Contentsestimated market value of this investment is determined with reference to the quoted price of the common units. Due to the decline in the quoted price of thecommon units since the fourth quarter of 2015, the fair value of our investments in Navios Midstream has been below its carrying value for the first time inover twelve months, indicating a potential impairment.As of December 31, 2016, the quoted unit price was $10.78, subsequently increasing to a high of $12.48 and low of $10.30. In relation to ourinvestment we are required to recognize an impairment loss where it is determined to be “other-than-temporary.” However, we believe the volatility and thedecline in the unit price is temporary. This is on the basis that the decline is being driven by industry trends. Specifically, the decline in oil prices, which hasresulted in a general negative sentiment towards the shipping stocks and its status as a Master Limited Partnership (“MLP”) has suffered in response to cuts indistributions by other MLPs in the sector. We believe, this is not a reflection of the Navios Midstream’s profitability, strong financial position or its ability tomaintain distributions given the short duration and limited severity of the decline in unit price, the historical trading levels of the units since the inception ofNavios Midstream and the fact that Partnership’s fleet currently operates under medium and long-term time charters with fixed charter rates, which hashistorically contributed to secure and stable operating cash flows. Thus we have assessed these conditions as being temporary and no adjustment to thecarrying value of our investment was deemed necessary as of December 31, 2016 as we have both the ability and intent to hold our investment in thePartnership.However, should these conditions continue to persist for an extended period of time, a conclusion could be reached in the future that an impairmentexists that is “other-than- temporary”, at which time we would write down the carrying amount of our investment to its estimated fair value which may have amaterial adverse impact on our results of operations in the period recognized.Recent Accounting PronouncementsIn January 2017, the FASB issued Accounting Standard Update (“ASU”) 2017-01, “Business Combinations” to clarify the definition of a business withthe objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets orbusinesses. Under current implementation guidance the existence of an integrated set of acquired activities (inputs and processes that generate outputs)constitutes an acquisition of business. This ASU provides a screen to determine when a set of assets and activities does not constitute a business. The screenrequires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group ofsimilar identifiable assets, the set is not a business. This update is effective for public entities with reporting periods beginning after December 15, 2017,including interim periods within those years. The amendments of this ASU should be applied prospectively on or after the effective date. Early adoption ispermitted, including adoption in an interim period (i) for transactions for which the acquisition date occurs before the issuance date or effective date of theASU, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (ii) for transactions inwhich a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only whenthe transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently assessing theimpact that adopting this new accounting guidance will have on its consolidated financial statements.In January 2017, the FASB issued ASU 2017-03 “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and JointVentures (Topic 323).” The ASU amends the Codification for SEC staff announcements made at recent Emerging Issues Task Force (EITF) meetings. The SECguidance that specifically relates to our Consolidated Financial Statements was from the September 2016 meeting, where the SEC staff expressed theirexpectations about the extent of disclosures registrants should make about the effects of the new FASB guidance as well as any amendments issued prior toadoption, on revenue (ASU 2014-09), leases (ASU 2016-02) and credit losses on financial instruments (ASU 2016-13) in accordance with SAB Topic 11.M.Registrants are required to disclose the effect that recently issued accounting standards will have on their 96Table of Contentsfinancial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, then additionalqualitative disclosures should be considered. The ASU incorporates these SEC staff views into ASC 250 and adds references to that guidance in the transitionparagraphs of each of the three new standards. The adoption of this new accounting guidance did not have a material effect on the Company’s ConsolidatedFinancial Statements.In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. This Update addresses the classificationand presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments are effective forpublic business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for allentities. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This updateaddresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for public businessentities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for all entities. TheCompany is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718)”. ASU 2016-09 simplifies several aspects ofaccounting for stock based compensation including the tax consequences, classification of awards as equity or liabilities, forfeitures and classification on thestatement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlyapplication is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. ASU 2016-02 will apply to both types of leases — capital (or finance) leasesand operating leases. According to the new Accounting Standard, lessees will be required to recognize assets and liabilities on the balance sheet for the rightsand obligations created by all leases with terms of more than 12 months. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018,including interim periods within those fiscal years. Early application is permitted. The Company is currently assessing the impact that adopting this newaccounting guidance will have on its consolidated financial statements and footnotes disclosures.In January 2016, FASB issued ASU 2016-01, “Financial Instruments — Overall (Subtopic 825-10) — Recognition and Measurement of FinancialAssets and Financial Liabilities”. The amendments in this ASU require an entity (i) to measure equity investments (except those accounted for under theequity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (ii) toperform a qualitative assessment to identify impairment in equity investments without readily determinable fair values; (iii) to present separately in othercomprehensive income the fair value of a liability resulting from a change in the instrument-specific credit risk; and (iv) to present separately financial assetsand financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet. Theamendments also eliminate the requirement, for public business entities, to disclose the methods and significant assumptions used to estimate the fair valueof financial instruments measured at amortized cost on the balance sheet and clarify that an entity should evaluate the need for a valuation allowance on adeferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, ASU 2016-01is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this new standard is notexpected to have a material impact on the Company’s results of operations, financial position or cash flows. 97Table of ContentsIn August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure ofUncertainties About an Entity’s Ability to Continue as a Going Concern”. This standard requires management to assess an entity’s ability to continue as agoing concern, and to provide related footnote disclosures in certain circumstances. Before this new standard, no accounting guidance existed formanagement on when and how to assess or disclose going concern uncertainties. The amendments are effective for annual periods ending after December 15,2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The adoption of the new standard had noimpact on the Company’s results of operations, financial position or cash flows.In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” clarifying the method used to determine the timing and requirementsfor revenue recognition on the statements of income. Under the new standard, an entity must identify the performance obligations in a contract, thetransaction price and allocate the price to specific performance obligations to recognize the revenue when the obligation is completed. The amendments inthis update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flowarising from contracts. The new accounting guidance was originally effective for interim and annual periods beginning after December 15, 2016. In August2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 for all entities by one year. The standard will be effective for publicentities for annual reporting periods beginning after December 15, 2017 and interim periods therein. The Company is currently assessing the impact thatadopting this new accounting guidance will have on its consolidated financial statements. Item 6.Directors, Senior Management and Employees A.Directors and Senior ManagementSet forth below are the names, ages and positions of Navios Acquisition’s directors, executive officers and key employees. Name Age PositionAngeliki Frangou 52 Chairman, Chief Executive Officer and DirectorLeonidas Korres 41 Chief Financial OfficerVasiliki Papaefthymiou 48 SecretaryAnna Kalathakis 47 Director, Senior Vice President — Legal Risk ManagementGeorge Galatis 54 DirectorBrigitte Noury 70 DirectorTed C. Petrone 62 DirectorNikolaos Veraros, CFA 47 DirectorAngeliki Frangou has been our Chairman and Chief Executive Officer since our inception. Ms. Frangou has also been Chairman and CEO of NaviosMaritime Holdings Inc. (NYSE: NM) — our sponsor — since August 2005. In addition, Ms. Frangou has been the Chairman and Chief Executive Officer ofNavios Maritime Partners L.P. (NYSE: NMM), an affiliated limited partnership, since August 2007 and the Chairman and Chief Executive Officer of NaviosMaritime Midstream Partners L.P. (NYSE: NAP), an affiliated limited partnership, since October 2014. Ms. Frangou has been the Chairman of the Board ofDirectors of Navios South American Logistics Inc. since its inception in December 2007. Previously, Ms. Frangou served as Chairman, Chief ExecutiveOfficer and President of International Shipping Enterprises Inc., which acquired Navios Holdings. From 1990 until August 2005, Ms. Frangou was the ChiefExecutive Officer of Maritime Enterprises Management S.A. and its predecessor company, which specialized in the management of dry cargo vessels.Ms. Frangou is the Chairman of IRF European Finance Investments Ltd., listed on the SFM of the London Stock Exchange. Ms. Frangou is Member of theBoard of the United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited, Vice Chairman of China Classification Society MediterraneanCommittee, a member of the International General Committee and of the Hellenic and Black Sea Committee of Bureau Veritas, 98Table of Contentsas well as a member of Greek Committee of Nippon Kaiji Kyokai. Since March 2016, Ms. Frangou is a Member of the DNV GL Greek National Committee.Since February 2015, Ms. Frangou has been a Member of the Board of the Union of Greek Shipowners. Since October 2015, Ms. Frangou has been a Memberof the Board of Trustees of Fairleigh Dickinson University. Since July 2013, Ms. Frangou has been a Member of the Board of Visitors of the ColumbiaUniversity School of Engineering and Applied Science. Ms. Frangou received a bachelor’s degree in Mechanical Engineering, summa cum laude, fromFairleigh Dickinson University and a master’s degree in Mechanical Engineering from Columbia University.Leonidas Korres has been our Chief Financial Officer since April 2010, and previously our Senior Vice President for Business Development fromJanuary 2010. Mr. Korres served as the Special Secretary for Public Private Partnerships in the Ministry of Economy and Finance of the Hellenic Republicfrom October 2005 until November 2009. Prior to that, from April 2004 to October 2005, Mr. Korres served as Special Financial Advisor to the Minister ofEconomy and Finance of the Hellenic Republic and as liquidator of the Organizational Committee for the Olympic Games Athens 2004 S.A. From 2001 to2004, Mr. Korres worked as a senior financial advisor for KPMG Corporate Finance. From October 2007 until January 2010, Mr. Korres was a member of theboard of directors of Navios Partners. From May 2003 to December 2006, Mr. Korres was Chairman of the Center for Employment and Entrepreneurship, anon-profit company. From June 2008 until February 2009, Mr. Korres served as a board member and audit committee member of HellenicTelecommunications Organization S.A. (trading on the Athens and New York Stock Exchanges). From June 2004 until November 2009, Mr. Korres served onthe board of Hellenic Olympic Properties S.A., which was responsible for operating the Olympic venues. Mr. Korres earned his bachelor’s degree inEconomics from the Athens University of Economics and Business and his master’s degree in Finance from the University of London.Vasiliki Papaefthymiou has been our Secretary since our inception. Ms. Papaefthymiou has also served as Navios Holdings’ Executive Vice President— Legal and a member of its Board of Directors since August 25, 2005, and prior to that was a member of the Board of Directors of ISE. Ms. Papaefthymiouhas also served as General Counsel for Maritime Enterprises Management S.A. since October 2001, where she has advised the company on shipping,corporate and finance legal matters. Ms. Papaefthymiou provided similar services as General Counsel to Franser Shipping from October 1991 to September2001. Ms. Papaefthymiou received her undergraduate degree from the Law School of the University of Athens and a master’s degree in maritime law fromSouthampton University in the United Kingdom. Ms. Papaefthymiou is admitted to practice law before the Bar in Piraeus, Greece.Anna Kalathakis has been a member of our Board of Directors and Senior Vice President — Legal Risk Management since May 2010. Ms. Kalathakishas been Chief Legal Risk Officer since November 2012 and Senior Vice President — Legal Risk Management of Navios Holdings from December 2005 untilOctober 2012. Before joining Navios Holdings, Ms. Kalathakis was the General Manager of the Greek office of A Bilbrough & Co. Ltd. (Managers of theLondon Steam-Ship Owners’ Mutual Insurance Association Limited, the “London P&I Club”) and an Associate Director of the London P&I Club where shegained experience in the handling of liability and contractual disputes in both the dry and tanker shipping sectors (including collisions, oil pollutionincidents, groundings, etc.). She previously worked for a U.S. maritime law firm in New Orleans, having qualified as a lawyer in Louisiana in 1995, and alsoserved in a similar capacity for a London maritime law firm. She qualified as a solicitor in England and Wales in 1999 and was admitted to the Piraeus Bar inGreece, in 2003. She received a bachelor’s degree in International Relations from Georgetown University and holds a master of business administrationdegree from European University in Brussels and a juris doctor degree from Tulane Law School.George Galatis has served as a member of our Board of Directors since July 2010. He is currently the Executive Vice President — ProductDevelopment at Demo Pharmaceutical Industry having served as a Senior Vice President — Project Development since 1999. Mr. Galatis also served as atechnical manager in Pharmaceutical Industry Projects at Telos Consulting Ltd. of London from 1994 to 1999. Previously, Mr. Galatis served as an engineer,technical manager and product manager at various shipping companies in the United 99Table of ContentsStates and the U.K. Mr. Galatis is a mechanical engineer and holds a bachelor’s degree in Mechanical Engineering and master’s degree in robotics from theUniversity of Newcastle upon Tyne. Mr. Galatis is also a member of our Nominating Committee and is an independent director.Brigitte Noury has been a member of our Board of Directors since May 2010. Ms. Noury served from March 2002 until December 2009 as Director ofCorporate & Investment Banking Asset & Recovery Management — Europe for Societe Generale. She also served from June 1989 until February 2002 asHead of Shipping at Societe Generale. In addition, she served as Vice President — Shipping at Banque Indosuez from 1987 to 1989. Before that Ms. Nouryserved as Financial Controller at Banque Internationale pour l’Afrique Occidentale (later acquired by BNP Paribas). Ms. Noury received a master’s degree inEconomic Sciences and a diploma in Business Administration from the University of Dijon. Ms. Noury is also a member of our Audit Committee andNominating Committee and is an independent director.Ted C. Petrone has been a member of our Board of Directors since our inception and was our President from our inception until December 2014. He hasalso been a director of Navios Holdings since May 2007, and served as President of Navios Corporation from September 2006 until December 2014. Hecurrently serves as Navios Corporation’s Vice Chairman, a position he has held since December 2014. Mr. Petrone has served in the maritime industry for 40years, 36 of which he has spent with Navios Holdings. After joining Navios Holdings as an assistant vessel operator, Mr. Petrone worked there in variousoperational and commercial positions. Mr. Petrone was previously responsible for all the aspects of the daily commercial activity, encompassing the tradingof tonnage, derivative hedge positions and cargoes. Mr. Petrone graduated from New York Maritime College at Fort Schuyler with a bachelor in sciencedegree in maritime transportation. He has also served aboard U.S. Navy (Military Sealift Command) tankers.Nikolaos Veraros, CFA, has been a member of our Board of Directors since June 2008. Mr. Veraros has over 18 years of experience in shipping financeand currently serves as a financial consultant to various shipping companies. He has also worked as a senior equity analyst for National Securities, S.A., asubsidiary of National Bank of Greece. Mr. Veraros is a Chartered Financial Analyst (CFA), a Certified Market Maker for Derivatives in the Athens StockExchange, and a Certified Analyst from the Hellenic Capital Market Commission. He is currently part time lecturer of shipping finance at King’s College ofthe University of London. Mr. Veraros received his bachelor of science degree in business administration from the Athens University of Economics andBusiness, from which he graduated as valedictorian, and his master of business administration degree in Finance and Accounting from the William E. SimonGraduate School of Business Administration at the University of Rochester. Mr. Veraros is also the Chairman of our Audit Committee and is an independentdirector.Effective March 31, 2017, John Koilalous resigned as a one of our directors. We are currently seeking a replacement for the vacancy created byMr. Koilalous’ resignation. B.CompensationCompensationOur independent directors are entitled to receive $50,000 in cash per year, from the respective start of their service on our Board of Directors.Ms. Frangou receives a fee of $150,000 per year for acting as a director and as our Chairman of the Board. No other executive officer has received any cashcompensation for services rendered.For the year ended December 31, 2016 the compensation paid to our executive officers and directors was $0.4 million.In October 2013, Navios Acquisition authorized and issued in the aggregate 2,100,000 restricted shares of common stock and options to purchase1,500,000 shares of common stock having an exercise price of $3.91 per share, to its directors and/or officers. These awards of restricted common stock andstock options are based on service conditions only and vest over three years. 100Table of ContentsAs of December 31, 2016 there were no restricted shares or non- vested stock options outstanding.In December 2015 and during 2016, the Compensation Committee of Navios Acquisition authorized and approved an aggregate cash payment of$4.0 million subject to fulfillment of certain service conditions that were provided and completed during 2016 and an additional $1.0 million to the directorsand/or officers of the Company subject to fulfillment of certain service conditions in 2017. C.Board PracticesBoard ClassesOur Board of Directors is divided into three classes with only one class of directors being elected in each year and each class serving a three-year term.The term of office of the first class of directors, currently consisting of George Galatis and Brigitte Noury, and will consist of a third director who will beappointed to this class to fill the vacancy created by Mr. Koilalous’ recent resignation, will expire at our 2018 annual meeting of stockholders. The term ofoffice of the second class of directors, consisting of Ted C. Petrone and Nikolaos Veraros, will expire at our 2019 annual meeting of stockholders, as theirterm was renewed for three years at our 2016 annual meeting. The term of office of the third class of directors, consisting of Angeliki Frangou and AnnaKalathakis, will expire at our 2017 annual meeting.Director IndependenceOur Board of Directors has determined that Messrs. Veraros, Galatis and Ms. Noury are “independent directors” as defined in the New York StockExchange listing standards and Rule 10A-3 of the Exchange Act. We will always seek to have a board of directors comprising of a majority of independentdirectors.Board committeesOur Board of Directors has an audit committee, a nominating committee and a compensation committee. Our Board of Directors has adopted a charterfor the audit committee as well as a code of conduct and ethics that governs the conduct of our directors and officers. From time to time the Board may createspecial committees to address particular situations or transactions, such as potential conflict of interest transactions that may arise with our affiliatedcompanies. The members’ duration and powers of any special committee will be as established by the Board as appropriate for the particular situation ortransaction.Audit committeeOur audit committee consists of Mr. Veraros and Ms. Noury. Each member of our audit committee is financially literate under the current listingstandards of the New York Stock Exchange, and our Board of Directors has determined that Mr. Veraros qualifies as an “audit committee financial expert,” assuch term is defined by SEC rules.The audit committee reviews the professional services and independence of our independent registered public accounting firm and our accounts,procedures and internal controls. The audit committee also selects our independent registered public accounting firm, reviews and approves the scope of theannual audit, reviews and evaluates with the independent public accounting firm our annual audit and annual consolidated financial statements, reviews withmanagement the status of internal accounting controls, evaluates problem areas having a potential financial impact on us that may be brought to thecommittee’s attention by management, the independent registered public accounting firm or the board of directors, and evaluates all of our public financialreporting documents.Any expense reimbursements payable to members of our audit committee are reviewed and approved by our Board of Directors, with the interesteddirector or directors abstaining from such review and approval. 101Table of ContentsNominating committeeA nominating committee of the board of directors has been established, which consists of Messrs. Veraros, Galatis, and Ms. Noury, each of whom is anindependent director. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our Board of Directors.The nominating committee considers persons identified by its members, management, stockholders, investment bankers and others.Compensation committeeThe board of directors has established a compensation committee of three independent directors, Messrs. Nikolaos Veraros, who serves as Chairman,and George Galatis. The compensation committee is governed by a written charter, which was approved by the board of directors. The compensationcommittee is responsible for reviewing and approving the compensation of the Company’s executive officers, for establishing, reviewing and evaluating, inconsultation with senior management, the long-term strategy of employee compensation and approving any material change to existing compensation plans.Code of conduct and ethicsWe have adopted a code of conduct and ethics applicable to our directors and officers in accordance with applicable federal securities laws and therules of the New York Stock Exchange.Conflicts of InterestStockholders and potential investors should be aware of the following potential conflicts of interest: • None of our officers and directors is required to commit their full time to our affairs and, accordingly, they will have conflicts of interest inallocating management time among various business activities, including those related to Navios Holdings, Navios Partners and NaviosMidstream. • Each of our directors has, or may come to have other fiduciary obligations. Angeliki Frangou, our Chairman and Chief Executive Officer, is theChairman and Chief Executive Officer of Navios Holdings, Navios Partners and Navios Midstream. In addition, Ms. Frangou is the Chairman ofthe board of directors of IRF European Finance Investments, Ltd. Ted C. Petrone, a member of our Board of Directors, is the vice chairman ofNavios Corporation, a subsidiary of Navios Holdings. Mr. Veraros is a senior analyst at Investments & Finance, Ltd., an investment banking firmspecializing in the shipping industry. Ms. Kalathakis is Chief Legal Risk Officer of Navios Holdings. • We entered a Management Agreement, initially set to expire on May 28, 2015, with a subsidiary of Navios Holdings, pursuant to which suchsubsidiary provides certain commercial and technical ship management services for a fixed daily fee. In May 2014, Navios Acquisition extendedthe duration of its existing Management Agreement with Navios Holdings, until May 2020 for fixed daily fees. • Pursuant to an amendment to the Management Agreement dated as of May 19, 2016, Navios Acquisition fixed the fees for commercial andtechnical ship management services of its fleet for two additional years from May 29, 2016, through May 2018, at a daily fee of: (a) $6,350 perMR2 product tanker and chemical tanker vessel; (b) $7,150 per LR1 product tanker vessel; and (c) $9,500 per VLCC. • We entered into an Administrative Services Agreement with Navios Holdings, initially set to expire on May 28, 2015, pursuant to which asubsidiary of Navios Holdings provides certain administrative management services to Navios Acquisition which include: bookkeeping, auditand accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services,client and investor relations and other services. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection with theprovision of these services. In May 2014, the duration of its existing Administrative Services Agreement was extended until May 2020 pursuantto its existing terms. 102Table of Contents • On September 19, 2016, Navios Acquisition entered into a $70.0 million secured loan facility with Navios Holdings. The loan facility is securedby all of Navios Holdings’ interest in Navios Acquisition and 78.5% of Navios Holdings’ interest in Navios Logistics, representing a majority ofthe shares outstanding of Navios Logistics.Please see “Item 5.B. Liquidity and Capital Resources and Uses”.We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniaryinterest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. Nor do we have a policy thatexpressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such parties mayhave an interest in certain transactions in which we are involved, and may also compete with us.We cannot assure you that any of the above mentioned conflicts will be resolved in our favor.Navios Holdings has a significant ownership interest in us. As a result of Navios Holdings’ significant ownership stake in us and our commonmanagement, there are certain potential conflicts of interest, including potential competition as to acquisition targets and, after an acquisition has beenconsummated, potential competition and business relationships with each other.All ongoing and future transactions between us and any of our officers and directors or their respective affiliates, including Navios Holdings, will be onterms believed by us to be no less favorable than are available from unaffiliated third parties, and such transactions will require prior approval, in eachinstance, by a unanimous vote of our disinterested “independent” directors or the members of our board who do not have an interest in the transaction.Please see “Item 7. Major Stockholders and Related Party Transactions.”FacilitiesWe do not own any real estate or other physical property. Our principal executive office is located at 7 Avenue de Grande Bretagne, Office 11B2,Monte Carlo, MC 98000 Monaco. D.EmployeesEmployees of Navios Holdings and its subsidiaries provide assistance to us and our operating subsidiaries pursuant to the Management Agreement andthe Administrative Services Agreement; therefore Navios Acquisition does not employ additional staff.The Manager crews its vessels primarily with Greek, Filipino, Romanian, Russian and Ukrainian officers and Filipino seamen. The Manager isresponsible for selecting its Greek officers. For other nationalities, officers and seamen are referred to us by local crewing agencies. Navios Acquisitionrequires that all of its seamen have the qualifications and licenses required to comply with international regulations and shipping conventions.Navios Holdings also provides on-shore advisory, operational and administrative support to us pursuant to service agreements. Please see “Item 7.Major Stockholders and Related Party Transactions.” E.Share OwnershipThe following table sets forth certain information regarding beneficial ownership, based on 151,982,990 shares of common stock outstanding as ofApril 4, 2017, of our common stock held by Navios Holdings, each of our officers and directors (who own in excess of 1% of our outstanding shares ofcommon stock) and by all of our directors and officers as a group. The information is not necessarily indicative of beneficial ownership for any otherpurposes. 103Table of ContentsUnless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of commonstock beneficially owned by them. Name and Address of Beneficial Owner(1) Amount ofBeneficialOwnership PercentageofCommonStock Navios Maritime Holdings Inc.(2) 65,301,220(2) 43.0% Angeliki Frangou(3) 4,902,628 3.2% All of our officers and directors as a group(3) 5,783,466 3.8% No other director or executive officer owns greater than 1% of our common stock. (1)Unless otherwise indicated, the business address of each of the individuals is c/o Navios Maritime Holdings Inc., 7 Avenue de Grande Bretagne, Office11B2, Monte Carlo, MC 98000 Monaco.(2)Navios Holdings is a U.S. public company controlled by its board of directors, which consists of the following seven members: Angeliki Frangou (ourChairman and Chief Executive Officer), Vasiliki Papaefthymiou, Shunji Sasada, Spyridon Magoulas, John Stratakis, Stathis Loizos and GeorgeMalanga.(3)Includes 1,502,628 shares held by Amadeus Maritime S.A. that may be deemed to be beneficially owned by Ms. Frangou and 1,500,000 options vestedbut not yet exercised. Item 7.Major Stockholders and Related Party Transactions A.Major StockholdersThe following table sets forth the beneficial ownership of our common stock by each person we know to beneficially own more than 5% of ourcommon stock based upon 151,982,990 shares of common stock outstanding as of April 4, 2017 and the amounts and percentages as are contained in thepublic filings of such persons and based on knowledge of the Company. The number of shares of common stock beneficially owned by each person isdetermined under SEC rules and the information is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules, a personbeneficially owns any units as to which the person has or shares voting or investment power. In addition, a person beneficially owns any shares of commonstock that the person or entity has the right to acquire as of April 4, 2017 through the exercise of any right. All of the stockholders, including the stockholderslisted in this table, are entitled to one vote per share of common stock held. Name of Beneficial Owner Amount ofBeneficialOwnership PercentageofCommonStock Navios Maritime Holdings Inc.(1) 65,301,220 43.0% A. Lawrence Carroll Trust(2) 14,000,000 9.21% (1)The business address of the reporting person is offices at 7 Avenue de Grande Bretagne, Office 11B2, Monte Carlo, MC 98000 Monaco. The foregoinginformation was derived from a Schedule 13D/A filed with the SEC on March 30, 2015.(2)The business address of the reporting person is 415 L’Ambiance Drive, #804, Longboat Key, FL 34228. The foregoing information was derived from aschedule 13G/A with the SEC on February 3, 2017. B.Related Party TransactionsStock options and restricted sharesIn October 2013, Navios Acquisition authorized and issued to its directors in the aggregate of 2,100,000 restricted shares of common stock and optionsto purchase 1,500,000 shares of common stock having an exercise price of $3.91 per share and an expiration term of 10 years. These awards of restrictedcommon stock and stock 104Table of Contentsoptions are based on service conditions only and vest ratably over a period of three years (33.33% each year). The holders of restricted stock are entitled todividends paid on the same schedule as paid to the common stockholders of the company. The fair value of restricted stock was determined by reference tothe quoted stock price on the date of grant of $3.99 per share (or total fair value of $8.4 million).The fair value of stock option grants was determined with reference to the option pricing model, and principally adjusted Black-Scholes models, usinghistorical volatility, historical dividend yield, zero forfeiture rate, risk free rate equal to 10-year U.S. treasury bond and the simplified method for determiningthe expected option term since the Company did not have sufficient historical exercise data upon which to have a reasonable basis to estimate the expectedoption term. The fair value of stock options was calculated at $0.79 per option (or $1.2 million). Compensation expense is recognized based on a gradedexpense model over the vesting period of three years from the date of the grant.The effect of compensation expense arising from the stock based arrangements described above amounted to $0.9 million, $2.4 million and$5.3 million for the years ended December 31, 2016, 2015 and 2014, respectively, and was reflected in general and administrative expenses on the statementsof income. The recognized compensation expense for the year was presented as an adjustment to reconcile net income to net cash provided by operatingactivities on the statements of cash flows.There were no restricted stock or stock options exercised, forfeited or expired during the year ended December 31, 2016.On October 24, 2016, 2015 and 2014, 700,005, 700,001 and 699,994 shares of restricted stock, respectively, were vested. Accordingly, there were norestricted shares outstanding and non-vested shares as of December 31, 2016 (non-vested restricted shares as of December 31, 2015 amounted to 700,005).On each of October 24, 2016, 2015 and 2014, 500,000 stock options were vested. Accordingly, there were no non-vested stock options outstanding asof December 31, 2016 (non-vested stock options outstanding as of December 31, 2015 amounted to 500,000).The weighted average contractual life of stock options outstanding as of December 31, 2016 was 6.8 years.Navios MidstreamIn November 2014, Navios Midstream, a Company formed as a subsidiary of the Company, completed an IPO of its units in the United States and islisted on the NYSE.In connection with the IPO of Navios Midstream, the Company sold all of the outstanding shares of capital stock of four of its vessel-owningsubsidiaries (Shinyo Ocean Limited, Shinyo Kannika Limited, Shinyo Kieran Limited and Shinyo Saowalak Limited) in exchange for: (i) all of the netproceeds from the IPO amounting to $110.4 million; (ii) $104.5 million of the $126.0 million borrowings under Navios Midstream’s credit facility withCredit Suisse; (iii) 9,342,692 subordinated units and 1,242,692 common units; and (iv) 381,334 general partner units, representing a 2.0% general partnerinterest in Navios Midstream, and all of the incentive distribution rights in Navios Midstream.Following the IPO, the Company concluded that it does not hold a controlling financial interest in Navios Midstream and deconsolidated the vesselssold as of the IPO date. (See Note 8, “Investment in affiliates”).On June 18, 2015, Navios Midstream exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste and the C. Dreamfrom Navios Acquisition for an aggregate sale price of $100.0 million. The sale price consisted of $73.0 million cash consideration and the issuance of1,592,920 Subordinated Series A Units to Navios Acquisition. The gain on sale of vessels which was recognized in the Company’s statement of income forthe year ended December 31, 2015 amounted to $5.8 million. 105Table of ContentsParticipation in offerings of affiliatesOn July 29, 2016, Navios Midstream launched a continuous public offering of its common units for an aggregate offering of up to $25.0 million (Referalso to Note 8 “Investment in affiliates”).On September 30, 2016 and December 30, 2016, Navios Acquisition entered into securities purchase agreements with Navios Midstream pursuant towhich Navios Acquisition made an investment in Navios Midstream by purchasing 5,655 and 1,143 general partnership interests, respectively, for anaggregate consideration of $0.1 million, in order to maintain its 2.0% partnership interest in Navios Midstream in light of such continuous public offering.The Company determined, under the equity method, that the issuance of common units of Navios Midstream qualified as a sale of shares by theinvestee. As a result, a net loss of $0.2 million was recognized in “Equity in net earnings of affiliated companies” for the year ended December 31, 2016.On February 16, 2017, Navios Acquisition entered into securities purchase agreements with Navios Midstream pursuant to which Navios Acquisitionmade an investment in Navios Midstream by purchasing 6,446 general partnership interests for an aggregate consideration of $0.1 million in order tomaintain its 2.0% partnership interest in Navios Midstream in light of such continuous public offering. As of April 4, 2017, Navios Acquisition owned a59.0% limited partner interest in Navios Midstream, which included a 2.0% general partner interest.The Navios Holdings Credit FacilitiesOn September 19, 2016, Navios Acquisition entered into a $70.0 million secured loan facility with Navios Holdings. The loan facility is secured by allof Navios Holdings’ interest in Navios Acquisition and 78.5% of Navios Holdings’ interest in Navios Logistics, representing a majority of the sharesoutstanding of Navios Logistics. The secured loan facility provided for an arrangement fee of $0.7 million, is available for up to five drawings and has a fixedinterest rate of 8.75% with a maturity date of November 15, 2018. As of December 31, 2016, the outstanding receivable balance of $50.7 million, included inthe consolidated balance sheets under “Due from related parties, long-term”, consisted of the drawdown of $50.0 million on September 20, 2016 net of thearrangement fee, upon deduction of the applicable expenses for the origination of the loan facility and the accrued interest of $1.2 million. The arrangementfee is deferred and amortized using the effective interest rate method.In March 2016, Navios Acquisition entered into the $50.0 million Revolver with Navios Holdings, which was available for multiple drawings up to alimit of $50.0 million. The Revolver had a margin of LIBOR plus 300bps and a maturity until December 2018. On April 14, 2016, Navios Acquisition andNavios Holdings announced that the Revolver was terminated. No borrowings had been made under the Revolver. Please refer to “Legal Proceedings” in Item8A.On November 11, 2014, Navios Acquisition entered into a short term credit facility with Navios Holdings pursuant to which Navios Acquisition mayborrow up to $200.0 million for general corporate purposes. The loan provided for an arrangement fee of $4.0 million and bore a fixed interest of 600 bps. OnNovember 13, 2014, the Company drew an amount of $169.7 million from the facility. The facility matured and was fully repaid by December 29, 2014.In 2010, Navios Acquisition entered into a $40.0 million credit facility with Navios Holdings, which matured in December 2015. The facility wasavailable for multiple drawings up to a limit of $40.0 million and had a margin of LIBOR plus 300 basis points. As of its maturity date, December 31, 2015,all amounts drawn had been fully repaid. 106Table of ContentsThe Management AgreementWe have entered into Management Agreement with the Manager, pursuant to which the Manager provides certain commercial and technical shipmanagement services to us. These services will be provided in a commercially reasonable manner in accordance with customary ship management practiceand under our direction. The Manager will provide these services to us directly but may subcontract for certain of these services with other entities, includingother Navios Holdings subsidiaries.The commercial and technical management services will include: • the commercial and technical management of vessels: managing day-to-day vessel operations including negotiating charters and otheremployment contracts for the vessels and monitoring payments thereunder, ensuring regulatory compliance, arranging for the vetting of vessels,procuring and arranging for port entrance and clearance, appointing counsel and negotiating the settlement of all claims in connection with theoperation of each vessel, appointing adjusters and surveyors and technical consultants as necessary, and providing technical support; • vessel maintenance and crewing: including the supervision of the maintenance and general efficiency of vessels and ensuring the vessels are inseaworthy and good operating condition, arranging our hire of qualified officers and crew, arranging for all transportation, board and lodging ofthe crew, negotiating the settlement and payment of all wages; and • purchasing and insurance: purchasing stores, supplies and parts for vessels, arranging insurance for vessels (including marine hull andmachinery insurance, protection and indemnity insurance and war risk and oil pollution insurance).Pursuant to the Management Agreement dated May 28, 2010 as amended on May 4, 2012, a subsidiary of Navios Holdings provided for five years fromthe closing of the Company’s initial vessel acquisition, commercial and technical management services to Navios Acquisition’s vessels for a daily feethrough May 28, 2014. This daily fee covered all of the vessels’ operating expenses, other than certain fees and costs. Dry docking expenses were fixed forthe first four years under this agreement for up to $0.3 million per LR1 and MR2 product tanker vessel and were reimbursed at cost for VLCC vessels.In May 2014, Navios Acquisition extended the duration of its existing Management Agreement with Navios Holdings until May 2020 and fixed thefees for ship management services of its owned fleet for two additional years through May 2016 at same as previous rates for product tanker and chemicaltanker vessels, being $6,000 daily rate per MR2 product tanker and chemical tanker vessel and $7,000 daily rate per LR1 product tanker vessel and reducedthe rate by 5% to $9,500 daily rate per VLCC vessel. Dry docking expenses under this Management Agreement are reimbursed at cost for all vessels.Pursuant to an amendment to the Management Agreement dated as of May 19, 2016, Navios Acquisition fixed the fees for commercial and technicalship management services of its fleet for two additional years from May 29, 2016, through May 2018, at a daily fee of: (a) $6,350 per MR2 product tankerand chemical tanker vessel; (b) $7,150 per LR1 product tanker vessel; and (c) $9,500 per VLCC.Total management fees for each of the years ended December 31, 2016, 2015 and 2014 amounted to $97.9 million, $95.3 million and $95.8 million,respectively.The Management Agreement may be terminated prior to the end of its term by us upon 120-days’ notice if there is a change of control of the Manageror by the Manager upon 120-days’ notice if there is a change of control of Navios Acquisition. In addition, the Management Agreement may be terminatedby us or by the Manager upon 120-days’ notice if: • the other party breaches the agreement; 107Table of Contents • a receiver is appointed for all or substantially all of the property of the other party; • an order is made to wind up the other party; • a final judgment or order that materially and adversely affects the other party’s ability to perform the Management Agreement is obtained orentered and not vacated or discharged; or • the other party makes a general assignment for the benefit of its creditors, files a petition in bankruptcy or liquidation or commences anyreorganization proceedings.Furthermore, at any time after the first anniversary of the Management Agreement, the Management Agreement may be terminated prior to the end ofits initial term by us or by the Manager upon 365-days’ notice for any reason other than those described above.In addition to the fixed daily fees payable under the Management Agreement, the Management Agreement provides that the Manager will be entitledto reasonable supplementary remuneration for extraordinary fees and costs resulting from: • time spent on insurance and salvage claims; • time spent vetting and pre-vetting the vessels by any charterers in excess of 10 days per vessel per year; • the deductible of any insurance claims relating to the vessels or for any claims that are within such deductible range; • the significant increase in insurance premiums which are due to factors such as “acts of God” outside the control of the Manager; • repairs, refurbishment or modifications, including those not covered by the guarantee of the shipbuilders or by the insurance covering thevessels, resulting from maritime accidents, collisions, other accidental damage or unforeseen events (except to the extent that such accidents,collisions, damage or events are due to the fraud, gross negligence or willful misconduct of the Manager, its employees or its agents, unless andto the extent otherwise covered by insurance); • expenses imposed due to any improvement, upgrade or modification to, structural changes with respect to the installation of new equipmentaboard any vessel that results from a change in, an introduction of new, or a change in the interpretation of, applicable laws, at therecommendation of the classification society for that vessel or otherwise; • costs associated with increases in crew employment expenses resulting from an introduction of new, or a change in the interpretation of,applicable laws or resulting from the early termination of the charter of any vessel; • any taxes, dues or fines imposed on the vessels or the Manager due to the operation of the vessels; • expenses incurred in connection with the sale or acquisition of a vessel such as inspections and technical assistance; and • any similar costs, liabilities and expenses that were not reasonably contemplated by us and the Manager as being encompassed by or acomponent of the fixed daily fees at the time the fixed daily fees were determined.Under the Management Agreement, neither we nor the Manager will be liable for failure to perform any of our or its obligations, respectively, under theManagement Agreement by reason of any cause beyond our or its reasonable control.In addition, the Manager will have no liability for any loss arising in the course of the performance of the commercial and technical managementservices under the Management Agreement unless and to the extent that 108Table of Contentssuch loss is proved to have resulted solely from the fraud, gross negligence or willful misconduct of the Manager or its employees, in which case (exceptwhere such loss has resulted from the Manager’s intentional personal act or omission and with knowledge that such loss would probably result) theManager’s liability will be limited to $3.0 million for each incident or series of related incidents.Further, under our Management Agreement, we have agreed to indemnify the Manager and its employees and agents against all actions that may bebrought against them under the Management Agreement including, without limitation, all actions brought under the environmental laws of any jurisdiction,or otherwise relating to pollution or the environment, and against and in respect of all costs and expenses they may suffer or incur due to defending orsettling such action; provided, however, that such indemnity excludes any or all losses which may be caused by or due to the fraud, gross negligence orwillful misconduct of the Manager or its employees or agents, or any breach of the Management Agreement by the Manager.The Administrative Services AgreementOn May 28, 2010, Navios Acquisition entered into an administrative services agreement with Navios Holdings, initially set to expire in May 2015 thatwas later extended until May 2020, pursuant to which Navios Holdings provides certain administrative management services to Navios Acquisition, whichinclude bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services,advisory services, client and investor relations and other services.The Administrative Services Agreement may be terminated prior to the end of its term by us upon 120-days’ notice if there is a change of control ofNavios Holdings or by Navios Holdings upon 120-days’ notice if there is a change of control of us. In addition, the Administrative Services Agreement maybe terminated by us or by Navios Holdings upon 120-days’ notice if: • the other party breaches the agreement; • a receiver is appointed for all or substantially all of the property of the other party; • an order is made to wind up the other party; • a final judgment or order that materially and adversely affects the other party’s ability to perform the Administrative Services Agreement isobtained or entered and not vacated or discharged; or • the other party makes a general assignment for the benefit of its creditors, files a petition in bankruptcy or liquidation or commences anyreorganization proceedings.Furthermore, at any time after the first anniversary of the Administrative Services Agreement, the Administrative Services Agreement may beterminated by us or by Navios Holdings upon 365-days’ notice for any reason other than those described above.The administrative services include: • bookkeeping, audit and accounting services: assistance with the maintenance of our corporate books and records, assistance with the preparationof our tax returns and arranging for the provision of audit and accounting services; • legal and insurance services: arranging for the provision of legal, insurance and other professional services and maintaining our existence andgood standing in necessary jurisdictions; • administrative and clerical services: providing office space, arranging meetings for our security holders, arranging the provision of IT services,providing all administrative services required for subsequent debt and equity financings and attending to all other administrative mattersnecessary to ensure the professional management of our business; 109Table of Contents • banking and financial services: providing cash management including assistance with preparation of budgets, overseeing banking services andbank accounts, arranging for the deposit of funds, negotiating loan and credit terms with lenders and monitoring and maintaining compliancetherewith; • advisory services: assistance in complying with United States and other relevant securities laws; • client and investor relations: arranging for the provision of, advisory, clerical and investor relations services to assist and support us in ourcommunications with our security holders; and client and investor relations; and • integration of any acquired businesses.We will reimburse Navios Holdings for reasonable costs and expenses incurred in connection with the provision of these services within 15 days afterNavios Holdings submits to us an invoice for such costs and expenses, together with any supporting detail that may be reasonably required.Under the Administrative Services Agreement, we have agreed to indemnify Navios Holdings and its employees against all actions which may bebrought against them under the Administrative Services. Agreement including, without limitation, all actions brought under the environmental laws of anyjurisdiction, and against and in respect of all costs and expenses they may suffer or incur due to defending or settling such actions; provided, however, thatsuch indemnity excludes any or all losses that may be caused by or due to the fraud, gross negligence or willful misconduct of Navios Holdings or itsemployees or agents.For each of the years ended December 31, 2016, 2015 and 2014 the expense arising from administrative services rendered by Navios Holdingsamounted to $9.4 million, $7.6 million and $7.3 million, respectively.Navios Europe INavios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe I revolving loans up to $24.1 million to fund workingcapital requirements (collectively, the “Navios Revolving Loans I”). See Note 8 for information on our investment in Navios Europe I.Balance due from Navios Europe I as of December 31, 2016 amounted to $12.3 million (December 31, 2015: $10.3 million) which included the NaviosRevolving Loans I of $7.1 million (December 31, 2015: $7.1 million), the non-current amount of $2.2 million (December 31, 2015: $1.4 million) related tothe accrued interest income earned under the Navios Term Loans I under the caption “Due from related parties, long-term” and the accrued interest incomeearned under the Navios Revolving Loans I of $2.9 million (December 31, 2015: $1.7 million) under the caption “Due from related parties, short-term.”The Navios Revolving Loans I and the Navios Term Loans I earn interest and an annual preferred return, respectively, at 12.7% per annum, on aquarterly compounding basis and are repaid from free cash flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter.There are no covenant requirements or stated maturity dates. As of December 31, 2016, the amount undrawn under the Navios Revolving Loans I was$9.1 million, of which Navios Acquisition was committed to fund $4.3 million.Navios Europe IINavios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe II revolving loans up to $43.5 million to fundworking capital requirements (collectively, the “Navios Revolving Loans II”). In March 2017 the availability under the Navios Revolving Loans II wasincreased by $14.0 million. See Note 8 for the Investment in Navios Europe II.Balance due from Navios Europe II as of December 31, 2016 amounted to $16.4 million (December 31, 2015: $8.5 million) which included the NaviosRevolving Loans II of $11.6 million (December 31, 2015: $7.3 110Table of Contentsmillion), the non-current amount of $2.1 million (December 31, 2015: $0.6 million) related to the accrued interest income earned under the Navios TermLoans II under the caption “Due from related parties, long-term” and the accrued interest income earned under the Navios Revolving Loans II of $2.7 million(December 31, 2015: $0.6 million) under the caption “Due from related parties, short-term.”The Navios Revolving Loans II and the Navios Term Loans II earn interest and an annual preferred return, respectively, at 18% per annum, on aquarterly compounding basis and are repaid from free cash flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter.There are no covenant requirements or stated maturity dates. As of December 31, 2016, the amount undrawn under the Navios Revolving Loans II was$19.1 million, of which Navios Acquisition was committed to fund $9.1 million.Registration RightsPursuant to a registration rights agreement between us and our initial stockholders entered into in connection with the IPO, the holders of the sponsorunits (and the common stock and warrants comprising such units and the common stock issuable upon exercise of such warrants), the sponsor warrants (andthe common stock issuable upon exercise of such warrants), the co-investment shares and such other shares of common stock purchased pursuant to the limitorders described above are entitled to three demand registration rights, “piggy-back” registration rights and short-form resale registration rights. We will bearthe expenses incurred in connection with any such registration statements other than underwriting discounts or commissions for shares not sold by us. Inaddition, we have registered the 1,677,759 shares of common stock issued in connection with the VLCC Acquisition. The resale registration statementbecame effective on January 19, 2011.In addition, in connection with the private placement of 17,702,491 shares that was completed on February 26, 2013, we have granted registrationrights to Navios Holdings and certain members of the management of Navios Acquisition, Navios Holdings and Navios Partners.In connection with the private placements of 16,438,356 shares and of 12,987,013 shares that were completed on May 21, 2013 and on September 16,2013, respectively, we have granted registration rights to Navios Holdings.The Acquisition Omnibus AgreementWe have entered an Acquisition Omnibus Agreement with Navios Holdings and Navios Partners. The following discussion describes certain provisionsof the Acquisition Omnibus Agreement.NoncompetitionNavios Holdings and Navios Partners agree not to acquire, charter-in or own Liquid Shipment Vessels (as hereinafter defined). For purposes of theAcquisition Omnibus Agreement, “Liquid Shipment Vessels” means vessels intended primarily for the sea going shipment of liquid products, includingchemical and petroleum-based products, except for container vessels and vessels that will be employed primarily in operations in South America. Thisrestriction will not prevent Navios Holdings or any of its controlled affiliates or Navios Partners (other than us and our subsidiaries) from:(1) acquiring a Liquid Shipment Vessel(s) from us for fair market value;(2) acquiring a Liquid Shipment Vessel(s) as part of the acquisition of a controlling interest in a business or package of assets and owning thosevessels; provided, however, that:a. if less than a majority of the value of the total assets or business acquired is attributable to a Liquid Shipment Vessel(s) and related charters, asdetermined in good faith by the board of directors of Navios Holdings or Navios Partners, as the case may be, Navios Holdings or Navios Partners, as the casemay be, must offer to 111Table of Contentssell a Liquid Shipment Vessel(s) and related charters to us for their fair market value plus any additional tax or other similar costs to Navios Holdings thatwould be required to transfer a Liquid Shipment Vessel(s) and related charters to us separately from the acquired business; andb. if a majority or more of the value of the total assets or business acquired is attributable to a Liquid Shipment Vessel(s) and related charters, asdetermined in good faith by the board of directors of Navios Holdings or Navios Partners, as the case may be, Navios Holdings or Partners, as the case may be,shall notify us in writing, of the proposed acquisition. We shall, not later than the 15th calendar day following receipt of such notice, notify Navios Holdingsor Navios Partners, as the case may be, if we wish to acquire such a Liquid Shipment Vessel(s) and related charters forming part of the business or package ofassets in cooperation and simultaneously with Navios Holdings or Navios Partners, as the case may be, acquiring a Liquid Shipment Vessel(s) and relatedcharters forming part of that business or package of assets. If we do not notify Navios Holdings of our intent to pursue the acquisition within 15 calendardays, Navios Holdings may proceed with the acquisition as provided in (a) above.(3) acquiring a non-controlling interest in any company, business or pool of assets;(4) acquiring or owning a Liquid Shipment Vessel(s) and related charter if we do not fulfill our obligation, under any existing or future writtenagreement, to purchase such vessel in accordance with the terms of any such agreement;(5) acquiring or owning a Liquid Shipment Vessel(s) subject to the offers to us described in paragraphs (3) and (4) above pending our determinationwhether to accept such offers and pending the closing of any offers we accept;(6) providing ship management services relating to any vessel whatsoever, including to a Liquid Shipment Vessel(s) owned by the controlled affiliatesof Navios Holdings; or(7) acquiring or owning a Liquid Shipment Vessel(s) if we have previously advised Navios Holdings or Navios Partners, as the case may be, that weconsent to such acquisition, or if we have been offered the opportunity to purchase such vessel pursuant to the Acquisition Omnibus Agreement and failed todo so.If Navios Holdings or Navios Partners, as the case may be, or any of their respective controlled affiliates (other than us or our subsidiaries) acquires orowns a Liquid Shipment Vessel(s) pursuant to any of the exceptions described above, it may not subsequently expand that portion of its business other thanpursuant to those exceptions.In addition, under the Acquisition Omnibus Agreement we have agreed, and will cause our subsidiaries to agree, not to acquire, own, operate or charterdrybulk carriers (“Drybulk Carriers”). Pursuant to an agreement between them, Navios Holdings and Navios Partners may be entitled to a priority over eachother depending on the class and charter length of any Drybulk Carrier. This restriction will not:(1) prevent us or any of our subsidiaries from acquiring a Drybulk Carrier(s) and any related charters as part of the acquisition of a controlling interestin a business or package of assets and owning and operating or chartering those vessels; provided, however, that:(a) if less than a majority of the value of the total assets or business acquired is attributable to a Drybulk Carrier(s) and related charter(s), asdetermined in good faith by us, we must offer to sell such Drybulk Carrier(s) and related charter to Navios Holdings or Navios Partners, as the case maybe, for their fair market value plus any additional tax or other similar costs to us that would be required to transfer the Drybulk Carrier(s) and relatedcharter(s) to Navios Holdings or Navios Partners, as the case may be, separately from the acquired business; and 112Table of Contents(b) if a majority or more of the value of the total assets or business acquired is attributable to a Drybulk Carrier(s) and related charter(s), asdetermined in good faith by us, we shall notify Navios Holdings or Navios Partners, as the case may be, in writing of the proposed acquisition. NaviosHoldings or Navios Partners, as the case may be, shall, not later than the 15th calendar day following receipt of such notice, notify us if it wishes toacquire the Drybulk Carrier(s) forming part of the business or package of assets in cooperation and simultaneously with us acquiring the Non-DrybulkCarrier assets forming part of that business or package of assets. If Navios Holdings and Navios Partners do not notify us of their intent to pursue theacquisition within 15 calendar days, we may proceed with the acquisition as provided in (a) above.(2) prevent us or any of our subsidiaries from owning, operating or chartering a Drybulk Carrier(s) subject to the offer to Navios Holdings or NaviosPartners described in paragraph (1) above, pending their determination whether to accept such offer and pending the closing of any offer they accept; or(3) prevent us or any of our subsidiaries from acquiring, operating or chartering a Drybulk Carrier(s) if Navios Holdings and Navios Partners havepreviously advised us that they consent to such acquisition, operation or charter, or if they have previously been offered the opportunity to purchase suchDrybulk Carrier(s) and have declined to do so.If we or any of our subsidiaries owns, operates and charters Drybulk Carriers pursuant to any of the exceptions described above, neither we nor suchsubsidiary may subsequently expand that portion of our business other than pursuant to those exceptions.The Midstream Omnibus AgreementNavios Acquisition entered into an omnibus agreement (the “Midstream Omnibus Agreement”), with Navios Midstream, Navios Holdings and NaviosPartners in connection with the Navios Midstream IPO, pursuant to which Navios Acquisition, Navios Midstream, Navios Holdings, Navios Partners and theircontrolled affiliates generally have agreed not to acquire or own any VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemicaltankers under time charters of five or more years without the consent of the Navios Midstream General Partner. The Midstream Omnibus Agreement containssignificant exceptions that will allow Navios Acquisition, Navios Holdings, Navios Partners or any of their controlled affiliates to compete with NaviosMidstream under specified circumstances.Under the Midstream Omnibus Agreement, Navios Midstream and its subsidiaries will grant to Navios Acquisition a right of first offer on any proposedsale, transfer or other disposition of any of its VLCCs or any crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers and relatedcharters owned or acquired by Navios Midstream. Likewise, Navios Acquisition will agree (and will cause its subsidiaries to agree) to grant a similar right offirst offer to Navios Midstream for any of the VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under charter forfive or more years it might own. These rights of first offer will not apply to a: (a) sale, transfer or other disposition of vessels between any affiliatedsubsidiaries, or pursuant to the terms of any charter or other agreement with a charter party, or (b) merger with or into, or sale of substantially all of the assetsto, an unaffiliated third-party.Backstop AgreementsOn November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream. In accordance with the terms of the backstopagreements, Navios Acquisition has provided a backstop commitment to charter-in the Shinyo Ocean and the Shinyo Kannika for a two-year period as of theirscheduled redelivery at the currently contracted rate if the market charter rate is lower than the currently contracted rate. Further, Navios Acquisition hasprovided a backstop commitment to charter-in the Nave Celeste for a two-year period as of its scheduled redelivery, at the net time charter-out rate per day(net of commissions) of $35,000 if the market 113Table of Contentscharter rate is lower than the charter-out rate of $35,000. Navios Acquisition has also provided a backstop commitment to charter-in the option vessels, theNave Galactic and the Nave Quasar for a four-year period as of their scheduled redelivery, at the net time charter-out rate per day (net of commissions) of$35,000 if the market charter rate is lower than the charter-out rate of $35,000. Conversely, if market charter rates are higher during the backstop period, suchvessels will be chartered-out to third-party charterers at prevailing market rates and Navios Acquisition’s backstop commitment will not be triggered. Thebackstop commitment does not include any profit sharing.In connection with the IPO of Navios Midstream, we have provided backstop commitments for a two-year period as of the redelivery of each of theNave Celeste, the Shinyo Ocean and the Shinyo Kannika from their original charters, at a net rate of $35,000, $38,400 and $38,025, respectively. NaviosMidstream has currently entered into new charter contracts for the above vessels with third parties. Those contracts provide for index-linked charter rates orpool earnings, as the case may be. Backstop commitments will be triggered if the actual rates achieved are below the backstop rates.Navios Midstream General Partner Option Agreement with Navios HoldingsNavios Acquisition entered into an option agreement, dated November 18, 2014, with Navios Holdings under which Navios Acquisition grants NaviosHoldings the option to acquire any or all of the outstanding membership interests in Navios Midstream General Partner and all of the incentive distributionrights in Navios Midstream representing the right to receive an increasing percentage of the quarterly distributions when certain conditions are met. Theoption shall expire on November 18, 2024. Any such exercise shall relate to not less than twenty-five percent of the option interest and the purchase price forthe acquisition of all or part of the option interest shall be an amount equal to its fair market value.Option VesselsIn connection with the IPO of Navios Midstream, Navios Acquisition granted options to Navios Midstream, initially exercisable until November 18,2016, to purchase seven VLCCs (two of which, the Nave Celeste and the C. Dream, were sold to Navios Midstream in June 2015 pursuant to such option)from Navios Acquisition at fair market value. On October 25, 2016, Navios Acquisition extended the option periods on three of the five remaining VLCCs,the Nave Buena Suerte, the Nave Neutrino and the Nave Electron, for an additional two-year period expiring on November 18, 2018. The purchase optionspursuant to the extended period do not include any backstop commitments from Navios Acquisition.Sale of C. Dream and Nave CelesteOn June 18, 2015, Navios Acquisition sold the vessel-owning subsidiaries of the C. Dream and the Nave Celeste to Navios Midstream for a sale price of$100.0 million in total. Out of the $100.0 million purchase price, $73.0 million was paid in cash and the remaining amount was paid through the issuance of1,592,920 subordinated Series A Units of Navios Midstream. In conjunction with the transaction, Navios Midstream also issued 32,509 general partner unitsto the General Partner, in order for the General Partner to maintain its 2.0% general partnership interest, for $0.6 million. Please see Note 15: “Transactionswith related parties”.Rights of First OfferUnder the Acquisition Omnibus Agreement, we and our subsidiaries will grant to Navios Holdings and Navios Partners, as the case may be, a right offirst offer on any proposed sale, transfer or other disposition of any of our Drybulk Carriers and related charters owned or acquired by us. Likewise, NaviosHoldings and Navios Partners will agree (and will cause its subsidiaries to agree) to grant a similar right of first offer to us for any Liquid Shipment Vessels itmight own. These rights of first offer will not apply to a: (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to theterms of any charter or other agreement with a counterparty; or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party. 114Table of ContentsPrior to engaging in any negotiation regarding any vessel disposition with respect to a Liquid Shipment Vessel(s) with a non-affiliated third party orany Drybulk Carrier(s) and related charter, we, Navios Holdings, or Navios Partners, as the case may be, will deliver a written notice to the other parties settingforth the material terms and conditions of the proposed transaction. During the 15-day period after the delivery of such notice, we, Navios Holdings or NaviosPartners, as the case may be, will negotiate in good faith to reach an agreement on the transaction. If we do not reach an agreement within such 15-day period,we or Navios Holdings or Navios Partners, as the case may be, will be able within the next 180 calendar days to sell, transfer or dispose of the vessel to a thirdparty (or to agree in writing to undertake such transaction with a third party) on terms generally no less favorable to us or Navios Holdings, as the case maybe, than those offered pursuant to the written notice.Upon a change of control of Navios Partners, the noncompetition and the right of first offer provisions of the Acquisition Omnibus Agreement willterminate immediately as to Navios Partners, but shall remain binding on us and Navios Holdings. Upon a change of control of Navios Holdings, thenoncompetition and the right of first offer provisions of the Acquisition Omnibus Agreement shall terminate; provided, however, that in no event shall thenoncompetition and the rights of first refusal terminate upon a change of control of Navios Holdings prior to the fourth anniversary of the AcquisitionOmnibus Agreement. Upon change of control of us, the noncompetition and the right of first offer provisions of the Acquisition Omnibus Agreement willterminate immediately as to all parties of the Acquisition Omnibus Agreement. C.Interest of Experts and CounselNot Applicable. Item 8.Financial Information A.Consolidated Statements and Other Financial InformationConsolidated Financial Statements: See Item 18.Legal ProceedingsThe Company is involved in various disputes and arbitration proceedings arising in the ordinary course of business. Provisions have been recognizedin the financial statements for all such proceedings where the Company believes that a liability may be probable, and for which the amounts are reasonablyestimable, based upon facts known at the date of the financial statements were prepared. In the opinion of the management, the ultimate disposition of thesematters individually and in aggregate will not materially affect the Company’s financial position, results of operations or liquidity.On April 1, 2016, Navios Holdings was named as a defendant in a putative shareholder derivative lawsuit brought by two alleged shareholders ofNavios Acquisition purportedly on behalf of nominal defendant, Navios Acquisition, in the United States District Court for the Southern District of NewYork, captioned Metropolitan Capital Advisors International Ltd., et al. v. Navios Maritime Holdings, Inc. et al., No. 1:16-cv-02437. The lawsuit challengedthe March 9, 2016 loan agreement between Navios Holdings and Navios Acquisition pursuant to which Navios Acquisition agreed to provide a $50.0 millionRevolver to Navios Holdings.On April 14, 2016, Navios Holdings and Navios Acquisition announced that the Revolver had been cancelled, and that no borrowings had been madeunder the Revolver. In June 2016, the parties reached an agreement resolving the plaintiffs’ application for attorneys’ fees and expenses which was approvedby an order of the court. The litigation was dismissed upon notice of the order being provided to Navios Acquisition’s shareholders via the inclusion of theorder as an attachment to a Navios Acquisition Form 6-K and the payment of $0.8 million by Navios Acquisition in satisfaction of the plaintiffs’ request forattorneys’ fees and expenses. A copy of the order was provided as an exhibit to Navios Acquisition’s Form 6-K filed with the Securities and ExchangeCommission on June 9, 2016. 115Table of ContentsDividend PolicyAt the present time, Navios Acquisition intends to retain most of its available earnings generated by operations for the development and growth of thebusiness. The continued declaration and payment of any dividend remains subject to the discretion of the Board of Directors, and will depend on, amongother things, Navios Acquisition’s cash requirements as measured by market opportunities and conditions. In addition, the terms and provisions of our currentsecured credit facilities and our indenture limit our ability to pay dividends in excess of certain amounts or if certain covenants are not met. (See also “Long-Term Debt Obligations and Credit Arrangements.”)On February 4, 2016, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2015 of $0.05 per share of commonstock payable on March 23, 2016 to stockholders of record as of March 17, 2016. A dividend in the aggregate amount of $7.9 million was paid on March 23,2016 out of which $7.5 million was paid to the stockholders of record as of March 17, 2016 and $0.4 million was paid to Navios Holdings, the holder of the1,000 shares of Series C Preferred Stock.On May 11, 2016, the Board of Directors declared a quarterly cash dividend in respect of the first quarter of 2016 of $0.05 per share of common stockpayable on June 22, 2016 to stockholders of record as of June 17, 2016. A dividend in the aggregate amount of $7.9 million was paid on June 22, 2016 out ofwhich $7.5 million was paid to the stockholders of record as of June 17, 2016 and $0.4 million was paid to Navios Holdings, the holder of the 1,000 shares ofSeries C Preferred Stock.On August 10, 2016, the Board of Directors declared a quarterly cash dividend in respect of the second quarter of 2016 of $0.05 per share of commonstock payable on September 21, 2016 to stockholders of record as of September 14, 2016. A dividend in the aggregate amount of $7.9 million was paid onSeptember 21, 2016 out of which $7.5 million was paid to the stockholders of record as of September 14, 2016 and $0.4 million was paid to Navios Holdings,the holder of the 1,000 shares of Series C Preferred Stock.On November 4, 2016, the Board of Directors declared a quarterly cash dividend in respect of the third quarter of 2016 of $0.05 per share of commonstock payable on December 21, 2016 to stockholders of record as of December 14, 2016. A dividend in the aggregate amount of $7.9 million was paid onDecember 21, 2016 out of which $7.5 million was paid to the stockholders of record as of December 14, 2016 and $0.4 million was paid to Navios Holdings,the holder of the 1,000 shares of Series C Preferred Stock.For the year ended December 31, 2016, Navios Acquisition had no outstanding Series B and Series D Preferred Stock.On February 3, 2017, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2016 of $0.05 per share of commonstock payable on March 14, 2017 to stockholders of record as of March 7, 2017.The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among otherthings, Navios Acquisition’s cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligationsand such other factors as the Board of Directors may deem advisable. B.Significant ChangesNot Applicable. 116Table of ContentsItem 9.Listing DetailsOur shares of common stock are traded on the New York Stock Exchange under the symbol “NNA.”The following table sets forth the high and low closing sales prices of Navios Acquisition’s common stock on the New York Stock Exchange. Price RangeCommonStock High Low Year Ended: December 31, 2016 $2.83 $1.20 December 31, 2015 $4.33 $2.82 December 31, 2014 $4.85 $2.47 December 31, 2013 $4.50 $2.45 December 31, 2012 $3.66 $2.11 Quarter Ended: December 31, 2016 $1.80 $1.22 September 30, 2016 $1.62 $1.20 June 30, 2016 $1.97 $1.52 March 31, 2016 $2.83 $1.55 December 31, 2015 $3.85 $2.82 September 30, 2015 $4.33 $3.27 June 30, 2015 $4.00 $3.36 March 31, 2015 $4.00 $3.20 Month Ended: March 31, 2017 $1.90 $1.60 February 28, 2017 $1.90 $1.73 January 31, 2017 $2.08 $1.76 December 31, 2016 $1.72 $1.48 November 30, 2016 $1.80 $1.22 October 31, 2016 $1.40 $1.27 Item 10.Additional Information A.Share CapitalNot applicable. B.Memorandum and Articles of AssociationPlease refer to the filings on Form 6-K (file number 001-34104) filed with the Securities and Exchange Commission: Exhibit 99.9 of Form 6-K filed onJune 4, 2010, Exhibit 3.1 of Form 6-K filed on February 10, 2011, Exhibit 1.1 of Form 6-K filed on September 21, 2010, Exhibit 1.1 of Form 6-K filed onNovember 9, 2010, and Exhibit 1.1 to Form 6-K filed on April 12, 2011, which the Company hereby incorporates by reference. C.Material ContractsThe following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we or anyof our subsidiaries is a party, for the two years immediately preceding the date of this Annual Report, each of which is included in the list of exhibits inItem 19. • Indenture, dated November 13, 2013, among Navios Acquisition, Navios Acquisition Finance, the guarantors party thereto and Wells FargoBank, National Association, as trustee and collateral trustee. • Acquisition Agreement, dated April 8, 2010, between Navios Acquisition and Navios Holdings. 117Table of Contents • Management Agreement, dated May 28, 2010, between Navios Acquisition and Navios Ship Management Inc. Please read “Item 7. MajorStockholders and Related Party Transactions” for a summary of certain contract terms. • Amendment to the Management Agreement dated May 4, 2012. Please read “Item 7. Major Stockholders and Related Party Transactions” for asummary of certain contract terms. • Amendment to the Management Agreement dated May 14, 2014. Please read “Item 7. Major Stockholders and Related Party Transactions” for asummary of certain contract terms. • Amendment to the Management Agreement dated May 19, 2016. Please read “Item 7. Major Stockholders and Related Party Transactions” for asummary of certain contract terms. • Administrative Services Agreement, dated May 28, 2010, between Navios Acquisition and Navios Ship Management Inc. Please read “Item 7.Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Amendment to the Administrative Services Agreement dated May 14, 2014. Please read “Item 7. Major Stockholders and Related PartyTransactions” for a summary of certain contract terms. • Acquisition Omnibus Agreement dated May 28, 2010 among Navios Acquisition, Navios Holdings and Navios Partners. Please read “Item 7.Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Midstream Omnibus Agreement dated November 18, 2014 among Navios Midstream, Navios Holdings and Navios Partners in connection withthe Navios Midstream IPO. • Securities Purchase Agreement, dated July 18, 2010, between Navios Acquisition and Vanship Holdings Limited, entered into in connectionwith the VLCC Acquisition. • Credit Agreement, dated April 7, 2010, among certain vessel-owning subsidiaries and Deutsche Schiffsbank AG, Alpha Bank A.E. and CreditAgricole Corporate and Investment Bank. Please read “Item 5. Operating and Financial Review and Prospects” for a summary of certain contractterms. • Credit Agreement, dated April 8, 2010, among certain vessel-owning subsidiaries and DVB Bank S.E. and Fortis Bank. Please read “Item 5.Operating and Financial Review and Prospects” for a summary of certain contract terms. • Facility Agreement for $52.0 million term loan facility, dated May 28, 2010, among certain vessel-owning subsidiaries and DVB Bank S.E. andABN AMRO BANK N.V. Please read “Item 5. Operating and Financial Review and Prospects” for a summary of certain contract terms. • First Supplemental Agreement, dated December 20, 2011, to Facility Agreement dated May 28, 2010, for $52.0 million term loan facility, whichamends certain terms of the Facility Agreement, including providing for additional definitions relating to new charters, amending provisionsrelating to prepayments upon termination of charters within a certain period of time and associated adjustments to the repayment installmentsand providing for mandatory prepayment of a minimal amount, and an associated adjustment to a future installment payment, in the event theinitial charter period is not extended by July 2012. • Facility Agreement for $52.2 million term loan facility, dated October 26, 2010, between Navios Acquisition and Eurobank Ergasias S.A. Pleaseread “Item 5. Operating and Financial Review and Prospects” for a summary of certain contract terms. • Facility Agreement for $52.0 million term loan facility, dated December 6, 2010, between Navios Acquisition and Eurobank Ergasias S.A. Pleaseread “Item 5. Operating and Financial Review and Prospects” for a summary of certain contract terms. • Facility Agreement for $55.1 million term loan facility, dated July 8, 2011, between Navios Acquisition and ABN AMRO Bank N.V. 118Table of Contents • Facility Agreement for $51.0 million term loan facility, dated December 7, 2011, between Navios Acquisition and DVB Bank S.E. • Facility Agreement for up to $28.1 million term loan facility, dated December 29, 2011, between Navios Acquisition and NorddeutscheLandesbank Girozentrale. Please read “Item 5. Operating and Financial Review and Prospects” for a summary of certain contract terms. • Facility Agreement for $56.3 million term loan facility, dated December 29, 2011, among Navios Acquisition, DVB Bank SE and Emporiki Bankof Greece S.A. Please read “Item 5. Operating and Financial Review and Prospects” for a summary of certain contract terms. • Loan Agreement for $40.0 million, dated September 7, 2010, between Navios Acquisition and Navios Holdings (the “Loan Agreement”). Pleaseread “Item 7. Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Letter Agreement Nr. 1 to the Loan Agreement, dated as of October 21, 2010, which provided that the loan would be a revolving facility. • Letter Agreement Nr. 2 to the Loan Agreement, dated November 8, 2011, pursuant to which Navios Holdings agreed to extend the maturity datefrom April 1, 2012 to December 31, 2014. • Facility Agreement for $48.5 million term loan facility, dated July 9, 2013, between Navios Acquisition (through Iraklia Shipping Corporation,Samothrace Shipping Corporation and Thasos Shipping Corporation, its wholly-owned subsidiaries) and Deutsche Bank AG FilialeDeutschlandgeschäft. • Facility Agreement for $40.3 million term loan facility, dated August 20, 2013, between Navios Acquisition (through Donoussa ShippingCorporation and Schinousa Shipping Corporation, its wholly-owned subsidiaries) and HSH Nordbank AG. Please read “Item 5. Operating andFinancial Review and Prospects” for a summary of certain contract terms. • Facility Agreement for $51.0 million term loan facility, dated February 6, 2014, between Navios Acquisition (through Tinos ShippingCorporation and Thera Shipping Corporation, its wholly-owned subsidiaries) and HSH Nordbank AG. • Loan Agreement between Navios Europe I, Navios Acquisition, Navios Holdings. and Navios Partners, as lenders, Navios Partners EuropeFinance Inc., as agent, Navios Acquisition Europe Finance Inc., a wholly owned subsidiary of Navios Acquisition, as arranger and NaviosHoldings Europe Finance Inc., as security trustee, dated December 13, 2013 relating to a term facility of up to $10.0 million and a revolvingfacility of up to $24.1 million entered into for the purpose of partly financing the acquisition cost of ten vessels by the term facility and forproviding additional working capital to Navios Europe I pursuant to the Master Agreement, dated December 13, 2013, between Navios Europe Iand HSH Nordbank AG. • Term loan facility agreement of up to $132.4 million, dated July 18, 2014, with Deutsche Bank AG Filiale Deutschlandgeschäft andSkandinaviska Enskilda Banken AB. Please read “Item 5. Operating and Financial Review and Prospects” for a summary of certain contractterms. • Short term credit facility for up to $200.0 million, dated November 11, 2014, with Navios Holdings for general corporate purposes. Please read“Item 7. Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Securities Purchase Agreement, dated February 26, 2013, between Navios Acquisition and Navios Holdings for the purchase by Navios Holdingsof 17,544,300 shares of common stock of Navios Acquisition for $2.85 per share in a private placement that was completed on February 26,2013. • Form of Co-Investment Share Purchase Agreement, which was entered into by Navios Acquisition and certain members of the management ofNavios Acquisition, Navios Holdings and Navios Partners for the purchase of an aggregate of 158,191 shares of common stock of NaviosAcquisition for $2.85 per share in a private placement that was completed on February 26, 2013. 119Table of Contents • Registration Rights Agreement, dated February 26, 2013, between Navios Acquisition and Navios Holdings and the management investors partythereto. Please read “Item 7. Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Securities Purchase Agreement, dated May 21, 2013, between Navios Acquisition and Navios Holdings for the purchase by Navios Holdings of16,438,356 shares of common stock of Navios Acquisition for $3.65 per share in a private placement that was completed on May 21, 2013. • Registration Rights Agreement, dated May 21, 2013, between Navios Acquisition and Navios Holdings. Please read “Item 7. Major Stockholdersand Related Party Transactions” for a summary of certain contract terms. • Securities Purchase Agreement, dated September 16, 2013, between Navios Acquisition and Navios Holdings for the purchase by NaviosHoldings of 12,897,013 shares of common stock of Navios Acquisition for $3.85 per share in a private placement that was completed onSeptember 16, 2013. • Registration Rights Agreement, dated September 16, 2013, between Navios Acquisition and Navios Holdings. Please read “Item 7. MajorStockholders and Related Party Transactions” for a summary of certain contract terms. • First Supplemental Indenture, dated January 8, 2014, among Navios Acquisition, Navios Acquisition Finance, the guarantors party thereto andWells Fargo Bank, National Association, as trustee and collateral trustee. • Second Supplemental Indenture, dated February 20, 2014, among Navios Acquisition, Navios Acquisition Finance, the guarantors party theretoand Wells Fargo Bank, National Association, as trustee and collateral trustee. • Third Supplemental Indenture, dated March 31, 2014, among Navios Acquisition, Navios Acquisition Finance, the guarantors party thereto andWells Fargo Bank, National Association, as trustee and collateral trustee. • Fourth Supplemental Indenture dated May 28, 2014, among Navios Acquisition, Navios Acquisition Finance, the guarantors party thereto andWells Fargo Bank, National Association, as trustee and collateral trustee. • Fifth Supplemental Indenture dated December 4, 2014, among Navios Acquisition, Navios Acquisition Finance, the guarantors party thereto andWells Fargo Bank, National Association, as trustee and collateral trustee. • Backstop Agreement, dated November 18, 2014, with Navios Midstream providing for a backstop commitment relating to Shinyo Ocean andShinyo Kannika and for three of the seven option vessels. Please read “Item 7. Major Stockholders and Related Party Transactions” for asummary of certain contract terms. • Navios Midstream General Partner Option Agreement, dated November 18, 2014, between Navios Acquisition and Navios Holdings. Please read“Item 7. Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Option Vessels Backstop Agreement, dated as of November 18, 2014, between Navios Midstream and Navios Acquisition. Please read “Item 7.Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Amended and Restated Facility Agreement for $125.0 million term loan facility, dated November 4, 2015, between Navios Acquisition (throughLimnos Shipping Corporation, Paxos Shipping Corporation, Skyros Shipping Corporation, Thasos Shipping Corporation and Tilos ShippingCorporation, its wholly-owned subsidiaries) and Deutsche Bank AG Filiale Deutschlandgeschäft. Please read “Item 5. Operating and FinancialReview and Prospects” for a summary of certain contract terms. 120Table of Contents • Sixth Supplemental Indenture, dated November 17, 2015, among Navios Acquisition, Navios Acquisition Finance (US) Inc., the guarantorsnamed therein and Wells Fargo Bank, National Association, as trustee and collateral trustee. • Facility Agreement for up to $44.0 million term loan facility, dated December 18, 2015, between Navios Acquisition and BNP Paribas, datedDecember 18, 2015. Please read “Item 5. Operating and Financial Review and Prospects” for a summary of certain contract terms. • Loan Agreement for a Revolving Loan Facility of up to $50.0 million, dated as of March 9, 2016, by and between Navios Acquisition andNavios Maritime Holdings Inc. Please read “Item 7. Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Loan Agreement for up to $70.0 million with Navios Maritime Holdings Inc., dated as of September 19, 2016. Please read “Item 7. MajorStockholders and Related Party Transactions” for a summary of certain contract terms. • Share Purchase Agreement, dated November 18, 2014, between Navios Maritime Midstream Partners L.P. and Aegean Sea Maritime Holdings Inc.Please read “Item 7. Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • First Amendment to Share Purchase Agreement, dated October 25, 2016, between Navios Maritime Midstream Partners L.P. and Aegean SeaMaritime Holdings Inc. Please read “Item 7. Major Stockholders and Related Party Transactions” for a summary of certain contract terms. • Credit Agreement, dated January 31, 2017, among certain vessel-owning subsidiaries and ABN AMRO Bank N.V. Please read “Item 5. Operatingand Financial Review and Prospects” for a summary of certain contract terms. D.Exchange controlsUnder the laws of the of the Marshall Islands, Cayman Islands, Hong Kong and the British Virgin Islands, the countries of incorporation of theCompany and its subsidiaries, there are currently no restrictions on the export or import of capital, including foreign exchange controls, or restrictions thataffect the remittance of dividends, interest or other payments to non-resident holders of our common stock. E.Taxation of HoldersMATERIAL INCOME TAX CONSIDERATIONSMarshall Islands Tax ConsiderationsWe are incorporated in the Marshall Islands. Under current Marshall Islands law, we are not subject to tax on income or capital gains, and no MarshallIslands withholding tax will be imposed upon payments of dividends by us to our stockholders. Under the laws of Marshall Islands, of the companies’incorporation and vessels’ registration, the companies are subject to registration and tonnage taxes which have been included in the daily management fee.Other JurisdictionsThe Marshall Islands, Cayman Islands, British Virgin Islands, and Hong Kong, do not impose a tax on international shipping income. As of January 1,2014, foreign-flagged vessels that are managed by Greek or foreign ship management companies in Greece are subject to duties towards the Greek state whichare calculated on the basis of the relevant vessels’ tonnage. The payment of such duties exhausts the tax liability of the foreign ship owning company and therelevant manager against any tax duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel. 121Table of ContentsMaterial U.S. Federal Income Tax ConsequencesThe following discussion addresses the material U.S. federal income tax consequences relating to the purchase, ownership and disposition of shares ofour common stock by beneficial owners of such shares. This discussion is based on current provisions of the Code, treasury regulations promulgated underthe Code (“Treasury Regulations”), Internal Revenue Service (“IRS”) rulings and pronouncements, and judicial decisions now in effect, all of which aresubject to change at any time by legislative, judicial or administrative action. Any such changes may be applied retroactively. No rulings from the IRS havebeen or will be sought with respect to the U.S. federal income tax consequences discussed below. The discussion below is not in any way binding on the IRSor the courts nor does it in any way constitute an assurance that the U.S. federal income tax consequences discussed herein will be accepted by the IRS or thecourts.The U.S. federal income tax consequences to a beneficial owner of shares of our common stock may vary depending upon such beneficial owner’sparticular situation or status. This discussion is limited to beneficial owners of shares of our common stock who hold such shares as capital assets, and it doesnot address aspects of U.S. federal income taxation that may be relevant to such beneficial owners that are subject to special treatment under U.S. federalincome tax laws, including but not limited to: dealers in securities; banks and other financial institutions; insurance companies; tax-exempt organizations,plans or accounts; persons holding shares of our common stock as part of a “hedge,” “straddle” or other risk reduction transaction; persons holding shares ofour common stock through partnerships, trusts or other entities; beneficial owners of shares of our common stock that own 2% or more (by vote or value) ofour outstanding capital stock; U.S. Holders (as defined below) whose functional currency is not the U.S. dollar; and controlled foreign corporations or passiveforeign investment companies, as those terms are defined in the Code. In addition, this discussion does not consider the effects of any applicable foreign,state, local or other tax laws, or estate or gift tax considerations, or the alternative minimum tax.For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of our common stock that is, for U.S. federal income tax purposes: acitizen or resident of the United States; a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) created ororganized in or under the laws of the United States or any state thereof (including the District of Columbia); an estate the income of which is subject to U.S.federal income tax regardless of its source; or a trust, if a court within the United States can exercise primary supervision over its administration, and one ormore “United States persons” (as defined in the Code) have the authority to control all of the substantial decisions of that trust (or the trust was in existenceon August 20, 1996, was treated as a domestic trust on August 19, 1996 and validly elected to continue to be treated as a domestic trust).For purposes of this discussion, a beneficial owner of shares of our common stock (other than a partnership or an entity or arrangement treated as apartnership for U.S. federal income tax purposes) that is not a U.S. Holder is a “Non-U.S. Holder.”If a partnership or other entity or arrangement classified as a partnership for U.S. federal income tax purposes holds shares of our common stock, the taxtreatment of its partners generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partnerlevel. If you are a partner in a partnership holding shares of our common stock, you should consult your own tax advisor regarding the tax consequences toyou of the partnership’s ownership of shares of our common stock.We urge beneficial owners of shares of our common stock to consult their own tax advisers as to the particular tax considerations applicable tothem relating to the purchase, ownership and disposition of shares of our common stock, including the applicability of U.S. federal, state and local taxlaws and non-U.S. tax laws. 122Table of ContentsU.S. Federal Income Taxation of Navios AcquisitionNavios Acquisition is a foreign company that is treated as a corporation for U.S. federal income tax purposes and it neither has made, nor intends tomake, an election to be treated as other than a corporation for U.S. federal income tax purposes. Consequently, among other things, U.S. Holders will notdirectly be subject to U.S. federal income tax on their shares of our income, but rather will be subject to U.S. federal income tax on distributions received fromus and dispositions of shares of our common stock as described below.Taxation of Operating Income: In GeneralUnder the Code, income derived from, or in connection with, the use (or hiring or leasing for use) of a vessel, or the performance of services directlyrelated to the use of a vessel, is treated as “Transportation Income.” Such Transportation Income can arise, for example, from the use (or hiring or leasing foruse) of vessels for use on a time, voyage or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating agreement,code sharing arrangement or other joint venture it directly or indirectly owns or participates in that generates such income, or from the performance ofservices directly related to those uses.Transportation Income that is attributable to transportation that either begins or ends, but that does not both begin and end, in the United States isconsidered to be 50.0% derived from sources within the United States (“U.S. Source International Transportation Income”). Transportation Incomeattributable to transportation that both begins and ends in the United States is considered to be 100.0% derived from sources within the United States (“U.S.Source Domestic Transportation Income”). Navios Acquisition is not permitted by law to engage in transportation that produces income which is consideredto be 100% from sources within the United States. Transportation Income that is attributable to transportation exclusively between non-U.S. destinations isconsidered to be 100.0% derived from sources outside the United States. Transportation Income derived from sources outside the United States generally isnot subject to U.S. federal income tax.U.S. Source International Transportation Income generally is subject to a 4.0% U.S. federal income tax without allowance for deduction or, if such U.S.Source International Transportation Income is effectively connected with the conduct of a trade or business in the United States, U.S. federal corporateincome tax (presently imposed at up to a 35.0% rate) as well as a branch profits tax (presently imposed at a 30.0% rate on effectively connected earnings),unless the non-U.S. corporation qualifies for exemption from tax under Section 883 of the Code.Exemption of Operating Income From U.S. Federal Income TaxationIn general, the exemption from U.S. federal income taxation under Section 883 of the Code provides that if a non-U.S. corporation satisfies therequirements of Section 883 of the Code and the Treasury Regulations thereunder, it will not be subject to the net basis and branch profits taxes or the 4%gross basis tax (each as described below) on its U.S. Source International Transportation income.Under Section 883 of the Code, we will be exempt from U.S. federal income taxation on our U.S. Source International Transportation income if:1. we and our vessel-owning subsidiaries are organized in a foreign country (“country of organization”) that grants an “equivalent exemption” tocorporations organized in the United States; and2. either: • more than 50% of the value of our stock is owned, directly or indirectly, for at least half the number of days during the taxable year by(i) individuals who are “residents” of our country of organization or of another foreign country that grants an “equivalent exemption” tocorporations organized in the United States, (ii) non-U.S. corporations that meet the “Publicly Traded Test” discussed below and are 123Table of Contents organized in a foreign country that grants an “equivalent exemption” to corporations organized in the United States or (iii) certain otherqualified persons described in the applicable regulations, which we refer to as the “Qualified Shareholder Stock Ownership Test,” or • our stock is “primarily and regularly traded on an established securities market” in our country of organization, in another country that grants an“equivalent exemption” to U.S. corporations, or in the United States, which we refer to as the “Publicly-Traded Test”; and3. we meet certain substantiation, reporting and other requirements.Currently, the jurisdiction where we are incorporated, as well as the jurisdictions where our vessel-owning subsidiaries are incorporated, namely, theRepublic of the Marshall Islands, the Cayman Islands, Hong Kong and the British Virgin Islands, grant an “equivalent exemption” to U.S. corporations.Therefore, at present, we will be exempt from U.S. federal income taxation with respect to our U.S. Source International Transportation income if we satisfyeither the Qualified Shareholder Stock Ownership Test or the Publicly-Traded Test. Our ability to satisfy the Qualified Shareholder Stock Ownership Test andPublicly-Traded Test is discussed below.The Treasury Regulations provide, in pertinent part, that stock of a foreign corporation will be considered to be “primarily traded” on an establishedsecurities market if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that countryexceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. Our commonstock is currently “primarily traded” on the New York Stock Exchange.Under the Treasury Regulations, our stock is considered to be “regularly traded” on an established securities market if one or more classes of our stockrepresenting more than 50% of our outstanding shares, by total combined voting power of all classes of stock entitled to vote and total value, is listed on themarket during the taxable year, which we refer to as the listing threshold. Since our common stock, which represents more than 50% of our outstanding sharesby vote and value, is currently listed on the NYSE, we currently satisfy the listing requirement.It is further required that with respect to each class of stock relied upon to meet the listing threshold (i) such class of stock is traded on the market, otherthan de minimis quantities, on at least 60 days during the taxable year or 1/6 of the days in a short taxable year; and (ii) the aggregate number of shares ofsuch class of stock traded on such market during the taxable year is at least 10% of the average number of shares of such class of stock outstanding duringsuch year or as appropriately adjusted in the case of a short taxable year. We currently satisfy the trading frequency and trading volume tests. Even if thiswere not the case, the regulations provide that the trading frequency and trading volume tests will be deemed satisfied by a class of stock if such class ofstock is traded during the taxable year on an established market in the United States and such class of stock is regularly quoted by dealers making a market insuch stock, which condition our common stock currently meets.Notwithstanding the foregoing, the Treasury Regulations provide, in pertinent part, that our common stock will not be considered to be “regularlytraded” on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of our common stockare owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5%or more of the vote and value of our common stock, which we refer to as the “5% Override Rule.”For purposes of being able to determine the persons who owns 5% or more of our common stock, or “5% Stockholders,” the Treasury Regulationspermit us to rely on Schedule 13G and Schedule 13D filings with the SEC to identify persons who have a 5% or more beneficial interest in our commonstock. The Treasury Regulations further provide that an investment company that is registered under the Investment Company Act will not be treated as a 5%Stockholder for such purposes. 124Table of ContentsIf our 5% Stockholders did own more than 50% of our common stock, then we would be subject to the 5% Override Rule unless we were able toestablish that among the closely-held group of 5% Stockholders, there are sufficient 5% Stockholders that are qualified stockholders for purposes ofSection 883 to preclude non-qualified 5% Stockholders in the closely-held group from owning 50% or more of the total value of each class of our stock formore than half the number of days during the taxable year. In order to establish this, sufficient 5% Stockholders that are qualified stockholders would have tocomply with certain documentation and certification requirements designed to substantiate their identity as qualified stockholders. These requirements areonerous and there is no guarantee that we would be able to satisfy them in all cases.Currently, Navios Holdings (a Marshall Islands corporation) owns approximately 43.0% of our common stock. Navios Holdings has represented to usthat it presently meets the Publicly Traded Test and has agreed to comply with the documentation and certification requirements described above.Accordingly, we anticipate that we will not be subject to the 5% Override Rule. However, there can be no assurance that Navios Holdings will continue tomeet the Publicly Traded Test or continue to be able to comply with the documentation and certification requirements described above. Consequently, therecan be no assurance that we will not be subject to the 5% Override Rule in the future.Taxation in Absence of ExemptionTo the extent the benefits of Section 883 are unavailable, our U.S. Source International Transportation Income, to the extent not considered to be“effectively connected” with the conduct of a U.S. trade or business, as described below, would be subject to a 4% tax imposed by Section 887 of the Codeon a gross basis, without the benefit of deductions.Since under the sourcing rules described above, no more than 50% of our U.S. Source International Transportation Income would be treated as beingderived from U.S. sources, the maximum effective rate of U.S. federal income tax on our U.S. Source International Transportation Income would never exceed2% of our gross income under the 4% gross basis tax regime.To the extent the benefits of the Section 883 exemption are unavailable and our U.S. Source International Transportation Income is considered to be“effectively connected” with the conduct of a U.S. trade or business, as described below, any such “effectively connected” U.S. Source InternationalTransportation Income, net of applicable deductions, would be subject to the U.S. federal corporate income tax currently imposed at rates of up to 35%. Inaddition, we may be subject to the 30% “branch profits” tax on any earnings and profits effectively connected with the conduct of such trade or business, asdetermined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of our U.S. trade or business.Our U.S. Source International Transportation Income would be considered “effectively connected” with the conduct of a U.S. trade or business only if: • we have, or are considered to have, a fixed place of business in the United States involved in the earning of shipping income; and • substantially all of our U.S. Source International Transportation Income is attributable to regularly scheduled transportation, such as theoperation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that beginor end in the United States.We do not intend to have, or permit circumstances that would result in having any vessel operating to the United States on a regularly scheduled basis.Based on the foregoing and on the expected mode of our shipping operations and other activities, we believe that none of our U.S. Source InternationalTransportation Income will be “effectively connected” with the conduct of a U.S. trade or business. 125Table of ContentsUnited States Taxation of Gain on Sale of VesselsRegardless of whether we will qualify for exemption under Section 883, we should not be subject to U.S. federal income taxation with respect to gainrealized on a sale of a vessel, provided that we did not depreciate the vessel for U.S. federal income tax purposes. If we took depreciation deductions withrespect to the vessel for U.S. federal income tax purposes (which would be the case if the vessel had produced effectively connected income), upon the sale ofsuch vessel, a portion of any gain realized on the sale would be sourced to the U.S. in proportion to the depreciation deductions taken in the U.S. compared tothe total depreciation of the vessel.United States Federal Income Taxation of U.S. HoldersDistributionsSubject to the discussion of the rules applicable to a PFIC below, any distributions made by us with respect to our common stock to a U.S. Holder willconstitute dividends, which will be taxable as ordinary income, to the extent of our current or accumulated earnings and profits, as determined under U.S.federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will be treated first as a nontaxable return of capitalto the extent of the U.S. Holder’s tax basis in our common stock on a dollar-for-dollar basis and thereafter as capital gain, which will be either long-term orshort-term capital gain depending upon whether the U.S. Holder held the common shares for more than one year. Because Navios Acquisition is not a U.S.corporation, U.S. Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive fromus. Dividends paid with respect to Navios Acquisition’s common stock will be treated as foreign source income and generally will be “passive categoryincome” for purposes of computing allowable foreign tax credits for U.S. foreign tax credit purposes.Dividends received by a non-corporate U.S. Holder are taxed at ordinary income tax rates (currently, a maximum 39.6%) unless such dividendsconstitute “qualified dividend income.” “Qualified dividend income” generally includes a dividend paid by a foreign corporation if (i) the stock with respectto which such dividend was paid is readily tradable on an established securities market in the U.S., (ii) the foreign corporation is not a PFIC for the taxableyear during which the dividend is paid and the immediately preceding taxable year (which we do not believe we have been for 2016, or will be forsubsequent years, as discussed below), (iii) the non-corporate U.S. Holder has owned the stock for more than 60 days during the 121-day period beginning 60days before the date on which the stock become ex-dividend (and has not entered into certain risk limiting transactions with respect to such stock), and(iv) the non-corporate U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property.Qualified dividend income is subject to the long-term capital gain tax rate, which is currently a maximum of 20%. In addition, a 3.8% tax may apply tocertain investment income. See “Medicare Tax” below. Because the common stock of Navios Acquisition was traded on the NYSE during 2016, dividendspaid during 2016 to U.S. Holders that are U.S. citizens or individual residents should generally be qualified dividend income subject to the long-term capitalgains tax rate. However if the NYSE were to delist our shares from trading on its exchange, future dividends may not constitute qualified dividend income.See “Risk Factors” above.Special rules may apply to any amounts received in respect of our common stock that are treated as “extraordinary dividends.” In general, anextraordinary dividend is a dividend with respect to a share of common stock that is equal to or in excess of 10.0% of a U.S. Holder’s adjusted tax basis (orfair market value upon the U.S. Holder’s election) in such share. In addition, extraordinary dividends include dividends received within a one year periodthat, in the aggregate, equal or exceed 20.0% of a U.S. Holder’s adjusted tax basis (or fair market value). If we pay an “extraordinary dividend” on ourcommon stock that is treated as “qualified dividend income,” then any loss recognized by an individual U.S. Holder from the sale or exchange of suchcommon stock will be treated as long-term capital loss to the extent of the amount of such dividend. 126Table of ContentsSale, Exchange or Other Disposition of Common StockSubject to the discussion of PFICs below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other disposition of ashare of our common stock in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other dispositionand the U.S. Holder’s adjusted tax basis in such stock. The U.S. Holder’s initial tax basis in a share of our common stock generally will be the U.S. Holder’spurchase price for the share and that tax basis will be reduced (but not below zero) by the amount of any distributions on our common stock that are treated asnon-taxable returns of capital (as discussed under “— Distributions” above). Such gain or loss will be treated as long-term capital gain or loss if the U.S.Holder’s holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated asU.S.-source income or loss, as applicable, for U.S. foreign tax credit purposes.A corporate U.S. Holder’s capital gains, long-term and short-term, are taxed at ordinary income tax rates. If a corporate U.S. Holder recognizes a lossupon the disposition of our common stock, the corporate U.S. Holder is limited to using the loss to offset other capital gain. If a corporate U.S. Holder has noother capital gain in the tax year of the loss, it may carry the capital loss back three years and forward five years.As described above, long-term capital gains of non-corporate U.S. Holders are subject to the current favorable maximum tax rate of 20%. In addition, a3.8% tax may apply to certain investment income. See “Medicare Tax” below. A non-corporate U.S. Holder may deduct a capital loss resulting from adisposition of our common stock to the extent of capital gains plus up to $3,000 ($1,500 for married individuals filing separate tax returns) and may carryforward capital losses indefinitely.Passive Foreign Investment Company Status and Significant Tax ConsequencesIn general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such holder held our common stock, either: • at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived otherthan in the active conduct of a rental business); or • at least 50% of the average value of the assets held by us during such taxable year produce, or are held for the production of, passive income.For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets,respectively, of any subsidiary corporation in which we own at least 25% of the value of the subsidiary’s stock. Income earned, or deemed earned, by us inconnection with the performance of services will not constitute passive income. By contrast, rental income will constitute “passive income” unless we aretreated as deriving our rental income in the active conduct of a trade or business under applicable rules.Based on our current and projected methods of operations, and an opinion of counsel, we believe that we were not a PFIC for the 2011 through 2016taxable years (we were treated as a PFIC for the 2008 through 2010 taxable years), and we do not believe that we will be a PFIC for 2017 and subsequenttaxable years. For post-2010 taxable years, our U.S. counsel, Thompson Hine LLP, is of the opinion that (1) the income we receive from the time charteringactivities and assets engaged in generating such income should not be treated as passive income or assets, respectively, and (2) so long as our income fromtime charters exceeds 25.0% of our gross income for each taxable year after our 2010 taxable year and the value of our vessels contracted under time chartersexceeds 50.0% of the average value of our assets for each taxable year after our 2010 taxable year, we should not be a PFIC for any taxable year after our2010 taxable year. This opinion is based on representations and projections provided to our counsel by us regarding our assets, income and charters, and itsvalidity is conditioned on the accuracy of such representations and projections. 127Table of ContentsOur counsel’s opinion is based principally on their conclusion that, for purposes of determining whether we are a PFIC, the gross income we derive (orare deemed to derive from any subsidiary in which we own at least 25% by value of the subsidiary’s stock) from time chartering activities should constituteservices income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that we own and operate (orthat we are deemed to own and operate through any subsidiary in which we own at least 25% by value of the subsidiary’s stock) in connection with theproduction of such income, in particular, the vessels we own (or we are deemed to own) that are subject to time charters, should not constitute passive assetsfor purposes of determining whether we are or have been a PFIC. We expect that all of the vessels in our fleet will be engaged in time chartering activities andintend to treat our income from those activities as non-passive income, and the vessels engaged in those activities as non-passive assets, for PFIC purposes.Our counsel has advised us that there is a significant amount of legal authority consisting of the Code, legislative history, IRS pronouncements andrulings supporting our position that the income from our time chartering activities constitutes services income (rather than rental income). There is, however,no direct legal authority under the PFIC rules addressing whether income from time chartering activities is services income or rental income. Moreover, in acase not interpreting the PFIC rules, Tidewater Inc. v. United States, 565 F.3d 299 (5th Cir. 2009), the Fifth Circuit held that the vessel time charters at issuegenerated predominantly rental income rather than services income. However, the IRS stated in an Action on Decision (AOD 2010-001) that it disagrees with,and will not acquiesce to, the way that the rental versus services framework was applied to the facts in the Tidewater decision, and in its discussion stated thatthe time charters at issue in Tidewater would be treated as producing services income for PFIC purposes. The IRS’s AOD, however, is an administrative actionthat cannot be relied upon or otherwise cited as precedent by taxpayers.The opinion of our counsel is not binding on the IRS or any court. Thus, while we have received an opinion of our counsel in support of our position,there is a possibility that the IRS or a court could disagree with this position and the opinion of our counsel. In addition, although we intend to conduct ouraffairs in a manner to avoid being classified as a PFIC with respect to any taxable year, we cannot assure you that the nature of our operations will not changein the future.As discussed more fully below, if we were to be treated as a PFIC for any taxable year in which a U.S. Holder owned our common stock, the U.S. Holderwould be subject to different taxation rules depending on whether the U.S. Holder makes an election to treat us as a “Qualified Electing Fund,” which we referto as a “QEF election.” (As previously discussed, we were not a PFIC for the 2011 through 2016 taxable years and we do not believe that we will be treated asa PFIC for 2017 and subsequent taxable years.) As an alternative to making a QEF election, the U.S. Holder may be able to make a “mark-to-market” electionwith respect to our common stock, as discussed below. In addition, if we were treated as a PFIC for any taxable year in which a U.S. Holder owned ourcommon stock, the U.S. Holder generally would be required to file IRS Form 8621 with the U.S. Holder’s U.S. federal income tax return for each year to reportthe U.S. Holder’s ownership of such common stock. It should also be noted that, if we were treated as a PFIC for any taxable year in which a U.S. Holderowned our common stock and any of our non-U.S. subsidiaries were also a PFIC, the U.S. Holder would be treated as owning a proportionate amount (byvalue) of the shares of the lower-tier PFIC for purposes of the application of these rules.Taxation of U.S. Holders Making a Timely QEF ElectionIf we were to be treated as a PFIC for any taxable year and a U.S. Holder makes a timely QEF election (any such U.S. Holder, an “Electing Holder”), theElecting Holder must report for U.S. federal income tax purposes its pro rata share of our ordinary earnings and net capital gain, if any, for our taxable yearthat ends with or within the Electing Holder’s taxable year, regardless of whether or not the Electing Holder received any distributions from us in that year.Such income inclusions would not be eligible for the preferential tax rates applicable to “qualified dividend income.” The Electing Holder’s adjusted taxbasis in our common stock will be increased to reflect taxed but undistributed earnings and profits. Distributions to the Electing Holder of our earnings and 128Table of Contentsprofits that were previously taxed will result in a corresponding reduction in the Electing Holder’s adjusted tax basis in our common stock and will not betaxed again once distributed. The Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that we incur with respectto any year. An Electing Holder generally will recognize capital gain or loss on the sale, exchange or other disposition of our common stock.Even if a U.S. Holder makes a QEF election for one of our taxable years, if we were a PFIC for a prior taxable year during which the U.S. Holder ownedour common stock and for which the U.S. Holder did not make a timely QEF election, the U.S. Holder would also be subject to the more adverse rulesdescribed below under “Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election.” However, under certain circumstances, a U.S.Holder may be permitted to make a retroactive QEF election with respect to us for any open taxable years in the U.S. Holder’s holding period for our commonstock in which we are treated as a PFIC. Additionally, to the extent that any of our subsidiaries is a PFIC, a U.S. Holder’s QEF election with respect to uswould not be effective with respect to the U.S. Holder’s deemed ownership of the stock of such subsidiary and a separate QEF election with respect to suchsubsidiary would be required.A U.S. Holder makes a QEF election with respect to any year that we are a PFIC by filing IRS Form 8621 with the U.S. Holder’s U.S. federal income taxreturn. If, contrary to our expectations, we were to determine that we are treated as a PFIC for any taxable year, we would notify all U.S. Holders and wouldprovide all necessary information to any U.S. Holder that requests such information in order to make the QEF election described above with respect to us andthe relevant subsidiaries. A QEF election would not apply to any taxable year for which we are not a PFIC, but would remain in effect with respect to anysubsequent taxable year for which we are a PFIC, unless the IRS consents to the revocation of the election.Taxation of U.S. Holders Making a “Mark-to-Market” ElectionIf we were to be treated as a PFIC for any taxable year and, subject to the possibility that our common stock may be delisted by a qualifying exchange,our common stock were treated as “marketable stock,” then, as an alternative to making a QEF election, a U.S. Holder would be allowed to make a“mark-to-market” election with respect to our common stock, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevantinstructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year theexcess, if any, of the fair market value of the U.S. Holder’s common stock at the end of the taxable year over the holder’s adjusted tax basis in the commonstock. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in the common stockover the fair market value thereof at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of themark-to-market election. A U.S. Holder’s tax basis in the U.S. Holder’s common stock would be adjusted to reflect any such income or loss recognized. Gainrecognized on the sale, exchange or other disposition of our common stock would be treated as ordinary income, and any loss recognized on the sale,exchange or other disposition of the common stock would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-marketgains previously included in income by the U.S. Holder. A mark-to-market election would not apply to our common stock owned by a U.S. Holder in anytaxable year during which we are not a PFIC, but would remain in effect with respect to any subsequent taxable year for which we are a PFIC, unless ourcommon stock is no longer treated as “marketable stock” or the IRS consents to the revocation of the election.Even if a U.S. Holder makes a “mark-to-market” election for one of our taxable years, if we were a PFIC for a prior taxable year during which the U.S.Holder owned our common stock and for which the U.S. Holder did not make a timely mark-to-market election or a timely QEF election, the U.S. Holderwould also be subject to the more adverse rules described below under “Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election.”Additionally, to the extent that any of our subsidiaries is a PFIC, a “mark-to-market” election with respect to our common stock would not apply to theU.S. Holder’s deemed ownership of the stock of such subsidiary. 129Table of ContentsTaxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market ElectionIf we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a timely QEF election or a timely “mark-to-market”election for that year (i.e., the taxable year in which the U.S. Holder’s holding period commences), whom we refer to as a “Non-Electing Holder,” would besubject to special rules resulting in increased tax liability with respect to (1) any excess distribution (i.e., the portion of any distributions received by theNon-Electing Holder on our common stock in a taxable year in excess of 125.0% of the average annual distributions received by the Non-Electing Holder inthe three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common stock), and (2) any gain realized on the sale,exchange or other disposition of our common stock. Under these special rules: • the excess distribution and any gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for the common stock; • the amount allocated to the current taxable year and any year prior to the year we were first treated as a PFIC with respect to the Non-ElectingHolder would be taxed as ordinary income; and • the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class oftaxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable toeach such other taxable year.Moreover, (i) any dividends received by a non-corporate U.S. Holder in a year in which we are a PFIC (or in which we were a PFIC in the precedingyear) will not be treated as “qualified dividend income” and will be subject to tax at rates applicable to ordinary income and (ii) if a Non-Electing Holderwho is an individual dies while owning our common stock, such holder’s successor generally would not receive a step-up in tax basis with respect to suchstock. Additionally, to the extent that any of our subsidiaries is a PFIC, the foregoing consequences would apply to the U.S. Holder’s deemed receipt of anyexcess distribution on, or gain deemed realized on the disposition of, the stock of such subsidiary deemed owned by the U.S. Holder.If we are treated as a PFIC for any taxable year during the holding period of a U.S. Holder, unless the U.S. Holder makes a timely QEF election,or a timely “mark-to-market” election, for the first taxable year in which the U.S. Holder holds our common stock and in which we are a PFIC, we willcontinue to be treated as a PFIC for all succeeding years during which the U.S. Holder owns our common stock even if we are not a PFIC for such years.U.S. Holders are encouraged to consult their tax advisers with respect to any available elections that may be applicable in such a situation. In thisregard, while it is our position and our U.S. counsel’s position that we should not be a PFIC for taxable years 2011 through 2016 and we believe that wewill not be a PFIC for subsequent taxable years, there is no assurance that these positions are correct. In addition, U.S. Holders should consult their taxadvisers regarding the IRS information reporting and filing obligations that may arise as a result of the ownership of shares in a PFIC.Medicare TaxA U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will generally besubject to a 3.8% tax on the lesser of (i) the U.S. Holder’s “net investment income” for a taxable year and (ii) the excess of the U.S. Holder’s modified adjustedgross income for such taxable year over $200,000 ($250,000 in the case of joint filers). For these purposes, “net investment income” will generally includedividends paid with respect to our common stock and net gain attributable to the disposition of our common stock (in each case, unless such common stockis held in connection with certain trades or businesses), but will be reduced by any deductions properly allocable to such income or net gain. 130Table of ContentsUnited States Federal Income Taxation of Non-U.S. HoldersDistributionsA Non-U.S. Holder generally will not be subject to U.S. federal income tax or withholding tax on distributions received with respect to our commonstock if the Non-U.S. Holder is not engaged in a U.S. trade or business. If the Non-U.S. Holder is engaged in a U.S. trade or business, our distributions will besubject to U.S. federal income tax to the extent they constitute income effectively connected with the Non-U.S. Holder’s U.S. trade or business (and acorporate Non-U.S. Holder may also be subject to U.S. federal branch profits tax). However, distributions paid to a Non-U.S. Holder who is engaged in a tradeor business may be exempt from taxation under an income tax treaty if the income arising from the distribution is not attributable to a U.S. permanentestablishment maintained by the Non-U.S. Holder.Sale, Exchange or other Disposition of Common StockIn general, a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax on any gain resulting from the disposition of ourcommon stock provided the Non-U.S. Holder is not engaged in a U.S. trade or business. A Non-U.S. Holder that is engaged in a U.S. trade or business will besubject to U.S. federal income tax in the event the gain from the disposition of our common stock is effectively connected with the conduct of such U.S. tradeor business (provided, in the case of a Non-U.S. Holder entitled to the benefits of an income tax treaty with the United States, such gain also is attributable toa U.S. permanent establishment). However, even if not engaged in a U.S. trade or business, individual Non-U.S. Holders may be subject to tax on gainresulting from the disposition of our common stock if they are present in the United States for 183 days or more during the taxable year of the disposition andmeet certain other requirements.Certain Information Reporting RequirementsIndividual U.S. Holders (and to the extent specified in applicable Treasury Regulations, certain individual Non-U.S. Holders and certain U.S. Holdersthat are entities) that hold “specified foreign financial assets,” including our common stock, whose aggregate value exceeds $75,000 at any time during thetaxable year or $50,000 on the last day of the taxable year (or such higher amounts as prescribed by applicable Treasury Regulations) are required to file areport on IRS Form 8938 with information relating to the assets for each such taxable year. Specified foreign financial assets would include, among otherthings, our common stock, unless such common stock is held in an account maintained by a U.S. “financial institution” (as defined). Substantial penaltiesapply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in theevent an individual U.S. Holder (and to the extent specified in applicable Treasury Regulations, an individual Non-U.S. Holder or a U.S. entity) that isrequired to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holderfor the related tax year may not close until three years after the date that the required information is filed. U.S. Holders (including U.S. entities) and Non-U.S.Holders should consult their own tax advisors regarding their reporting obligations.U.S. Backup Withholding Tax and Related Information Reporting RequirementsIn general, dividend payments and payments of proceeds from the disposition of our common stock made to a non-corporate U.S. Holder may besubject to information reporting requirements. Such payments may also be subject to backup withholding tax (currently at a rate of 28%) if you are anon-corporate U.S. Holder and you: • fail to provide an accurate taxpayer identification number; • are notified by the IRS that you are subject to backup withholding because you have previously failed to report all interest or dividends requiredto be shown on your federal income tax returns; or • fail to comply with applicable certification requirements. 131Table of ContentsA U.S. Holder generally is required to certify its compliance with the backup withholding rules on IRS Form W-9.Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on anapplicable IRS Form W-8.Backup withholding tax is not an additional tax. Rather, you generally may obtain a credit of any amounts withheld against your liability for U.S.federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by timely filing a U.S. federal income tax return with the IRS.F. Dividends and paying agentsNot applicable.G. Statements by expertsNot applicable.H. Documents on displayWe file reports and other information with the SEC. These materials, including this Annual Report and the accompanying exhibits, may be inspectedand copied at the public facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549, or from the SEC’s website http://www.sec.gov. Youmay obtain information on the operation of the public reference room by calling 1 (800) SEC-0330 and you may obtain copies at prescribed rates.I. Subsidiary informationNot applicable. Item 11.Quantitative and Qualitative Disclosures about Market RisksForeign Exchange RiskOur functional and reporting currency is the U.S. dollar. We engage in worldwide commerce with a variety of entities. Although our operations mayexpose us to certain levels of foreign currency risk, our transactions are predominantly U.S. dollar denominated. Transactions in currencies other than U.S.dollar are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date atransaction denominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized. Expenses incurred inforeign currencies against which the U.S. Dollar falls in value can increase thereby decreasing our income or vice versa if the U.S. dollar increases in value.For example, during the year ended December 31, 2016, the value of U.S. dollar increased by approximately 3.6% as compared to the Euro.Interest Rate RiskAs of December 31, 2016 and 2015, Navios Acquisition had a total of $1,111.2 million and $1,216.6 million, respectively, in short term and long-termindebtedness. The debt is U.S. dollar-denominated. Borrowings under our credit facilities bear interest at rates based on a premium over U.S. $ LIBOR exceptfor the interest rate on the Notes which is fixed. Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. For the yearended December 31, 2016, 2015 and 2014 we paid interest on our outstanding debt at a weighted average interest rate of 6.0%, 6.0% and 5.73%,respectively. A 1% increase in LIBOR would have increased our interest expense for the years ended December 31, 2016, 2015 and 2014 by $5.1 million,$4.9 million and $5.8 million, respectively. 132Table of ContentsConcentration of Credit RiskFinancial instruments, which potentially subject us to significant concentrations of credit risk, consist principally of trade accounts receivable. Weclosely monitor our exposure to customers for credit risk. We have policies in place to ensure that we trade with customers with an appropriate credit history.Our major customers during 2014 were: DOSCO and Navig8. For the year ended December 31, 2014, these two customers accounted for 22.4% and 28.8%,respectively, of Navios Acquisition’s revenue. Our major customers during 2015 were: Navig8, Shell and Mansel. For the year ended December 31, 2015,these three customers accounted for 35.2%, 13.6% and 10.8%, respectively, of Navios Acquisition’s revenue. Our major customers during 2016 were: Navig8,Shell and Mansel. For the year ended December 31, 2016, these three customers accounted for 33.0%, 20.0% and 14.7%, respectively, of NaviosAcquisition’s revenue.Cash and Cash EquivalentsCash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event ofnon-performance by financial institutions. The Company does maintain cash deposits and equivalents in excess of government-provided insurance limits.The Company also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.InflationInflation has had a minimal impact on vessel operating expenses and general and administrative expenses. Our management does not consider inflationto be a significant risk to direct expenses in the current and foreseeable economic environment. Item 12.Description of Securities Other than Equity SecuritiesNot applicable. 133Table of ContentsPART II Item 13.Defaults, Dividend Arrearages and DelinquenciesNone. Item 14.Material Modifications to the Rights of Shareholders and Use of ProceedsNone. Item 15.Controls and Procedures A.Disclosure Controls and ProceduresThe management of Navios Acquisition, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation,pursuant to Rule 13a-15 promulgated under the Securities Act of 1934, as amended (the “Exchange Act”), of the effectiveness of our disclosure controls andprocedures as of December 31, 2016. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controlsand procedures were effective as of December 31, 2016.Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us inthe reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’srules and forms and that such information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated andcommunicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriateto allow timely decisions regarding required disclosures. B.Management’s annual report on internal control over financial reportingThe management of Navios Acquisition is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a-15(f) or 15d-15(f) of the Exchange Act. Navios Acquisition’s internal control system was designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples in the United States (“GAAP”).Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Navios Acquisition’s management assessed the effectiveness of Navios Acquisition’s internal control over financial reporting as of December 31, 2016.In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in InternalControl — Integrated Framework (2013). Based on its assessment, management concluded that, as of December 31, 2016, Navios Acquisition’s internalcontrol over financial reporting is effective based on those criteria.Navios Acquisition’s independent registered public accounting firm has issued an attestation report on Navios Acquisition’s internal control overfinancial reporting. C.Attestation report of the registered public accounting firmNavios Acquisition’s independent registered public accounting firm has issued an audit report on Navios Acquisition’s internal control over financialreporting. This report appears on Page F-2 of the consolidated financial statements. 134Table of ContentsD.Changes in internal control over financial reportingThere have been no changes in internal controls over financial reporting (identified in connection with management’s evaluation of such internalcontrols over financial reporting) that occurred during the year covered by this Annual Report that have materially affected, or are reasonably likely tomaterially affect, Navios Acquisition’s internal controls over financial reporting. Item 16A.Audit Committee Financial ExpertOur audit committee currently consists of two independent directors, Mr. Veraros and Ms. Noury. Each member of our audit committee is financiallyliterate under the current listing standards of the New York Stock Exchange, and our board of directors has determined that Mr. Veraros qualifies as an “auditcommittee financial expert,” as such term is defined by the SEC. Mr. Veraros is independent under applicable NYSE and SEC standards. We expect toappoint a third independent director to the Audit Committee at such time as the vacancy created by Mr. Koilalous’ resignation has been filled. Item 16B.Code of EthicsWe have adopted a code of conduct and ethics applicable to our directors and officers in accordance with applicable federal securities laws and therules of the New York Stock Exchange. The code is available for review on our website at http://www.navios-acquisition.com. Item 16C.Principal Accountant Fees and ServicesAudit FeesOur principal accountants for the fiscal years 2016 and 2015 were PricewaterhouseCoopers S.A. The audit fees for the audit for each of the years endedDecember 31, 2016 and 2015 were $0.3 million and $0.2 million, respectively.Audit-Related FeesThere were no audit-related fees billed in 2016 and 2015.Tax FeesThere were no tax fees billed in 2016 and 2015.Other FeesThere were no other fees billed in 2016 and 2015.Audit CommitteeThe Audit Committee is responsible for the appointment, replacement, compensation, evaluation and oversight of the work of the independentauditors. As part of this responsibility, the audit committee pre-approves the audit and non-audit services performed by the independent auditors in order toassure that they do not impair the auditors’ independence from Navios Acquisition. The Audit Committee has adopted a policy which sets forth theprocedures and the conditions pursuant to which services proposed to be performed by the independent auditors may be pre-approved.The Audit Committee separately pre-approved all engagements and fees paid to our principal accountants in 2016 and 2015. 135Table of ContentsItem 16D.Exemptions from the Listing Standards for Audit CommitteesNot applicable. Item 16E.Purchases of Equity Securities by the Issuer and Affiliated PurchasersNone. Item 16F.Change in Registrant’s Certifying AccountantNot applicable. Item 16G.Corporate GovernancePursuant to an exception for foreign private issuers, we are not required to comply with the corporate governance practices followed by U.S. companiesunder the New York Stock Exchange listing standards. However, we have voluntarily adopted all of the New York Stock Exchange required practices. Item 16H.Mine Safety DisclosuresNot applicable. Item 17.Financial StatementsSee Item 18. Item 18.Financial StatementsThe financial information required by this Item is set forth on pages F-1 to F-51 and are filed as part of this annual report.Separate consolidated financial statements and notes thereto for Navios Midstream for each of the years ended December 31, 2016, 2015 and 2014 arebeing provided as a result of Navios Midstream meeting a significance test in 2016 pursuant to Rule 3-09 of Regulation S-X and, accordingly, the financialstatements of Navios Midstream for the years ended December 31, 2016, 2015 and 2014 are required to be filed as part of this Annual Report on Form 20-F.See Exhibit 15.4 to this Annual Report on Form 20-F. Item 19.Exhibits ExhibitNo. Description 1.1 Amended and Restated Articles of Incorporation (Previously filed as an exhibit to a Report on Form 6-K filed on June 4, 2010 and herebyincorporated by reference.) 1.2 Articles of Amendment to the Amended and Restated Articles of Incorporation (Previously filed as an exhibit to a Report on Form 6-K filedon February 10, 2011, and hereby incorporated by reference.) 1.3 By-laws (Previously filed as an exhibit to the Navios Acquisition Registration Statement on Form F-1, as amended (File No 333-151707) andhereby incorporated by reference.) 136Table of ContentsExhibitNo. Description 2.1 Specimen Unit Certificate (Previously filed as an exhibit to the Navios Acquisition Registration Statement on Form F-1, as amended (File No333-151707) and hereby incorporated by reference.) 2.2 Specimen Common Stock Certificate (Previously filed as an exhibit to the Navios Acquisition Registration Statement on Form F-1, as amended(File No 333-151707) and hereby incorporated by reference.) 2.3 Specimen Warrant Certificate (Previously filed as an exhibit to the Navios Acquisition Registration Statement on Form F-1, as amended (FileNo 333-151707) and hereby incorporated by reference.) 2.4 Form of Amendment to Warrant Agreement between Continental Stock Transfer & Trust Company and Navios Acquisition (Previously filed asan exhibit to a Report on Form 6-K filed on July 29, 2010, and hereby incorporated by reference.) 2.5 Certificate of Designation of the Series A Convertible Preferred Stock, as filed with the Registrar of Companies of the Republic of the MarshallIslands on September 16, 2010 (Previously filed as an exhibit to a Report on Form 6-K filed on September 21, 2010, and hereby incorporatedby reference.) 2.6 Certificate of Designation of the Series B Convertible Preferred Stock, as filed with the Registrar of Companies of the Republic of the MarshallIslands on October 29, 2010 (Previously filed as an exhibit to a Report on Form 6-K filed on November 9, 2010, and hereby incorporated byreference.) 2.7 Certificate of Designation of the Series C Convertible Preferred Stock, as filed with the Registrar of Companies of the Republic of the MarshallIslands on March 29, 2011 (Previously filed as an exhibit to a Report on Form 6-K filed on April 12, 2011, and hereby incorporated byreference.) 2.8 Indenture dated November 13, 2013 (Previously filed as an exhibit to a Report on Form 6-K filed on December 9, 2013, and herebyincorporated by reference.) 2.9 Certificate of Designation of the Series D Convertible Preferred Stock, as filed with the Registrar of Companies of the Republic of the MarshallIslands on August 24, 2012 (Previously filed as an exhibit to a Report on Form 6-K filed on November 16, 2012, and hereby incorporated byreference.) 2.10 Form of Indenture (Previously filed as an exhibit to the Navios Acquisition Registration Statement on Form F-3 filed on November 21, 2016,and hereby incorporated by reference). 4.1 Form of Right of First Refusal Agreement among Navios Acquisition, Navios Holdings and Navios Partners (Previously filed as an exhibit tothe Navios Acquisition Registration Statement on Form F-1, as amended (File No 333-151707) and hereby incorporated by reference.) 4.2 Repurchase Plan dated April 8, 2010 (Previously filed as an exhibit to a Report on Form 6-K filed on April 12, 2010, and hereby incorporatedby reference.) 4.3 Amended Co-Investment Shares Subscription Agreement dated April 8, 2010 (Previously filed as an exhibit to a Report on Form 6-K filed onJune 4, 2010, and hereby incorporated by reference.) 4.4 Acquisition Agreement, dated April 8, 2010 between Navios Acquisition and Navios Holdings (Previously filed as an exhibit to a Report onForm 6-K filed on June 4, 2010, and hereby incorporated by reference.) 4.5 Management Agreement dated May 28, 2010 between Navios Acquisition and Navios Ship Management Inc. (Previously filed as an exhibit toa Report on Form 6-K filed on June 4, 2010, and hereby incorporated by reference.) 4.6 Administrative Services Agreement dated May 28, 2010 between Navios Acquisition and Navios Ship Management Inc. (Previously filed as anexhibit to a Report on Form 6-K filed on June 4, 2010, and hereby incorporated by reference.) 137Table of ContentsExhibitNo. Description 4.7 Acquisition Omnibus Agreement dated May 28, 2010 among Navios Acquisition, Navios Holdings and Navios Partners (Previously filed as anexhibit to a Report on Form 6-K filed on June 4, 2010, and hereby incorporated by reference.) 4.8 Midstream Omnibus Agreement dated November 18, 2014 among Navios Midstream, Navios Holdings and Navios Partners (Previously filed asan exhibit to a Registration Statement on Form S-1 for Navios Maritime Midstream Partners LP filed on October 27, 2014, and herebyincorporated by reference.) 4.9 Securities Purchase Agreement dated July 18, 2010 between Navios Acquisition and Vanship Holdings Limited (Previously filed as an exhibitto a Report on Form 6-K filed on July 26, 2010, and hereby incorporated by reference.) 4.10 Credit Agreement, dated April 7, 2010, among certain vessel-owning subsidiaries and Deutsche Schiffsbank AG, Alpha Bank A.E. and CreditAgricole Corporate and Investment Bank (Previously filed as an exhibit to a Report on Form 6-K filed on June 4, 2010, and herebyincorporated by reference.) 4.11 Credit Agreement, dated April 8, 2010, among certain vessel-owning subsidiaries and DVB Bank SE and Fortis Bank (Previously filed as anexhibit to a Report on Form 6-K filed on June 4, 2010, and hereby incorporated by reference.) 4.12 Facility Agreement for $52.0 million term loan facility, dated May 28, 2010 Previously filed as an exhibit to a Report on Form 6-K filed onJune 4, 2010, and hereby incorporated by reference.) 4.13 Facility Agreement for $52.2 million term loan facility, dated October 26, 2010 (Previously filed as an exhibit to a Report on Form 6-K filed onNovember 9, 2010, and hereby incorporated by reference.) 4.14 Facility Agreement for $52.0 million term loan facility, dated December 6, 2010 (Previously filed as an exhibit to a Report on Form 6-K filedon January 12, 2012, and hereby incorporated by reference.) 4.15 Registration Rights Agreement dated May 26, 2011 (Previously filed as an exhibit to a Report on Form 6-K filed on May 27, 2011, and herebyincorporated by reference.) 4.16 Loan Agreement for $40.0 million with Navios Maritime Holdings Inc., dated September 7, 2010 (Previously filed as an exhibit to a Report onForm 6-K filed on May 27, 2011, and hereby incorporated by reference.) 4.17 Letter Agreement Nr. 1 to Loan Agreement, dated as of October 21, 2010 (Previously filed as an exhibit to a Report on Form 6-K filed onMay 27, 2011, and hereby incorporated by reference.) 4.18 Facility Agreement for $55.1 million term loan facility, dated July 8, 2011 (Previously filed as an exhibit to a Report on Form 6-K filed onJuly 21, 2011, and hereby incorporated by reference.) 4.19 Letter Agreement Nr. 2 to Loan Agreement, dated November 8, 2011 (Previously filed as an exhibit to a Report on Form 6-K filed onNovember 15, 2011, and hereby incorporated by reference.) 4.20 Facility Agreement for $51 million term loan facility, dated December 7, 2011 (Previously filed as an exhibit to a Report on Form 6-K filed onDecember 14, 2011, and hereby incorporated by reference.) 4.21 First Supplemental Agreement dated December 20, 2011, to Facility Agreement dated May 28, 2010, for $52 million term loan facility(Previously filed as an exhibit to a Report on Form 6-K filed on January 12, 2012, and hereby incorporated by reference.) 138Table of ContentsExhibitNo. Description 4.22 Facility Agreement for up to $28.1 million term loan facility, dated December 29, 2011 (Previously filed as an exhibit to a Report on Form 6-Kfiled on February 22, 2012, and hereby incorporated by reference.) 4.23 Facility Agreement for $56.3 million term loan facility, dated December 29, 2011 (Previously filed as an exhibit to a Report on Form 6-K filedon February 22, 2012, and hereby incorporated by reference.) 4.24 Facility Agreement for $48.5 million term loan facility, dated July 9, 2013 (Previously filed as an exhibit to a Report on Form 6-K filed onAugust 7, 2013, and hereby incorporated by reference.) 4.25 Facility Agreement for $40.3 million term loan facility, dated August 20, 2013 (Previously filed as an exhibit to a Report on Form 6-K filed onAugust 27, 2013, and hereby incorporated by reference.) 4.26 Facility Agreement for $51.0 million term loan facility, dated February 6, 2014 (Previously filed as an exhibit to a Report on Form 6-K filed onFebruary 13, 2014, and hereby incorporated by reference.) 4.27 Loan Agreement between Navios Europe Inc., Navios Acquisition, Navios Maritime Holdings Inc. and Navios Maritime Partners L.P., aslenders, Navios Partners Europe Finance Inc., as agent, Navios Acquisition Europe Finance Inc., a wholly owned subsidiary of NaviosAcquisition, as arranger and Navios Holdings Europe Finance Inc., as security trustee, dated December 13, 2013 (Previously filed as an exhibitto a Report on Form 6-K filed on February 13, 2014, and hereby incorporated by reference.) 4.28 Amendment to the Management Agreement dated May 4, 2012 (Previously filed as an exhibit to a Report on Form 6-K filed on May 15, 2012,and hereby incorporated by reference.) 4.29 Term Loan Facility Agreement for $132.4 million loan facility, dated July 18, 2014 (Previously filed as an exhibit to a Report on Form 6-Kfiled on August 12, 2014, and hereby incorporated by reference.) 4.30 Short Term Credit Facility for up to $200.0 million, dated November 11, 2014, with Navios Maritime Holdings Inc. (Previously filed as anexhibit to a Report on Form 20-F filed on March 30, 2015, and hereby incorporated by reference.) 4.31 Securities Purchase Agreement, dated February 26, 2013, between Navios Maritime Acquisition Corporation and Navios Maritime HoldingsInc. (Previously filed as an exhibit to a Report on Form 6-K filed on March 4, 2013, and hereby incorporated by reference.) 4.32 Form of Co-Investment Share Purchase Agreement (Previously filed as an exhibit to a Report on Form 6-K filed on March 4, 2013, and herebyincorporated by reference.) 4.33 Registration Rights Agreement, dated February 26, 2013, between Navios Maritime Acquisition Corporation and Navios Maritime HoldingsInc. and the management investors party thereto (Previously filed as an exhibit to a Report on Form 6-K filed on March 4, 2013, and herebyincorporated by reference.) 4.34 Securities Purchase Agreement, dated May 21, 2013, between Navios Maritime Acquisition Corporation and Navios Maritime Holdings Inc.(Previously filed as an exhibit to a Report on Form 6-K filed on May 30, 2013, and hereby incorporated by reference.) 4.35 Registration Rights Agreement, dated May 21, 2013, between Navios Maritime Acquisition Corporation and Navios Maritime Holdings Inc.(Previously filed as an exhibit to a Report on Form 6-K filed on May 30, 2013, and hereby incorporated by reference.) 139Table of ContentsExhibitNo. Description 4.36 Securities Purchase Agreement, dated September 16, 2013, between Navios Maritime Acquisition Corporation and Navios Maritime HoldingsInc. (Previously filed as an exhibit to a Report on Form 6-K filed on September 18, 2013, and hereby incorporated by reference.) 4.37 Registration Rights Agreement, dated September 16, 2013, between Navios Maritime Acquisition Corporation and Navios Maritime HoldingsInc. (Previously filed as an exhibit to a Report on Form 6-K filed on September 18, 2013, and hereby incorporated by reference.) 4.38 First Supplemental Indenture dated January 8, 2014 (Previously filed as an exhibit to a Report on Form 6-K filed on April 3, 2014, and herebyincorporated by reference.) 4.39 Second Supplemental Indenture dated February 20, 2014 (Previously filed as an exhibit to a Report on Form 6-K filed on April 3, 2014, andhereby incorporated by reference.) 4.40 Third Supplemental Indenture dated March 31, 2014 (Previously filed as an exhibit to a Report on Form 6-K filed on April 3, 2014, and herebyincorporated by reference.) 4.41 Fourth Supplemental Indenture dated May 28, 2014 (Previously filed as an exhibit to a Report on Form 6-K filed on August 12, 2014, andhereby incorporated by reference.) 4.42 Fifth Supplemental Indenture dated December 4, 2014 (Previously filed as an exhibit to a Report on Form 20-F filed on March 30, 2015, andhereby incorporated by reference.) 4.43 Backstop Agreement, dated November 18, 2014, with Navios Maritime Midstream Partners LP (Previously filed as an exhibit to a Report onForm 20-F for Navios Maritime Midstream Partners LP filed on March 17, 2015, and hereby incorporated by reference.) 4.44 Navios Midstream General Partner Option Agreement, dated November 18, 2014, with Navios Maritime Holdings Inc. (Previously filed as anexhibit to a Report on Form 20-F for Navios Maritime Midstream Partners LP filed on March 17, 2015, and hereby incorporated by reference.) 4.45 General Partner Option Agreement, dated as of November 18, 2014, with Navios Maritime Holdings Inc. (Previously filed as an exhibit to aReport on Form 20-F for Navios Maritime Midstream Partners LP filed on March 17, 2015, and hereby incorporated by reference.) 4.46 Amendment to the Management Agreement dated May 14, 2014 (Previously filed as an exhibit to a Report on Form 6-K filed on May 22,2014, and hereby incorporated by reference.) 4.47 Amendment to the Administrative Services Agreement dated May 14, 2014 (Previously filed as an exhibit to a Report on Form 6-K filed onMay 22, 2014, and hereby incorporated by reference.) 4.48 Amended and Restated Facility Agreement for $125.0 million term loan facility, dated November 4, 2015 (Previously filed as an exhibit to aReport on Form 6-K filed on November 13, 2015, and hereby incorporated by reference.) 4.49 Sixth Supplemental Indenture, dated November 17, 2015 (Previously filed as an exhibit to a Report on Form 6-K filed on January 6, 2016, andhereby incorporated by reference.) 4.50 Facility Agreement for up to $44.0 million term loan facility, dated December 18, 2015 (Previously filed as an exhibit to a Report on Form 6-Kfiled on January 6, 2016, and hereby incorporated by reference.) 4.51 Loan Agreement for up to $70.0 million with Navios Maritime Holdings Inc., dated as of September 19, 2016 (Previously filed as an exhibit toa Report on Form 6-K filed on September 21, 2016, and hereby incorporated by reference). 140Table of ContentsExhibitNo. Description 4.52 Share Purchase Agreement, dated November 18, 2014, between Navios Maritime Midstream Partners L.P. and Aegean Sea Maritime HoldingsInc. (Previously filed as an exhibit to a Registration Statement on Form F-1 filed on October 27, 2014, and hereby incorporated by reference). 4.53 First Amendment to Share Purchase Agreement, dated October 25, 2016, between Navios Maritime Midstream Partners L.P. and Aegean SeaMaritime Holdings Inc. (Previously filed as an exhibit to a Report on Form 6-K filed on November 21, 2016, and hereby incorporated byreference). 4.54 Facility Agreement for $26.7 million term loan facility, dated January 31, 2017, among certain vessel-owning subsidiaries and ABN AMROBank N.V.* 8.1 List of subsidiaries.*12.1 Certification by principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*12.2 Certification by principal financial officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.*13.1 Certification by principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +15.1 Consent of PricewaterhouseCoopers S.A.*15.2 Consent of Ernst & Young (Hellas) Certified Auditors Accountants S.A.*15.3 Consent of PricewaterhouseCoopers S.A.*15.4 Financial statements of Navios Maritime Midstream Partners L.P. for the fiscal years ended December 31, 2016, 2015 and 2014.*101 The following materials from the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2016, formatted ineXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at December 31, 2016 and 2015; (ii) ConsolidatedStatements of Income for each of the years ended December 31, 2016, 2015 and 2014; (iii) Consolidated Statements of Cash Flows for each ofthe years ended December 31, 2016, 2015 and 2014; (iv) Consolidated Statements of Changes in Equity for each of the years endedDecember 31, 2016, 2015 and 2014; and (v) the Notes to the Consolidated Financial Statements as blocks of text. *Filed herewith.+Furnished herewith. 141Table of ContentsSignaturesNavios Maritime Acquisition Corporation hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused andauthorized the undersigned to sign this Annual Report on its behalf. Navios Maritime Acquisition Corporation/s/ Angeliki FrangouBy: Angeliki FrangouIts: Chairman and Chief Executive OfficerDate: April 5, 2017 142Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATION REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2 CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2016 AND 2015 F-3 CONSOLIDATED STATEMENTS OF INCOME FOR EACH OF THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 F-4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 F-5 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR EACH OF THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 F-6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-7 F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and Board of Directors ofNavios Maritime Acquisition Corporation:In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, changes in equity, and cash flowspresent fairly, in all material respects, the financial position of Navios Maritime Acquisition Corporation and its subsidiaries (the “Company”) atDecember 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 inconformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for thesefinancial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control overfinancial reporting, included in “Management’s annual report on internal control over financial reporting” appearing in Item 15(b) of the Company’s 2016Annual Report on Form 20-F. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financialreporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financialstatements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control overfinancial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate./s/ PricewaterhouseCoopers S.A.Athens, GreeceApril 5, 2017 F-2Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONCONSOLIDATED BALANCE SHEETS(Expressed in thousands of U.S. Dollars except share data) Notes December 31,2016 December 31,2015 ASSETS Current assets Cash and cash equivalents 3 $49,292 $54,805 Restricted cash 3 7,366 6,840 Accounts receivable, net 4 20,933 14,202 Due from related parties, short term 15 25,047 17,837 Prepaid expenses and other current assets 4,644 3,665 Total current assets 107,282 97,349 Vessels, net 5 1,306,923 1,441,635 Goodwill 7 1,579 1,579 Other long-term assets 900 1,920 Deferred dry dock and special survey costs, net 10,172 10,326 Investment in affiliates 8,15 196,695 204,808 Due from related parties, long-term 8,15 80,068 16,474 Total non-current assets 1,596,337 1,676,742 Total assets $1,703,619 $1,774,091 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable 9 $4,855 $2,753 Accrued expenses 11 11,047 9,802 Deferred revenue 8,519 7,600 Current portion of long-term debt, net of deferred finance costs 12 55,000 62,643 Total current liabilities 79,421 82,798 Long-term debt, net of current portion, premium and net of deferred finance costs 12 1,040,938 1,134,940 Deferred gain on sale of assets 5,15 7,829 8,982 Total non-current liabilities 1,048,767 1,143,922 Total liabilities $1,128,188 $1,226,720 Commitments and contingencies 16 — — Puttable common stock 250,000 and 650,000 shares issued and outstanding with $2,500 and $6,500 redemption amountas of December 31, 2016 and December 31, 2015, respectively 17 2,500 6,500 Stockholders’ equity Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 1,000 series C shares and 4,000 series A and C sharesissued and outstanding as of December 31, 2016 and December 31, 2015, respectively 17 — — Common stock, $0.0001 par value; 250,000,000 shares authorized; 150,582,990 and 149,782,990 issued and outstanding asof December 31, 2016 and December 31, 2015, respectively 17 15 15 Additional paid-in capital 17 541,720 540,856 Retained Earnings 31,196 — Total stockholders’ equity 572,931 540,871 Total liabilities and stockholders’ equity $1,703,619 $1,774,091 See notes to consolidated financial statements. F-3Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONCONSOLIDATED STATEMENTS OF INCOME(Expressed in thousands of U.S. dollars- except share and per share data) Notes Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Revenue $290,245 $313,396 $264,877 Time charter and voyage expenses (4,980) (4,492) (5,187) Direct vessel expenses 15 (3,567) (1,532) (1,979) Management fees (entirely through related party transactions) 15 (97,866) (95,336) (95,827) General and administrative expenses 15,17 (17,057) (15,532) (14,588) Depreciation and amortization 5,6 (57,617) (57,623) (67,718) Interest income 4,767 1,683 720 Interest expenses and finance cost 12 (75,987) (73,561) (78,610) Impairment loss 5 — — (11,690) Gain on sale of vessels 5,15 11,749 5,771 22,599 Change in fair value of other assets — — (1,188) Equity in net earnings of affiliated companies 8 15,499 18,436 2,000 Other income 377 41 280 Other expense (2,685) (1,514) (642) Net income $62,878 $89,737 $13,047 Dividend on preferred shares Series B — (78) (108) Dividend on preferred shares Series D — (281) (642) Dividend on restricted shares (105) (245) (385) Undistributed income attributable to Series C participating preferred shares (3,058) (4,337) (541) Net income attributable to common stockholders, basic 19 $59,715 $84,796 $11,371 Plus: Dividend on preferred shares Series B — 78 — Dividend on preferred shares Series D — 281 — Dividend on restricted shares 105 245 — Undistributed income attributable to Series C participating preferred shares — — 541 Net income attributable to common stockholders, diluted 19 59,820 85,400 $11,912 Net income per share, basic 19 $0.40 $0.57 $0.08 Weighted average number of shares, basic 149,932,713 150,025,086 147,606,448 Net income per share, diluted 19 $0.40 $0.56 $0.08 Weighted average number of shares, diluted 150,736,156 153,300,395 156,482,448 See notes to consolidated financial statements. F-4Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in thousands of U.S. dollars) Notes Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Operating Activities Net income $62,878 $89,737 $13,047 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,6 57,617 57,623 67,718 Amortization and write-off of deferred finance fees and bond premium 12 3,656 3,495 9,111 Gain on debt repayment (350) — — Amortization of dry dock and special survey costs 2,837 1,532 1,979 Stock based compensation 17 864 2,362 5,254 Impairment loss 5 — — 11,690 Gain on sale of vessels 5 (11,749) (5,771) (22,599) Change in fair value of other assets — — 1,188 Equity in earnings of affiliates, net of dividends received 8 (1,438) (3,821) (2,000) Changes in operating assets and liabilities: (Increase)/ decrease in prepaid expenses and other current assets (479) 5,067 (5,287) (Increase)/ decrease in accounts receivable (6,731) 4,367 (9,308) Increase in due from related parties short-term (7,210) — — Decrease/ (increase) in restricted cash 224 (41) 642 Decrease/ (increase) in other long term assets 1,020 (1,230) 3,665 Increase in accounts payable 2,102 1,246 254 Increase/ (decrease) in accrued expenses 1,245 (293) (1,640) Payments for dry dock and special survey costs (3,828) (6,598) (5,726) (Decrease)/ increase in due to related parties — (17,763) 15,014 Increase in due from related parties long-term (7,638) (16,476) (1,361) (Decrease)/ increase in deferred revenue (75) 6,200 (5,656) Net cash provided by operating activities $92,945 $119,636 $75,985 Investing Activities Acquisition of vessels 5 — (163,791) (362,339) Deposits for vessel acquisitions 5 — — (11,881) Net cash proceeds from sale of vessels 5,8 89,988 71,224 232,956 Investment in affiliates (89) (7,201) — Loans receivable from affiliates (4,275) (7,327) (4,465) Loan receivable from affiliate, net of issuance fee and costs 15 (49,342) — — Dividends received from affiliates 7,223 2,585 — Net cash provided by/ (used in) investing activities $43,505 $(104,510) $(145,729) Financing Activities Loan proceeds, net of deferred finance costs and net of premium 12 — 192,930 161,932 Loan proceeds from related party, net of deferred finance cost — — 165,650 Loan repayment to related party — — (169,650) Loan repayments 12 (105,531) (140,861) (216,197) Proceeds from issuance of ship mortgage and senior notes, net of debt issuance costs 12 — — 59,598 Dividend paid 10 (31,682) (40,084) (31,871) (Increase)/ decrease in restricted cash (750) (130) 17,651 Payment to related party 15 — (11,265) — Net proceeds from equity offerings 17 — — 54,289 Redemption of Convertible shares and puttable common stock 17 (4,000) (5,500) — Acquisition of treasury stock 17 — (9,904) — Net cash (used in)/ provided by financing activities $(141,963) $(14,814) $41,402 Net (decrease)/ increase in cash and cash equivalents (5,513) 312 (28,342) Cash and cash equivalents, beginning of year 54,805 54,493 82,835 Cash and cash equivalents, end of year $49,292 $54,805 $54,493 Supplemental disclosures of cash flow information Cash interest paid, net of capitalized interest $72,478 $70,130 $69,255 Non-cash investing activities Capitalized financing costs $— $19 $355 Common units received upon sale of vessels $— $— $18,640 Investment in affiliates received upon sale of vessels $— $27,111 $145,860 Accrued interest on loan to affiliates $3,498 $1,357 $645 Deferred gain on sale of assets $8,823 $8,971 $— Non-cash financing activities Dividends payable $— $— $7,967 Acquisition of vessels $— $(914) $(3,885) Deposits for vessel acquisitions $— $— $(1,201) Due to related party $— $(914) $5,086 Stock-based compensation $864 $2,362 $5,254 See notes to consolidated financial statements. F-5Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Expressed in thousands of U.S. dollars, except share data) Preferred Stock Common Stock AccumulatedDeficit/RetainedEarnings Note Number ofPreferredShares Amount Number ofCommonShares Amount AdditionalPaid-inCapital TotalStockholders’Equity Balance, December 31, 2013 4,540 $— 136,714,942 $13 $530,203 $(79,394) $450,822 Issuance of common shares 17 — — 14,950,000 2 54,287 — 54,289 Stock-based compensation 17 — — — — 5,254 — 5,254 Dividend paid/declared 10 — — — — (32,619) — (32,619) Net income — — — — — 13,047 13,047 Balance, December 31, 2014 (Revised) 4,540 $— 151,664,942 $15 $557,125 $(66,347) $490,793 Conversion of preferred stock into puttable commonstock 17 — — 800,000 — — — — Redemption of puttable common stock 17 — — (150,000) — — — — Conversion of preferred stock into common stock 17 (540) — 172,800 — — — — Acquisition of treasury stock 17 — — (2,704,752) — (9,904) — (9,904) Stock- based compensation 17 — — — — 2,362 — 2,362 Dividend paid/ declared 10 — — — — (8,727) (23,390) (32,117) Net income — — — — — 89,737 89,737 Balance, December 31, 2015 4,000 $— 149,782,990 $15 $540,856 $— $540,871 Redemption of puttable common stock 17 — — (400,000) — — — — Conversion of Series A preferred stock into commonstock 17 (3,000) — 1,200,000 — — — — Stock-based compensation 17 — — — — 864 — 864 Dividend paid/ declared 10 — — — — — (31,682) (31,682) Net income — — — — — 62,878 62,878 Balance, December 31, 2016 1,000 $— 150,582,990 $15 $541,720 $31,196 $572,931 See notes to consolidated financial statements. F-6Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data)NOTE 1: DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONSNavios Maritime Acquisition Corporation (“Navios Acquisition” or the “Company”) (NYSE: NNA) owns a large fleet of modern crude oil, refinedpetroleum product and chemical tankers providing world-wide marine transportation services. The Company’s strategy is to charter its vessels tointernational oil companies, refiners and large vessel operators under long, medium and short-term charters. The Company is committed to providing qualitytransportation services and developing and maintaining long-term relationships with its customers. The operations of Navios Acquisition are managed by asubsidiary of Navios Maritime Holdings Inc. (“Navios Holdings”).Navios Acquisition was incorporated in the Republic of the Marshall Islands on March 14, 2008. On July 1, 2008, Navios Acquisition completed itsinitial public offering (“IPO”). On May 28, 2010, Navios Acquisition consummated the vessel acquisition which constituted its initial business combination.Following such transaction, Navios Acquisition commenced its operations as an operating company.In November 2014, Navios Maritime Midstream Partners L.P. (“Navios Midstream”), a company formed as a subsidiary of Navios Acquisition,completed an IPO of its units in the United States and is listed on the NYSE under the symbol “NAP”.In connection with the IPO of Navios Midstream, the Company sold all of the outstanding shares of capital stock of four of its vessel-owningsubsidiaries (Shinyo Ocean Limited, Shinyo Kannika Limited, Shinyo Kieran Limited and Shinyo Saowalak Limited) in exchange for: (i) all of the estimatednet proceeds from the IPO amounting to $110,403; (ii) $104,451 of the $126,000 of borrowings under Navios Midstream’s credit facility with Credit Suisse;(iii) 9,342,692 subordinated units and 1,242,692 common units; and (iv) 381,334 general partner units, representing a 2.0% general partner interest in NaviosMidstream, and all of the incentive distribution rights in Navios Midstream, to the general partner of Navios Midstream.Following the IPO, the Company concluded that it does not hold a controlling financial interest in Navios Midstream and deconsolidated the vesselssold as of the IPO date. (Refer to Note 8, “Investment in affiliates”).In June 2015, Navios Midstream exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste and the C. Dream fromNavios Acquisition for an aggregate purchase price of $100,000. The aggregate purchase price consisted of 1,592,920 of Subordinated Series A Units, issuedto Navios Acquisition and $73,000 cash consideration.As of December 31, 2016, Navios Holdings had 43.4% of the voting power and 46.1% of the economic interest in Navios Acquisition.As of December 31, 2016, Navios Acquisition had outstanding: 150,582,990 shares of common stock and 1,000 shares of Series C ConvertiblePreferred Stock held by Navios Holdings.NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Basis of presentation: The accompanying consolidated financial statements are prepared in accordance with accounting principles generallyaccepted in the United States of America (GAAP).(b) Principles of consolidation: The accompanying consolidated financial statements include the accounts of Navios Acquisition, a Marshall Islandscorporation, and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidatedstatements. F-7Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) The Company also consolidates entities that are determined to be variable interest entities (“VIEs”) as defined in the accounting guidance, if itdetermines that it is the primary beneficiary. A variable interest entity is defined as a legal entity where either (a) equity interest holders as a group lack thecharacteristics of a controlling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards, or (b) the equityholders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or(c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expectedresidual returns of the entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that hasdisproportionately few voting rights.Based on internal forecasts and projections that take into account reasonably possible changes in our trading performance, management believes thatthe Company has adequate financial resources to continue in operation and meet its financial commitments, including but not limited to capital expendituresand debt service obligations, for a period of at least twelve months from the date of issuance of these consolidated financial statements. Accordingly, theCompany continues to adopt the going concern basis in preparing its financial statements.(c) Equity method investments: Affiliates are entities over which the Company generally has between 20% and 50% of the voting rights, or over whichthe Company has significant influence, but it does not exercise control. Investments in these entities are accounted for under the equity method ofaccounting. Under this method, the Company records an investment in the stock of an affiliate at cost, and adjusts the carrying amount for its share of theearnings or losses of the affiliate subsequent to the date of investment and reports the recognized earnings or losses in income. Dividends received from anaffiliate reduce the carrying amount of the investment. The Company recognizes gains and losses in earnings for the issuance of shares by its affiliates,provided that the issuance of such shares qualifies as a sale of such shares. When the Company’s share of losses in an affiliate equals or exceeds its interest inthe affiliate, the Company does not recognize further losses, unless the Company has incurred obligations or made payments on behalf of the affiliate.Navios Acquisition evaluates its equity method investments, for other than temporary impairment, on a quarterly basis. Consideration is given to(1) the length of time and the extent to which the fair value has been less than the carrying value, (2) the financial condition and near-term prospects and(3) the intent and ability of the Company to retain its investments for a period of time sufficient to allow for any anticipated recovery in fair value.(d) Subsidiaries: Subsidiaries are those entities in which the Company has an interest of more than one half of the voting rights and/or otherwise haspower to govern the financial and operating policies. The acquisition method of accounting is used to account for the acquisition of subsidiaries if deemed tobe a business combination. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date ofacquisition. The excess of the cost of acquisition over the fair value of the net assets acquired and liabilities assumed is recorded as goodwill. F-8Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) As of December 31, 2016, the entities included in these consolidated financial statements were: Navios Maritime AcquisitionCorporation and Subsidiaries: Nature Country ofIncorporation 2016 2015 2014 Company Name Aegean Sea Maritime Holdings Inc. Sub-Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Amorgos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Andros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Antikithira Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Antiparos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Amindra Navigation Co. Sub-Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Crete Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Folegandros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Ikaria Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Ios Shipping Corporation Vessel-Owning Company Cayman Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Kithira Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Kos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Mytilene Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Navios Maritime Acquisition Corporation Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Navios Acquisition Finance (U.S.) Inc. Co-Issuer Delaware 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Rhodes Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Serifos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Shinyo Dream Limited Vessel-Owning Company(3) Hong Kong — 1/1 - 6/17 1/1 - 12/31 Shinyo Kannika Limited Vessel-Owning Company(3) Hong Kong — — 1/1 - 11/17 Shinyo Kieran Limited Vessel-Owning Company(3) British Virgin Is — — 1/1 - 11/17 Shinyo Loyalty Limited Vessel-Owning Company(1) Hong Kong 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Shinyo Navigator Limited Vessel-Owning Company(2) Hong Kong 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Shinyo Ocean Limited Vessel-Owning Company(3) Hong Kong — — 1/1 - 11/17 Shinyo Saowalak Limited Vessel-Owning Company(3) British Virgin Is. — — 1/1 - 11/17 Sifnos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Skiathos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Skopelos Shipping Corporation Vessel-Owning Company Cayman Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Syros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Thera Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Tinos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Oinousses Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Psara Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Antipsara Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Samothrace Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Thasos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Limnos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Skyros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Alonnisos Shipping Corporation Vessel-Owning Company(4) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Makronisos Shipping Corporation Vessel-Owning Company(4) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Iraklia Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Paxos Shipping Corporation Vessel-Owning Company(5) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Antipaxos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Donoussa Shipping Corporation Vessel-Owning Company(6) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Schinousa Shipping Corporation Vessel-Owning Company(7) Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Navios Acquisition Europe Finance Inc Sub-Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 F-9Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Navios Maritime AcquisitionCorporation and Subsidiaries: Nature Country ofIncorporation 2016 2015 2014 Sikinos Shipping Corporation Vessel-Owning Company(3) Marshall Is. — 1/1 - 6/17 1/1 - 12/31 Kerkyra Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Lefkada Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Zakynthos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 1/1 - 12/31 Leros Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 4/4 - 12/31 Kimolos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 4/29 - 12/31 Samos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 9/15 - 12/31 Tilos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 10/9 - 12/31 — Delos Shipping Corporation Vessel-Owning Company Marshall Is. 1/1 - 12/31 10/9 - 12/31 — Navios Maritime Midstream Partners GP LLC Holding Company Marshall Is. 1/1 - 12/31 1/1 - 12/31 10/13 - 12/31 (1)Former vessel-owner of the Shinyo Splendor which was sold to an unaffiliated third party on May 6, 2014.(2)Former vessel-owner of the Shinyo Navigator which was sold to an unaffiliated third party on December 6, 2013.(3)Navios Midstream acquired all of the outstanding shares of capital stock of the vessel-owning subsidiary.(4)Each company had the rights over a shipbuilding contract of an MR2 product tanker vessel. In February 2015, these shipbuilding contracts wereterminated, with no exposure to Navios Acquisition, due to the shipyard’s inability to issue a refund guarantee.(5)Former vessel-owner of the Nave Lucida which was sold to an unaffiliated third party on January 27, 2016.(6)Former vessel-owner of the Nave Universe which was sold to an unaffiliated third party on October 4, 2016(7)Former vessel-owner of the Nave Constellation which was sold to an unaffiliated third party on November 15, 2016(e) Use of estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financialstatements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates andjudgments, including those related to uncompleted voyages, future drydock dates, the selection of useful lives for tangible assets and scrap value, expectedfuture cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivables, provisions for legal disputes andcontingencies and the valuations estimates inherent in the deconsolidation gain. Management bases its estimates and judgments on historical experience andon various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about thecarrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under differentassumptions and/or conditions.(f) Cash and Cash equivalents: Cash and cash equivalents consist of cash on hand, deposits held on call with banks, and other short-term liquidinvestments with original maturities of three months or less.(g) Restricted Cash: As of December 31, 2016 and 2015, restricted cash consisted of $7,366 and $6,840, respectively, which related to amounts held inretention account in order to service debt and interest payments, as required by certain of Navios Acquisition’s credit facilities.(h) Accounts Receivable, net: The amount shown as accounts receivable, net at each balance sheet date includes receivables from charterers for hire,freight and demurrage billings, net of a provision for doubtful F-10Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provisionfor doubtful accounts.(i) Other long term assets: As of December 31, 2016 and 2015, the amounts shown as other long term assets reflected the advances of $900 and $1,920,respectively, to certain unrelated counterparties for working capital purposes as per charters entered with them.(j) Vessels, net: Vessels are stated at historical cost, which consists of the contract price, delivery and acquisition expenses and capitalized interest costswhile under construction. Vessels acquired in an asset acquisition or in a business combination are recorded at fair value. Subsequent expenditures for majorimprovements and upgrading are capitalized, provided they appreciably extend the life, increase the earning capacity or improve the efficiency or safety ofthe vessels. Expenditures for routine maintenance and repairs are expensed as incurred.Depreciation is computed using the straight line method over the useful life of the vessels, after considering the estimated residual value. Managementestimates the residual values of our tanker vessels based on a scrap value cost of steel times the weight of the ship noted in lightweight ton (LWT). Residualvalues are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons. Revisions of residual values affect thedepreciable amount of the vessels and affects depreciation expense in the period of the revision and future periods. The management after considering currentmarket trends for scrap rates and 10-year average historical scrap rates of the residual values of the Company’s vessels, estimates scrap value at a rate of $360per LWT.Management estimates the useful life of our vessels to be 25 years from the vessel’s original construction. However, when regulations place limitationsover the ability of a vessel to trade on a worldwide basis, its useful life is re-estimated to end at the date such regulations become effective.(k) Vessels held for sale: Vessels are classified as “Vessels held for sale” when all of the following criteria are met: management has committed to aplan to sell the vessel; the vessel is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of vessels;an active program to locate a buyer and other actions required to complete the plan to sell the vessel have been initiated; the sale of the vessel is probableand transfer of the vessel is expected to qualify for recognition as a completed sale within one year; the asset is being actively marketed for sale at a price thatis reasonable in relation to its current fair value and actions required to complete the plan indicate that it is unlikely that significant changes to the plan willbe made or that the plan will be withdrawn. Vessels classified as held for sale are measured at the lower of their carrying amount or fair value less cost to sell.These vessels are not depreciated once they meet the criteria to be held for sale.(l) Deposits for vessels acquisitions: This represents amounts paid by the Company in accordance with the terms of the purchase agreements for theconstruction of long-lived fixed assets. Interest costs incurred during the construction (until the asset is substantially complete and ready for its intended use)are capitalized. Capitalized interest amounted to $0, $104 and $3,290 as of December 31, 2016, 2015 and 2014, respectively.(m) Impairment of long-lived asset group: Vessels, other fixed assets and other long-lived assets held and used by Navios Acquisition are reviewedperiodically for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fullyrecoverable. Navios Acquisition’s management evaluates the carrying amounts and periods over which long-lived assets are depreciated to determine ifevents or changes in circumstances have occurred that would require modification to their carrying values or useful lives. In evaluating useful lives andcarrying values of long-lived assets, certain F-11Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) indicators of potential impairment are reviewed such as, undiscounted projected operating cash flows, vessel sales and purchases, business plans and overallmarket conditions.Undiscounted projected net operating cash flows are determined for each asset group (consisting of the individual vessel and the intangible, if any,with respect to the time charter agreement attached to that vessel) and compared to the vessel carrying value and related carrying value of the intangible withrespect to the time charter agreement attached to that vessel or the carrying value of deposits for newbuildings, if any. Within the shipping industry, vesselsare often bought and sold with a charter attached. The value of the charter may be favorable or unfavorable when comparing the charter rate to then currentmarket rates. The loss recognized either on impairment (or on disposition) will reflect the excess of carrying value over fair value (selling price) for the vesselindividual asset group.As of March 31, 2014, the Company had a current expectation that, more likely than not, the Shinyo Splendor would be sold before the end of itspreviously estimated useful life, and, as a result, performed an impairment test of the specific asset group. The recoverability test was based on undiscountedcash flows expected to result from the entity’s use and eventual disposition of the asset. The significant factors and assumptions used in the undiscountedprojected net operating cash flow analysis included determining the net operating cash flows by considering the charter revenues from the existing timecharter until its expiration, net of brokerage and address commissions and management fees and an estimate of sale proceeds from its disposal based onmarket valuations for such vessel. The carrying amount of the asset group was more than its undiscounted future cash flows. As a result, the entity failed therecoverability test (step one) of the impairment test and proceeded with step two of the impairment analysis. An impairment loss in the amount of $10,718was recognized on this asset group as the carrying amount of the asset group was not recoverable and exceeded its fair value as of March 31, 2014. TheShinyo Splendor was sold on May 6, 2014 to an unaffiliated third party for a net cash consideration of $18,315 (refer to Note 5 “Vessels, Net”).During the fourth quarter of fiscal 2016, management concluded that, although market rates were at healthy levels during the year, events occurred andcircumstances had changed, over previous years, which indicated the potential impairment of Navios Acquisition’s long-lived assets may exist. Theseindicators included continued volatility in the charter market and the related impact of the tanker sector has on management’s expectation for futurerevenues. As a result, an impairment assessment of long-lived assets or identified asset groups was performed.The Company determined undiscounted projected net operating cash flows for each vessel and compared it to the vessel’s carrying value together withthe carrying value of the related intangible. The significant factors and assumptions used in the undiscounted projected net operating cash flow analysisincluded: determining the projected net operating cash flows by considering the charter revenues from existing time charters for the fixed fleet days(Company’s remaining charter agreement rates) and an estimated daily time charter equivalent for the unfixed days (based on the 10- year average historicalone year time charter rates) over the remaining economic life of each vessel, net of brokerage and address commissions, excluding days of scheduled off-hires,management fees fixed until May 2018 and thereafter assuming an annual increase of 3.0% and utilization rate of 99.7% based on the fleet historicalperformance.The assessment concluded that step two of the impairment analysis was not required and no impairment of vessels, existed as of December 31, 2016, asthe undiscounted projected net operating cash flows exceeded the carrying value.In the event that impairment would occur, the fair value of the related asset would be determined and a charge would be recognized in the statements ofincome calculated by comparing the asset’s carrying value to its F-12Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) fair value. Fair value is estimated primarily through the use of third-party valuations performed on an individual vessel basis.Although management believes the underlying assumptions supporting this assessment are reasonable, if charter rate trends and the length of thecurrent market downturn vary significantly from our forecasts, management may be required to perform step two of the impairment analysis in the future thatcould expose Navios Acquisition to material impairment charges in the future.Impairment loss recognized amounted to $0, $0 and $10,718 for the years ended December 31, 2016, 2015 and 2014, respectively.(n) Deferred Finance Costs: Deferred finance costs include fees, commissions and legal expenses associated with obtaining loan facilities and arepresented as a deduction from the corresponding liability, consistent with debt discount. These costs are amortized over the life of the related debt using theeffective interest rate method, and are included in interest expense. Amortization of deferred finance costs for each of the years ended December 31, 2016,2015 and 2014 was $3,501, $3,183 and $7,275, respectively.(o) Goodwill: Goodwill acquired in a business combination is not to be amortized. Goodwill is tested for impairment at the reporting unit level at leastannually and written down with a charge to the statements of income if the carrying amount exceeds the estimated implied fair value.The Company evaluates impairment of goodwill using a two-step process. First, the aggregate fair value of the reporting unit is compared to itscarrying amount, including goodwill. The Company determines the fair value of the reporting unit based on a combination of discounted cash flow analysisand an industry market multiple.If the fair value exceeds the carrying amount, no impairment exists. If the carrying amount of the reporting unit exceeds the fair value, then theCompany must perform the second step in order to determine the implied fair value of the reporting unit’s goodwill and compare it with its carrying amount.The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all the assets and liabilities of that unit, as if the unit hadbeen acquired in a business combination and the fair value of the unit was the purchase price. If the carrying amount of the goodwill exceeds the implied fairvalue, then goodwill impairment is recognized by writing the goodwill down to its implied fair value.Navios Acquisition has one reporting unit. No impairment loss was recognized for any of the periods presented.(p) Intangibles other than goodwill: Navios Acquisition’s intangible assets and liabilities consisted of favorable lease terms and unfavorable leaseterms. When intangible assets or liabilities associated with the acquisition of a vessel are identified, they are recorded at fair value. Fair value is determinedby reference to market data and the discounted amount of expected future cash flows. Where charter rates are higher than market charter rates, an asset isrecorded, being the difference between the acquired charter rate and the market charter rate for an equivalent vessel. Where charter rates are less than marketcharter rates, a liability is recorded, being the difference between the assumed charter rate and the market charter rate for an equivalent vessel. Thedetermination of the fair value of acquired assets and assumed liabilities requires us to make significant assumptions and estimates of many variablesincluding market charter rates, expected future charter rates, the level of utilization of its vessels and its weighted average cost of capital. The use of differentassumptions could result in a material change in the fair value of these items, which could have a material impact on Navios Acquisition’s financial positionand results of operations. F-13Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) The amortizable value of favorable and unfavorable leases is amortized over the remaining life of the lease term and the amortization expense isincluded in the statements of income in the depreciation and amortization line item. The amortizable value of favorable leases would be considered impairedif their fair market values could not be recovered from the future undiscounted cash flows associated with the asset. If a vessel purchase option is exercisedthe portion of this asset will be capitalized as part of the cost of the vessel and will be depreciated over the remaining useful life of the vessel. As ofDecember 31, 2016 and 2015, Navios Acquisition did not have any intangible assets or liabilities.Management, after considering various indicators performed impairment tests on asset groups which included intangible assets and liabilities asdescribed in paragraph (l) above. As of December 31, 2016 and 2015, there was no impairment of intangible assets.(q) Preferred shares Series D: Navios Acquisition issued shares of its authorized Series D Preferred Stock (nominal and fair value $12,000) to ashipyard, in partial settlement of the purchase price of its newbuild vessels. The preferred stock contains a 6% per annum dividend payable quarterly, startingone year after delivery of the vessel. The Series D Preferred Stock mandatorily converted into shares of common stock 30 months after issuance at a price pershare of common stock equal to $10.00. The holder of the preferred stock had the right to convert the shares of preferred stock into common stock prior to thescheduled maturity dates at a price of $7.00 per share of common stock. The preferred stock did not have any voting rights. Navios Acquisition was obligatedto redeem the Series D Preferred Stock (or converted common shares) at holder’s option exercisable beginning on 18 months after issuance, at par payable atup to 12 equal quarterly installments.The fair value of the series D Preferred Stock, was determined using a combination of Black Scholes model and discounted projected cash flows for theconversion option and put, respectively. The model used took into account the credit spread of Navios Acquisition, the volatility of its stock, as well as theprice of its stock at the issuance date. The convertible preferred stock was classified as temporary equity (i.e., apart from permanent equity) as a result of theredemption feature upon exercise of the put option granted to the holder of the preferred stock.(r) Investments in Equity Securities: Navios Acquisition evaluates its investments in Navios Midstream, Navios Europe I Inc. (“Navios Europe I”) andNavios Europe II Inc. (“Navios Europe II”) for OTTI on a quarterly basis. Consideration is given to (i) the length of time and the extent to which the fair valuehas been less than the carrying value, (ii) the financial condition and near-term prospects of Navios Midstream, Navios Europe I and Navios Europe II, and(iii) the intent and ability of the Company to retain its investment in Navios Midstream, Navios Europe I and Navios Europe II for a period of time sufficientto allow for any anticipated recovery in fair value.(s) Deferred Dry dock and Special Survey Costs: Navios Acquisition’s vessels are subject to regularly scheduled drydocking and special surveys whichare carried out every 30 or 60 months to coincide with the renewal of the related certificates issued by the classification societies, unless a further extension isobtained in rare cases and under certain conditions. The costs of drydocking and special surveys is deferred and amortized over the above periods or to thenext drydocking or special survey date if such has been determined. Unamortized drydocking or special survey costs of vessels sold are written off to incomein the year the vessel is sold.Costs capitalized as part of the drydocking or special survey consist principally of the actual costs incurred at the yard, spare parts, paints, lubricantsand services incurred solely during the drydocking or special survey period. For each of the years ended December 31, 2016, 2015 and 2014, theamortization expense was $2,837, $1,532 and $1,979, respectively. Accumulated amortization as of December 31, 2016 and 2015 amounted to $4,995 and$2,222, respectively. F-14Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) (t) Foreign currency translation: Navios Acquisition’s functional and reporting currency is the U.S. dollar. Navios Acquisition engages in worldwidecommerce with a variety of entities. Although, its operations may expose it to certain levels of foreign currency risk, its transactions are predominantly U.S.dollar denominated. Additionally, Navios Acquisition’s wholly owned vessel subsidiaries transacted a nominal amount of their operations in Euros; however,all of the subsidiaries’ primary cash flows are U.S. dollar-denominated. Transactions in currencies other than the functional currency are translated at theexchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in aforeign currency is consummated and the date on which it is either settled or translated, are recognized in the statements of income.(u) Provisions: Navios Acquisition, in the ordinary course of its business, is subject to various claims, suits and complaints. Management, inconsultation with internal and external advisors, will provide for a contingent loss in the financial statements if the contingency had been incurred at the dateof the financial statements and the amount of the loss was probable and can be reasonably estimated. If Navios Acquisition has determined that thereasonable estimate of the loss is a range and there is no best estimate within the range, Navios Acquisition will provide the lower amount of the range.Navios Acquisition, through the Management Agreement with the Manager, participates in Protection and Indemnity (P&I) insurance coverage plansprovided by mutual insurance societies known as P&I clubs. Services such as the ones described above are provided by the Manager under the ManagementAgreement dated May 28, 2010 as recently amended in May 2016, and are included as part of the daily fee of $6.35 for each MR2 product tanker andchemical tanker vessel, $7.15 per LR1 product tanker vessel and $9.5 per VLCC vessel. (See Note 15).(v) Segment Reporting: Navios Acquisition reports financial information and evaluates its operations by charter revenues and not by the length of shipemployment for its customers or vessel type. Navios Acquisition does not use discrete financial information to evaluate operating results for each type ofcharter. Management does not identify expenses, profitability or other financial information by charter type. As a result, management reviews operatingresults solely by revenue per day and operating results of the fleet and thus Navios Acquisition has determined that it operates under one reportable segment.(w) Revenue and Expense Recognition:Revenue Recognition: Revenue is recorded when services are rendered, under a signed charter agreement or other evidence of an arrangement, the priceis fixed or determinable, and collection is reasonably assured. Revenue is generated from the voyage charter and the time charter of vessels.Voyage revenues for the transportation of cargo are recognized ratably over the estimated relative transit time of each voyage. Voyage expenses arerecognized as incurred. A voyage is deemed to commence when a vessel is available for loading and is deemed to end upon the completion of the dischargeof the current cargo. Estimated losses on voyages are provided for in full at the time such losses become evident. Under a voyage charter, a vessel is providedfor the transportation of specific goods between specific ports in return for payment of an agreed upon freight per ton of cargo.Revenues from time chartering of vessels are accounted for as operating leases and are thus recognized on a straight-line basis as the average revenueover the rental periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers’ disposal for a period oftime during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Under time charters, operating costs such as for crews,maintenance and insurance are typically paid by the owner of the vessel. F-15Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Profit-sharing revenues are calculated at an agreed percentage of the excess of the charterer’s average daily income (calculated on a quarterly or half-yearly basis) over an agreed amount and accounted for on an accrual basis based on provisional amounts and for those contracts that provisional accrualscannot be made due to the nature of the profit share elements, these are accounted for on the actual cash settlement. Profit sharing for the years endedDecember 31, 2016, December 31, 2015 and December 31, 2014 amounted to $7,603, $32,060 and $6,710, respectively.Revenues are recorded net of address commissions. Address commissions represent a discount provided directly to the charterers based on a fixedpercentage of the agreed upon charter or freight rate. Since address commissions represent a discount (sales incentive) on services rendered by the Companyand no identifiable benefit is received in exchange for the consideration provided to the charterer, these commissions are presented as a reduction of revenue.Pooling arrangements: For vessels operating in pooling arrangements, the Company earns a portion of total revenues generated by the pool, net ofexpenses incurred by the pool. The amount allocated to each pool participant vessel, including the Company’s vessels, is determined in accordance with anagreed-upon formula, which is determined by the margins awarded to each vessel in the pool based on the vessel’s age, design and other performancecharacteristics. Revenue under pooling arrangements is accounted for on the accrual basis and is recognized when an agreement with the pool exists, price isfixed, service is provided and the collectability is reasonably assured. Revenue for vessels operating in pooling arrangements amounted to $50,832, $43,406and $16,974, for the years ended December 31, 2016, 2015 and 2014, respectively.The allocation of such net revenue may be subject to future adjustments by the pool however, such changes are not expected to be material.Time Charter and Voyage Expenses: Time charter and voyage expenses comprise all expenses related to each particular voyage, including timecharter hire paid and bunkers, port charges, canal tolls, cargo handling, agency fees and brokerage commissions. Time charter expenses are expensed over theperiod of the time charter and voyage expenses are recognized as incurred.Direct Vessel Expense: Direct vessel expenses comprise of the amortization of drydock and special survey costs of certain vessels of NaviosAcquisition’s fleet.Management fees: Pursuant to the Management Agreement dated May 28, 2010 and as previously amended in May 2012 and May 2014, the Managerprovided commercial and technical management services to Navios Acquisition’s vessels for a fixed daily fee of: (a) $6.0 per MR2 product tanker andchemical tanker vessel; (b) $7.0 per LR1 product tanker vessel; and (c) $9.5 per VLCC, through May 2016.Pursuant to an amendment to the Management Agreement dated as of May 19, 2016, Navios Acquisition fixed the fees for commercial and technicalship management services of its fleet for two additional years from May 29, 2016, through May 2018, at a daily fee of: (a) $6.35 per MR2 product tanker andchemical tanker vessel; (b) $7.15 per LR1 product tanker vessel; and (c) $9.5 per VLCC.Dry docking expenses are reimbursed by Navios Acquisition at cost.General and administrative expenses: On May 28, 2010, Navios Acquisition entered into an Administrative Services Agreement with NaviosHoldings, pursuant to which Navios Holdings provides certain administrative management services to Navios Acquisition which include: bookkeeping,audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, F-16Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) client and investor relations and other services. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision ofthese services. In May 2014, Navios Acquisition extended the duration of its existing Administrative Services Agreement with Navios Holdings, until May2020.Deferred Revenue: Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized asrevenue over the voyage or charter period.Prepaid Expense and Other Current Assets: Prepaid expenses relate primarily to cash paid in advance for expenses associated with voyages. Theseamounts are recognized as expense over the voyage or charter period.(x) Financial Instruments: Financial instruments carried on the balance sheet include trade receivables and payables, other receivables and otherliabilities and long-term debt. The particular recognition methods applicable to each class of financial instrument are disclosed in the applicable significantpolicy description of each item, or included below as applicable.Financial risk management: Navios Acquisition’s activities expose it to a variety of financial risks including fluctuations in future freight rates, timecharter hire rates, and fuel prices, credit and interest rate risk. Risk management is carried out under policies approved by executive management. Guidelinesare established for overall risk management, as well as specific areas of operations.Credit risk: Navios Acquisition closely monitors its exposure to customers and counterparties for credit risk. Navios Acquisition has entered into theManagement Agreement with the Manager, pursuant to which the Manager agreed to provide commercial and technical management services to NaviosAcquisition. When negotiating on behalf of Navios Acquisition various employment contracts, the Manager has policies in place to ensure that it trades withcustomers and counterparties with an appropriate credit history. For the year ended December 31, 2016, Navios Acquisition’s customers representing 10% ormore of total revenue were Navig8, Shell Tankers Singapore Private LTD (“Shell”) and Mansel LTD (“Mansel”), which accounted for 33.0%, 20.0% and14.7%, respectively. For the year ended December 31, 2015, Navios Acquisition’s customers representing 10% or more of total revenue were Navig8, Shelland Mansel, which accounted for 35.2%, 13.6% and 10.8%, respectively. For the year ended December 31, 2014, Navios Acquisition’s customersrepresenting 10% or more of total revenue were Navig8 Chemicals Shipping and Trading Co. (“Navig8”) and Dalian Ocean Shipping Co. (“DOSCO”), whichaccounted for 28.8% and 22.4%, respectively.No other customers accounted for 10% or more of total revenue for any of the years presented.Foreign exchange risk: Foreign currency transactions are translated into the measurement currency rates prevailing at the dates of transactions.Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominatedin foreign currencies are recognized in the consolidated statements of income.(y) Earnings per Share: Basic earnings per share is computed by dividing net income attributable to Navios Acquisition’s common shareholders by theweighted average number of common shares outstanding during the periods presented. Diluted earnings per share reflect the potential dilution that wouldoccur if securities or other contracts to issue common stock were exercised. Dilution has been computed by the treasury stock method whereby all of theCompany’s dilutive securities (the warrants and preferred shares and the stock options) are assumed to be exercised and the proceeds used to repurchaseshares of common stock at the weighted average market price of the Company’s common stock during the relevant periods. Convertible shares are includedin the F-17Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) diluted earnings per share, based on the weighted average number of convertible shares assumed to be outstanding during the period. The incremental shares(the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of thediluted earnings per share computation. Restricted stock and restricted stock units (vested and unvested) are included in the calculation of the dilutedearnings per share, based on the weighted average number of restricted stock and restricted stock units assumed to be outstanding during the period.Net income for the years ended December 31, 2016, 2015 and 2014 was adjusted for the purposes of earnings per share calculation, for the dividendson the Series B Preferred Shares, the Series D Preferred Shares, the restricted common stock and for the undistributed income that is attributable to Series Cpreferred stock.(z) Dividends: Dividends are recorded in the Company’s financial statements in the period in which they are declared.(za) Stock based Compensation: In October 2013, Navios Acquisition authorized the issuance of shares of restricted common stock and stock optionsfor its directors. These awards of restricted common stock and stock options are based on service conditions only and vest over three years.The fair value of stock option grants is determined with reference to option pricing model, and principally adjusted Black-Scholes models. The fairvalue of restricted stock is determined by reference to the quoted stock price on the date of grant. Compensation expense is recognized based on a gradedexpense model over the vesting period.The effect of compensation expense arising from the restricted shares and stock options described above amounted to $864, $2,362 and $5,254 as ofDecember 31, 2016, 2015 and 2014, respectively, and it is reflected in general and administrative expenses on the statements of income.There were no restricted stock or stock options exercised, forfeited or expired during the year ended December 31, 2016.On October 24, 2016, 2015 and, 2014, 700,005, 700,001 and 699,994 shares of restricted stock were vested. Accordingly, there were no restrictedshares outstanding and non-vested as of December 31, 2016. The number of stock options vested as of December 31, 2016 amounted to 500,000 (outstandingand non-vested stock options as of December 31, 2015 amounted to 500,000). The weighted average contractual life of stock options outstanding as ofDecember 31, 2016 was 6.8 years.NOTE 3: CASH AND CASH EQUIVALENTS AND RESTRICTED CASHCash and cash equivalents consisted of the following: December 31, 2016 December 31, 2015 Cash on hand and at banks $39,286 $51,831 Short-term deposits 10,006 2,974 Total cash and cash equivalents $49,292 $54,805 Short-term deposits and highly liquid funds relate to amounts held in banks for general financing purposes and represent deposits with an originalmaturity of less than three months. F-18Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Cash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event ofnon-performance by financial institutions. The Company does maintain cash deposits and equivalents in excess of government-provided insurance limits.The Company also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.In restricted cash there is an amount of $7,366 for 2016 and $6,840 for 2015 held in retention accounts in order to service debt and interest payments,as required by certain of Navios Acquisition’s credit facilities.NOTE 4: ACCOUNTS RECEIVABLE, NETAccounts receivable consisted of the following: December 31, 2016 December 31, 2015 Accounts receivable $20,933 $14,202 Less: Provision for doubtful accounts — — Accounts receivable, net $20,933 $14,202 Financial instruments that potentially subject Navios Acquisition to concentrations of credit risk are accounts receivable. Navios Acquisition does notbelieve its exposure to credit risk is likely to have a material adverse effect on its financial position, results of operations or cash flows.NOTE 5: VESSELS, NET Vessels Cost AccumulatedDepreciation Net BookValue Balance at December 31, 2014 $1,487,606 $(111,675) $1,375,931 Additions 207,000 (57,164) 149,836 Disposals (104,274) 20,142 (84,132) Balance at December 31, 2015 $1,590,332 $(148,697) $1,441,635 Additions — (57,617) (57,617) Disposals (including vessels held for sale) (85,319) 8,224 (77,095) Balance at December 31, 2016 $1,505,013 $(198,090) $1,306,923 Acquisition of vessels2015On January 8, 2015, Navios Acquisition took delivery of the Nave Sextans, a newbuilding, 49,999 dwt, MR2 product tanker, from an unaffiliated thirdparty for a total cost of $33,373. Cash paid was $17,750 and $15,623 was transferred from vessel deposits.On February 11, 2015, Navios Acquisition took delivery of the Nave Velocity, a newbuilding, 49,999 dwt, MR2 product tanker, from an unaffiliatedthird party for a total cost of $39,233. Cash paid was $12,591 and $26,642 was transferred from vessel deposits.On November 6, 2015, Navios Acquisition took delivery of the Nave Spherical, a 2009-built, 297,188 dwt VLCC, from an unaffiliated third party for atotal cost of $69,198. F-19Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) On December 2, 2015, Navios Acquisition took delivery of the Nave Photon, a 2008-built, 297,395 dwt VLCC from an unaffiliated third party for atotal cost of $65,196.Disposal of vessels2016On January 27, 2016, Navios Acquisition sold the Nave Lucida to an unaffiliated third party for net cash proceeds of $18,449. The gain on sale of thevessel, upon write-off of the unamortized dry-docking, was $2,282.On October 4, 2016, Navios Acquisition sold the Nave Universe to an unaffiliated third party for net cash proceeds of $35,768. As of June 30, 2016, thevessel was classified as held for sale as the relevant criteria for the classification were met. The gain on sale of the vessel was $4,847.On November 15, 2016, Navios Acquisition sold the Nave Constellation to an unaffiliated third party for net cash proceeds of $35,771. As of June 30,2016, the vessel was classified as held for sale as the relevant criteria for the classification were met. The gain on sale of the vessel was $4,620.2015On June 18, 2015, Navios Midstream exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste, a 2003-built of298,717 dwt VLCC, and the C. Dream, a 2000 built VLCC of 298,570 dwt, from Navios Acquisition for an aggregate sale price of $100,000. The sale priceconsisted of $73,000 cash consideration and the issuance of 1,592,920 Subordinated Series A Units to Navios Acquisition. Refer to Note 15. The gain on saleof vessels amounted to $5,771 and was calculated as follows: Proceeds received: Net Cash proceeds received from sale of assets $71,224 Subordinated Series A Units 27,111 98,335 Carrying Value of assets sold: Vessels and deferred dry dock and special survey costs, net (84,184) Favorable & unfavorable leases 37 Working capital 554 (83,593) 14,742 Deferred gain on sale of assets 8,971 Gain on sale of vessels $5,771 This gain is included in “Gain on sale of vessels” in the consolidated statements of income. Navios Midstream was deconsolidated from the date of theIPO. Refer to Note 8, “Investment in affiliates”.2014On May 6, 2014, Navios Acquisition sold the Shinyo Splendor to an unaffiliated third party for an aggregate sale price of $20,020. As of March 31,2014, an impairment loss of $10,718 related to the Shinyo Splendor has been recognized under the line item “Impairment Loss.” The Company had a currentexpectation that, more likely than not, the Shinyo Splendor would be sold before the end of its previously estimated useful life, and as a F-20Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) result performed an impairment test of the specific asset group. The carrying amount of the asset group was more than its undiscounted future cash flowswhich resulted in an impairment loss (refer to Note 2(m) for further details related to the impairment test). The vessel’s aggregate net carrying amount as at thedate of sale was $19,219 (including the remaining carrying balance of dry dock and special survey costs in the amount of $1,021). The Company received netcash proceeds in the amount of $18,315 and recognized a loss of $904. This loss is presented under “Gain on sale of vessels” in the consolidated statementsof income.On November 18, 2014, Navios Acquisition sold all of the outstanding shares of capital stock of four of its vessel-owning subsidiaries (Shinyo OceanLimited, Shinyo Kannika Limited, Shinyo Kieran Limited and Shinyo Saowalak Limited) to Navios Midstream (see Note 1).The gain on sale amounted to $23,503 and was calculated as: Proceeds received: Cash proceeds received from sale of assets $214,854 Common units 18,640 General Partner units 5,720 Subordinated units 140,140 Selling expenses (211) 379,143 Carrying Value of assets sold: Vessels (322,121) Favorable leases (32,129) Other assets / liabilities, net (1,390) (355,640) Gain on sale of vessels $23,503 The Company recorded the common units, general partner units and subordinated units at their fair value on November 18, 2014. Refer to Note 8,“Investment in affiliates”.This gain is included in “Gain / (loss) on sale of vessels” in the consolidated statements of operations. Navios Midstream was deconsolidated from thedate of the IPO. Refer to Note 8, “Investment in affiliates”.Deposits for vessel acquisitionsDeposits for vessel acquisitions represent deposits for vessels to be delivered in the future. As of December 31, 2016 and December 31, 2015, there wereno deposits for vessels to be delivered in the future. As of December 31, 2014, Navios Acquisition vessel deposits amounted to $42,276 of which $23,540was financed through loans and the balance from existing cash. For the year ended December 31, 2014, additions to deposits for vessels acquisitionscomprising of cash payments and capitalized interest were $11,881, which was offset by $71,220 transferred to vessels, net.For the year ended December 31, 2016, 2015 and 2014, capitalized interest amounted to $0, $104 and $3,290, respectively. F-21Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) NOTE 6: INTANGIBLE ASSETS OTHER THAN GOODWILLIntangible assets as of December 31, 2016 and December 31, 2015, consisted of the following: Favorable lease terms Cost AccumulatedAmortization Net BookValue Balance at December 31, 2014 $10,498 $(7,198) $3,300 Additions — (776) (776) Disposals* (10,498) 7,974 (2,524) Balance at December 31, 2015 $— $— $— Balance at December 31, 2016 $— $— $— Unfavorable lease terms Cost AccumulatedAmortization Net BookValue Balance at December 31, 2014 $(5,819) $2,941 $(2,878) Additions — 317 317 Disposals* 5,819 (3,258) 2,561 Balance at December 31, 2015 $— $— $— Balance at December 31, 2016 $— $— $— Amortization (expense) /income of favorable and unfavorable lease terms for the years ended December 31, 2016, 2015 and 2014 is presented in thefollowing table: December 31,2016 December 31,2015 December 31,2014 Unfavorable lease terms $— $317 $683 Favorable lease terms charter-out — (776) (4,742) Total $— $(459) $(4,059) (*)On June 18, 2015, Navios Acquisition sold all of the outstanding shares of capital stock of two of Navios Acquisition’s vessel-owning subsidiaries(Sikinos Shipping Corporation and Shinyo Dream Limited) to Navios Midstream. The carrying amount of the favorable leases was $2,524 and of theunfavorable leases was $(2,561).NOTE 7: GOODWILLGoodwill as of December 31, 2016 and December 31, 2015 amounted to: Balance at January 1, 2015 $1,579 Balance at December 31, 2015 $1,579 Balance at December 31, 2016 $1,579 NOTE 8: INVESTMENT IN AFFILIATESNavios Europe IOn October 9, 2013, Navios Holdings, Navios Acquisition and Navios Maritime Partners L.P. (“Navios Partners”) established Navios Europe I and haveownership interests of 47.5%, 47.5% and 5.0%, respectively. On December 18, 2013, Navios Europe I acquired ten vessels for aggregate considerationconsisting of (i) cash F-22Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) which was funded with the proceeds of senior loan facility (the “Senior Loan I”) and loans aggregating $10,000 from Navios Holdings, Navios Acquisitionand Navios Partners (in each case, in proportion to their ownership interests in Navios Europe I) (collectively, the “Navios Term Loans I”) and (ii) theassumption of a junior participating loan facility (the “Junior Loan I”). In addition to the Navios Term Loans I, Navios Holdings, Navios Acquisition andNavios Partners will also make available to Navios Europe I revolving loans up to $24,100 to fund working capital requirements (collectively, the “NaviosRevolving Loans I”).On an ongoing basis, Navios Europe I is required to distribute cash flows (after payment of operating expenses, amounts due pursuant to the terms ofthe Senior Loan I and repayments of the Navios Revolving Loans I) according to a defined waterfall calculation as follows: • First, Navios Holdings, Navios Acquisition and Navios Partners will each earn a 12.7% preferred distribution on the Navios Term Loans I and theNavios Revolving Loans I; and • Second, any remaining cash is then distributed on an 80%/20% basis, respectively, between (i) the Junior Loan I holder and (ii) the holders of theNavios Term Loans I.The Navios Term Loans I will be repaid from the future sale of vessels owned by Navios Europe I and is deemed to be the initial investment by NaviosAcquisition. Navios Acquisition evaluated its investment in Navios Europe I under ASC 810 and concluded that Navios Europe I is a VIE and that theCompany is not the party most closely associated with Navios Europe I and, accordingly, is not the primary beneficiary of Navios Europe I based on thefollowing: • the power to direct the activities that most significantly impact the economic performance of Navios Europe I are shared jointly between(i) Navios Holdings, Navios Acquisition and Navios Partners and (ii) and the Junior Loan I holder; and • while Navios Europe I’s residual is shared on an 80%/20% basis, respectively, between (i) the Junior Loan I holder and (ii) Navios Holdings,Navios Acquisition and Navios Partners, the Junior Loan I holder is exposed to a substantial portion of Navios Europe I’s risks and rewards.Navios Acquisition further evaluated its investment in the common stock of Navios Europe I under ASC 323 and concluded that it has the ability toexercise significant influence over the operating and financial policies of Navios Europe I and, therefore, its investment in Navios Europe I is accounted forunder the equity method.The fleet of Navios Europe I is managed by subsidiaries of Navios Holdings.As of December 31, 2016 and December 31, 2015, the estimated maximum potential loss by Navios Acquisition in Navios Europe I would have been$18,268 and $15,764, respectively, which represented the Company’s carrying value of its investment of $5,967 (December 31, 2015: $5,498) theCompany’s portion of the carrying balance of the Navios Revolving Loans I including accrued interest on the Navios Term Loans I of $9,356 (December 31,2015: $8,523), which is included under “Due from related parties, long- term” and the accrued interest income on the Navios Revolving Loans I in theamount of $2,945 (December 31, 2015: $1,743) which is included under “Due from related parties, short-term”. Refer to Note 15 for the terms of the NaviosRevolving Loans I.Income of $1,302, $1,294 and $829 was recognized in “Equity in net earnings of affiliated companies” for the years ended December 31, 2016, 2015and 2014, respectively. F-23Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Accounting for basis differenceThe initial investment in Navios Europe I recorded under the equity method of $4,750, at the inception included the Company’s share of the basisdifference between the fair value and the underlying book value of the assets of Navios Europe I, which amounted to $6,763. This difference is amortizedthrough “Equity in net earnings of affiliated companies” over the remaining life of Navios Europe I. As of December 31, 2016 and December 31, 2015, theunamortized difference between the carrying amount of the investment in Navios Europe I and the amount of the Company’s underlying equity in net assetsof Navios Europe I was $4,710, and $5,386, respectively.Navios Europe IIOn February 18, 2015, Navios Holdings, Navios Acquisition and Navios Partners established Navios Europe II Inc. and have ownership interests of47.5%, 47.5% and 5.0%, respectively. From June 8, 2015 through December 31, 2015, Navios Europe II acquired fourteen vessels for: (i) cash considerationof $145,550 (which was funded with the proceeds of $131,550 of senior loan facilities (the “Senior Loans II”) and loans aggregating $14,000 from NaviosHoldings, Navios Acquisition and Navios Partners (in each case, in proportion to their ownership interests in Navios Europe II) (collectively, the “NaviosTerm Loans II”) and (ii) the assumption of a junior participating loan facility (the “Junior Loan II”) with a face amount of $182,150 and fair value of $99,147.In addition to the Navios Term Loans II, Navios Holdings, Navios Acquisition and Navios Partners will also make available to Navios Europe II revolvingloans up to $43,500 to fund working capital requirements (collectively, the “Navios Revolving Loans II”). In March 2017 the availability under the NaviosRevolving Loans II was increased by $14,000.On an ongoing basis, Navios Europe II is required to distribute cash flows (after payment of operating expenses, amounts due pursuant to the terms ofthe Senior Loans and repayments of the Navios Revolving Loans II) according to a defined waterfall calculation as follows: • First, Navios Holdings, Navios Acquisition and Navios Partners will each earn a 18.0% preferred distribution on the Navios Term Loans II andthe Navios Revolving Loans II; and • Second, any remaining cash is then distributed on an 80%/20% basis, respectively, between (i) the Junior Loan II holder and (ii) the holders ofthe Navios Term Loans II.The Navios Term Loans II will be repaid from the future sale of vessels owned by Navios Europe II and is deemed to be the initial investment by NaviosAcquisition. Navios Acquisition evaluated its investment in Navios Europe II under ASC 810 and concluded that Navios Europe II is a “VIE” and that theCompany is not the party most closely associated with Navios Europe II and, accordingly, is not the primary beneficiary of Navios Europe II based on thefollowing: • the power to direct the activities that most significantly impact the economic performance of Navios Europe II are shared jointly between(i) Navios Holdings, Navios Acquisition and Navios Partners and (ii) the Junior Loan holder II; and • while Navios Europe II’s residual is shared on an 80%/20% basis, respectively, between (i) the Junior Loan holder II and (ii) Navios Holdings,Navios Acquisition and Navios Partners, the Junior Loan II holder is exposed to a substantial portion of Navios Europe II’s risks and rewards.Navios Acquisition further evaluated its investment in the common stock of Navios Europe II under ASC 323 and concluded that it has the ability toexercise significant influence over the operating and financial policies of Navios Europe II and, therefore, its investment in Navios Europe II is accounted forunder the equity method. F-24Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) The fleet of Navios Europe II is managed by subsidiaries of Navios Holdings.As of December 31, 2016, the estimated maximum potential loss by Navios Acquisition in Navios Europe II would have been $22,287 (December 31,2015: $15,867), which represented the Company’s carrying value of the investment of $5,894 (December 31, 2015: $7,342), the Company’s balance of theNavios Revolving Loans II including accrued interest on the Navios Term Loans II of $13,652 (December 31, 2015: $7,952), which is included under “Duefrom related parties, long-term”, and the accrued interest income on the Navios Revolving Loans II in the amount of $2,741 (December 31, 2015: $573),which is included under “Due from related parties, short-term”. Refer to Note 15 for the terms of the Navios Revolving Loans II.Loss of $22 in total and a total income of $1,317 were recognized in “Equity in net earnings of affiliated companies” for the years ended December 31,2016 and 2015, respectively.Accounting for basis differenceThe initial investment in Navios Europe II recorded under the equity method of $6,650, at the inception included the Company’s share of the basisdifference between the fair value and the underlying book value of the assets of Navios Europe II, which amounted to $9,419. This difference is amortizedthrough “Equity in net earnings of affiliated companies” over the remaining life of Navios Europe II. As of December 31, 2016, and December 31, 2015 theunamortized difference between the carrying amount of the investment in Navios Europe II and the amount of the Company’s underlying equity in net assetsof Navios Europe II was $7,953 and $8,895, respectively.Navios MidstreamOn October 13, 2014, the Company formed in the Marshall Islands a wholly-owned subsidiary, Navios Midstream. The purpose of Navios Midstream isto own, operate and acquire crude oil tankers, refined petroleum product tankers, chemical tankers and liquefied petroleum gas tankers under long-termemployment contracts.On the same day, the Company formed in the Marshall Islands a limited liability company, Navios Maritime Midstream Partners GP LLC (the “NaviosMidstream General Partner”) a wholly-owned subsidiary to act as the general partner of Navios Midstream.Navios Midstream completed an IPO of its units on November 18, 2014 and is listed on the NYSE under the symbol “NAP.”In connection with the IPO of Navios Midstream in November 2014, Navios Acquisition sold all of the outstanding shares of capital stock of four ofNavios Acquisition’s vessel-owning subsidiaries (Shinyo Ocean Limited, Shinyo Kannika Limited, Shinyo Kieran Limited and Shinyo Saowalak Limited) inexchange for: (i) all of the estimated net cash proceeds from the IPO amounting to $110,403; (ii) $104,451 of the $126,000 borrowings under NaviosMidstream’s credit facility with Credit Suisse; (iii) 9,342,692 subordinated units and 1,242,692 common units; and (iv) 381,334 general partner units,representing a 2.0% general partner interest in Navios Midstream, and all of the incentive distribution rights in Navios Midstream to the Navios MidstreamGeneral Partner.The Company evaluated its investment in Navios Midstream under ASC 810 and concluded that Navios Midstream is not a “VIE”. The Companyfurther evaluated the power to control the board of directors of Navios Midstream under the voting interest model. As of the IPO date, Navios Acquisition, asthe general partner, F-25Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) delegated all its powers to the board of directors of Navios Midstream and does not have the right to remove or replace the elected directors from the board ofdirectors. Elected directors were appointed by the general partner, but as of the IPO date are deemed to be elected directors. The elected directors represent themajority of the board of directors of Midstream and therefore, the Company concluded that it does not hold a controlling financial interest in NaviosMidstream but concluded that it does maintain significant influence and deconsolidated the vessels sold as of the IPO date.Following the deconsolidation of Navios Midstream, the Company accounts for all of its interest in the general partner and in each of the common andsubordinated units under the equity method of accounting.In connection with the sale of Nave Celeste and the C. Dream to Navios Midstream in June 2015, Navios Acquisition received 1,592,920 SubordinatedSeries A Units of Navios Midstream, as part of the sales price. In conjunction with the transaction, Navios Midstream also issued 32,509 general partner unitsto the General Partner for $551, in order for the General Partner to maintain its 2.0% general partnership interest. The Company analyzed its investment in thesubordinated Series A units and concluded that this is to be accounted for under the equity method on the basis that the Company has significant influenceover Navios Midstream. The Company’s investment in the subordinated Series A units was fair valued at $ 17.02 per unit, in total $27,111 on the date of thesale of the vessels to Navios Midstream.On July 29, 2016, Navios Midstream launched a continuous public offering of its common units for an aggregate offering of up to $25,000. OnSeptember 30, 2016 and December 30, 2016, Navios Acquisition entered into securities purchase agreements with Navios Midstream pursuant to whichNavios Acquisition made an investment in Navios Midstream by purchasing 5,655 and 1,143 general partnership interests, respectively, for an aggregateconsideration of $75 and $14, respectively, in order to maintain its 2.0% partnership interest in Navios Midstream in light of such continuous public offering.The Company determined, under the equity method, that the issuance of common units of Navios Midstream qualified as a sale of shares by theinvestee. As a result, a net loss of $246 was recognized in “Equity in net earnings of affiliated companies” for the year ended December 31, 2016.As of December 31, 2016, the Company owned a 2.0% general partner interest in Navios Midstream through the Navios Midstream General Partner anda 57.9% limited partnership interest through the ownership of subordinated units (44.4%), the subordinated series A units (7.6%) and through common units(5.9%), based on all of the outstanding common, subordinated and general partner units.For the year ended December 31, 2016, 2015 and 2014, total equity method income from Navios Midstream recognized in “Equity in net earnings ofaffiliated companies” was $14,219, $15,825 and $1,171, respectively. Dividends received during the year ended December 31, 2016, 2015 and 2014 were$21,283, $17,202 and $0, respectively.As of December 31, 2016 and December 31, 2015, the carrying amount of the investment in Navios Midstream was $184,834 and $191,968,respectively.As of December 31, 2016 the market value of the investment in Navios Midstream was $135,817.Accounting for basis differenceThe initial investment in Navios Midstream following the completion of the IPO recorded under the equity method of $183,141, as of thedeconsolidation date included the Company’s share of the basis difference F-26Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) between the fair value and the underlying book value of Navios Midstream’s assets, which amounted to $20,169. Of this difference, an amount of $(332) wasallocated on the intangibles assets and $20,501 was allocated on the tangible assets. This difference is amortized through “Equity in net earnings of affiliatedcompanies” over the remaining life of Navios Midstream’s tangible and intangible assets.In connection with the sale of the Nave Celeste and the C. Dream, the Company recognized its incremental investment upon the receipt of theSubordinated series A units in Navios Midstream, which amounted to $27,665 under “Investment in affiliates”. The investment was recognized at fair valueat $17.02 per unit. The incremental investment included the Company’s share of the basis difference between the fair value and the underlying book value ofNavios Midstream’s assets at the transaction date, which amounted to $2,554. Of this difference an amount of $(72) was allocated to the intangible assets and$2,626 was allocated to the tangible assets. This difference is amortized through “Equity in net earnings of affiliated companies” over the remaining life ofNavios Midstream’s tangible and intangible assets.As of December 31, 2016 and December 31, 2015, the unamortized difference between the carrying amount of the investment in Navios Midstream andthe amount of the Company’s underlying equity in net assets of Navios Midstream was $21,221 and $22,120, respectively. This difference is amortizedthrough “Equity in net earnings of affiliated companies” over the remaining life of Navios Midstream’s tangible and intangible assets.Summarized financial information of the affiliated companies is presented below: December 31, 2016 December 31, 2015 Balance Sheet NaviosMidstream NaviosEurope I NaviosEurope II NaviosMidstream NaviosEurope I NaviosEurope II Cash and cash equivalents, including restricted cash $52,791 $10,785 $16,916 $37,834 $11,839 $17,366 Current assets $61,087 $15,980 $19,487 $45,860 $14,782 $22,539 Non-current assets $414,694 $169,925 $232,363 $434,708 $179,023 $245,154 Current liabilities $6,143 $18,490 $24,126 $4,078 $15,377 $16,897 Long-term debt including current portion, net of deferred finance costsand discount $197,176 $86,060 $119,234 $197,819 $96,580 $129,185 Non-current liabilities $196,515 $155,387 $184,530 $197,176 $182,537 $173,543 Year EndedDecember 31, 2016 Year EndedDecember 31, 2015 For theperiodNovember 18,2014 toDecember 31,2014 Year EndedDecember 31, 2014 Income Statement NaviosMidstream NaviosEurope I NaviosEurope II NaviosMidstream NaviosEurope I NaviosEurope II NaviosMidstream NaviosEurope I NaviosEurope II Revenue $91,834 $40,589 $30,893 $83,362 $41,437 $20,767 $7,643 $35,119 $— Net income/ (loss) before non-cash changein fair value of Junior Loan $24,890 $(2,174) $(25,062) $27,072 $(1,347) $1,673 $2,551 $(5,061) $— Net income/ (loss) $24,890 $16,137 $(34,059) $27,072 $(1,118) $77,252 $2,551 $(1,896) $— F-27Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) NOTE 9: ACCOUNTS PAYABLEAccounts payable as of December 31, 2016 and 2015 consisted of the following: December 31,2016 December 31,2015 Creditors $1,625 $638 Brokers 2,031 1,800 Professional and legal fees 1,199 315 Total accounts payable $4,855 $2,753 NOTE 10: DIVIDENDS PAYABLEOn November 8, 2013, the Board of Directors declared a quarterly cash dividend for the third quarter of 2013 of $0.05 per share of common stock. Adividend in the aggregate amount of $7,220 was paid on January 7, 2014 out of which $6,836 was paid to the stockholders of record as of December 19, 2013including holders of restricted stock and $384 was paid to Navios Holdings, the holder of the 1,000 shares of the Series C preferred stock.On February 7, 2014, the Board of Directors of Navios Acquisition declared a quarterly cash dividend for the fourth quarter of 2013 of $0.05 per shareof common stock. A dividend in the aggregate amount of $7,967 was paid on April 8, 2014 out of which $7,583 was paid to the stockholders of record as ofMarch 19, 2014 and $384 was paid to Navios Holdings, the holder of the 1,000 shares of the Series C preferred stock.On May 9, 2014, the Board of Directors declared a quarterly cash dividend in respect of the first quarter of 2014 of $0.05 per share of common stockpayable on July 3, 2014 to stockholders of record as of June 17, 2014. A dividend in the aggregate amount of $7,967 was paid on July 3, 2014 out of which$7,583 was paid to the stockholders of record as of June 17, 2014 and $384 was paid to Navios Holdings, the holder of the 1,000 shares of the Series Cpreferred stock.On August 11, 2014, the Board of Directors declared a quarterly cash dividend in respect of the second quarter of 2014 of $0.05 per share of commonstock payable on October 1, 2014 to stockholders of record as of September 17, 2014. A dividend in the aggregate amount of $7,967 was paid on October 2,2014 out of which $7,583 was paid to the stockholders of record as of September 17, 2014 and $384 was paid to Navios Holdings, the holder of the 1,000shares of the Series C preferred stock.On October 31, 2014, the Board of Directors declared a quarterly cash dividend in respect of the third quarter of 2014 of $0.05 per share of commonstock payable on January 6, 2015 to stockholders of record as of December 17, 2014. A dividend in the aggregate amount of $7,967 was paid on January 6,2015 out of which $7,583 was paid to the stockholders of record as of December 17, 2014 and $384 was paid to Navios Holdings, the holder of the 1,000shares of the Series C Preferred Stock.On February 6, 2015, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2014 of $0.05 per share of commonstock payable on April 2, 2015 to stockholders of record as of March 18, 2015. A dividend in the aggregate amount of $7,977 was paid on April 2, 2015 outof which $7,593 was paid to the stockholders of record as of March 18, 2015 and $384 was paid to Navios Holdings, the holder of the 1,000 shares of theSeries C Preferred Stock.On May 11, 2015, the Board of Directors declared a quarterly cash dividend in respect of the first quarter of 2015 of $0.05 per share of common stockpayable on July 2, 2015 to stockholders of record as of June 18, 2015. F-28Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) A dividend in the aggregate amount of $7,986 was paid on July 2, 2015 out of which $7,602 was paid to the stockholders of record as of June 18, 2015 and$384 was paid to Navios Holdings, the holder of the 1,000 shares of the Series C Preferred Stock.On August 13, 2015, the Board of Directors declared a quarterly cash dividend for the second quarter of 2015 of $0.05 per share of common stockpayable on September 24, 2015 to stockholders of record as of September 18, 2015. A dividend in the aggregate amount of $7,922 was paid on September 24,2015 out of which $7,538 was paid to the stockholders of record as of September 18, 2015 and $384 was paid to Navios Holdings, the holder of the 1,000shares of the Series C Preferred Stock.On November 6, 2015, the Board of Directors declared a quarterly cash dividend for the third quarter of 2015 of $0.05 per share of common stockpayable on December 23, 2015 to stockholders of record as of December 17, 2015. A dividend in the aggregate amount of $7,873 was paid on December 23,2015 out of which $7,489 was paid to the stockholders of record as of December 17, 2015 and $384 was paid to Navios Holdings, the holder of the 1,000shares of the Series C Preferred Stock.On February 4, 2016, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2015 of $0.05 per share of commonstock payable on March 23, 2016 to stockholders of record as of March 17, 2016. A dividend in the aggregate amount of $7,928 was paid on March 23, 2016out of which $7,544 was paid to the stockholders of record as of March 17, 2016 and $384 was paid to Navios Holdings, the holder of the 1,000 shares ofSeries C Preferred Stock.On May 11, 2016, the Board of Directors declared a quarterly cash dividend in respect of the first quarter of 2016 of $0.05 per share of common stockpayable on June 22, 2016 to stockholders of record as of June 17, 2016. A dividend in the aggregate amount of $7,923 was paid on June 22, 2016 out ofwhich $7,539 was paid to the stockholders of record as of June 17, 2016 and $384 was paid to Navios Holdings, the holder of the 1,000 shares of Series CPreferred Stock.On August 10, 2016, the Board of Directors declared a quarterly cash dividend in respect of the second quarter of 2016 of $0.05 per share of commonstock payable on September 21, 2016 to stockholders of record as of September 14, 2016. A dividend in the aggregate amount of $7,918 was paid onSeptember 21, 2016 out of which $7,534 was paid to the stockholders of record as of September 14, 2016 and $384 was paid to Navios Holdings, the holderof the 1,000 shares of Series C Preferred Stock.On November 4, 2016, the Board of Directors declared a quarterly cash dividend in respect of the third quarter of 2016 of $0.05 per share of commonstock payable on December 21, 2016 to stockholders of record as of December 14, 2016. A dividend in the aggregate amount of $7,913 was paid onDecember 21, 2016 out of which $7,529 was paid to the stockholders of record as of December 14, 2016 and $384 was paid to Navios Holdings, the holder ofthe 1,000 shares of Series C Preferred Stock.For the year ended December 31, 2016, Navios Acquisition had no outstanding Series B and Series D Preferred Stock. For the year ended December 31,2015, Navios Acquisition paid dividend in the aggregate of $359 to the holders of the Series B and Series D Preferred Stock. For the year ended December 31,2014, Navios Acquisition paid dividend in the aggregate of $750 to the holders of the 540 shares of Series B and Series D Preferred Stock.The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among otherthings, Navios Acquisition’s cash requirements as measured by F-29Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the Board of Directors may deemadvisable.NOTE 11: ACCRUED EXPENSESAccrued expenses as of December 31, 2016 and December 31, 2015 consisted of the following: December 31,2016 December 31,2015 Accrued voyage expenses $1,369 $485 Accrued loan interest 8,800 9,026 Accrued legal and professional fees 878 291 Total accrued expenses $11,047 $9,802 In December 2015 and during 2016, the Compensation Committee of Navios Acquisition authorized and approved an aggregate cash payment of$4,010 subject to fulfillment of certain service conditions that were provided and completed during 2016 and an additional $1,000 to the directors and/orofficers of the Company subject to fulfillment of certain service conditions in 2017. As of December 31, 2016, an accrued amount of $750 is included inaccrued legal and professional fees and an amount of $3,260 was paid during 2016. The total amount of $4,010, $2,750 and $0 was recorded in general andadministrative expenses on the statements of income for the years ended December 31, 2016, 2015 and 2014, respectively.NOTE 12: BORROWINGS December 31,2016 December 31,2015 Commerzbank AG, Alpha Bank AE, Credit Agricole Corporate and Investment Bank $94,250 $119,250 BNP Paribas S.A. and DVB Bank S.E. 60,750 65,250 Eurobank Ergasias S.A. $52,200 38,297 41,025 Eurobank Ergasias S.A. $52,000 36,102 38,550 Norddeutsche Landesbank Girozentrale 25,391 26,953 DVB Bank S.E. and Credit Agricole Corporate and Investment Bank 48,828 51,953 Ship Mortgage Notes $670,000 670,000 670,000 Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB 97,615 125,000 HSH Nordbank AG $40,300 — 34,633 BNP Paribas $44,000 40,000 44,000 1,111,233 1,216,614 Less: Deferred finance costs, net (16,685) (20,640) Add: bond premium 1,390 1,609 Total borrowings $1,095,938 $1,197,583 Less: current portion, net of deferred finance costs (55,000) (62,643) Total long-term borrowings, net of current portion, bond premium and deferred finance costs $1,040,938 $1,134,940 F-30Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Long-Term Debt Obligations and Credit ArrangementsShip Mortgage Notes:8 1/8% First Priority Ship Mortgages: On November 13, 2013, the Company and its wholly owned subsidiary, Navios Acquisition Finance (US) Inc.(“Navios Acquisition Finance” and together with the Company, the “2021 Co-Issuers”) issued $610,000 in first priority ship mortgage notes (the “ExistingNotes”) due on November 15, 2021 at a fixed rate of 8.125%.On March 31, 2014, the Company completed a sale of $60,000 of its first priority ship mortgage notes due in 2021 (the “Additional Notes,” andtogether with the Existing Notes, the “2021 Notes”). The terms of the Additional Notes are identical to the Existing Notes and were issued at 103.25% plusaccrued interest from November 13, 2013. The net cash received amounted to $59,598.The 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of Navios Acquisition’s subsidiaries with the exception ofNavios Acquisition Finance (a co-issuer of the 2021 Notes).The 2021 Co-Issuers have the option to redeem the 2021 Notes in whole or in part, at any time: (i) before November 15, 2016, at a redemption priceequal to 100% of the principal amount, plus a make-whole premium, plus accrued and unpaid interest, if any; and (ii) on or after November 15, 2016, at afixed price of 106.094% of the principal amount, which price declines ratably until it reaches par in 2019, plus accrued and unpaid interest, if any.At any time before November 15, 2016, the 2021 Co-Issuers could have redeemed up to 35% of the aggregate principal amount of the 2021 Notes withthe net proceeds of an equity offering at 108.125% of the principal amount of the 2021 Notes, plus accrued and unpaid interest, if any, so long as at least 65%of the aggregate principal amount of the Existing Notes remains outstanding after such redemption. No redemption took place.In addition, upon the occurrence of certain change of control events, the holders of the 2021 Notes will have the right to require the 2021 Co-Issuers torepurchase some or all of the 2021 Notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date.The 2021 Notes contain covenants which, among other things, limit the incurrence of additional indebtedness, issuance of certain preferred stock, thepayment of dividends, redemption or repurchase of capital stock or making restricted payments and investments, creation of certain liens, transfer or sale ofassets, entering in transactions with affiliates, merging or consolidating or selling all or substantially all of the 2021 Co-Issuers’ properties and assets andcreation or designation of restricted subsidiaries. The 2021 Co-Issuers were in compliance with the covenants as of December 31, 2016.The Existing Notes and the Additional Notes are treated as a single class for all purposes under the indenture including, without limitation, waivers,amendments, redemptions and other offers to purchase and the Additional Notes rank evenly with the Existing Notes. The Additional Notes and the ExistingNotes have the same CUSIP number.GuaranteesThe Company’s 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with theexception of Navios Acquisition Finance (a co-issuer of the 2021 Notes). F-31Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) The Company’s 2021 Notes are unregistered. The guarantees of our subsidiaries that own mortgaged vessels are senior secured guarantees and the guaranteesof our subsidiaries that do not own mortgaged vessels are senior unsecured guarantees. All subsidiaries, including Navios Acquisition Finance, are 100%owned. Navios Acquisition does not have any independent assets or operations. Except as provided above, Navios Acquisition does not have anysubsidiaries that are not guarantors of the 2021 Notes.Credit FacilitiesCommerzbank AG, Alpha Bank A.E., and Credit Agricole Corporate and Investment Bank: Navios Acquisition assumed a loan agreement dated April 7,2010, with Commerzbank AG, Alpha Bank A.E. and Credit Agricole Corporate and Investment Bank of up to $150,000 (divided in six equal tranches of$25,000 each) to partially finance the construction of two chemical tankers and four product tankers. Each tranche of the facility is repayable in 12 equalsemi-annual installments of $750 each with a final balloon payment of $16,000 to be repaid on the last repayment date. The repayment of each tranchestarted six months after the delivery date of the respective vessel which that tranche financed. It bears interest at a rate of LIBOR plus 250 bps. The loan alsorequires compliance with certain financial covenants. On October 27, 2016, Navios Acquisition reduced the facility by $16,000 through payment of $15,650in cash being the balloon instalment for one of the six tranches, achieving a nominal benefit amount of $350. As of December 31, 2016, the amount of$94,250 was outstanding. On January 27, 2017, Navios Acquisition repaid $16,000 being the balloon instalment for another of the remaining five tranches.BNP Paribas S.A. Bank and DVB Bank S.E.: Navios Acquisition assumed a loan agreement dated April 8, 2010, of up to $75,000 (divided in three equaltranches of $25,000 each) to partially finance the purchase price of three product tankers. Each of the tranches is repayable in 12 equal semi-annualinstallments of $750 each with a final balloon payment of $16,000 to be repaid on the last repayment date. The repayment date of each tranche started sixmonths after the delivery date of the respective vessel which that tranche finances. It bears interest at a rate of LIBOR plus 250 bps. The loan also requirescompliance with certain financial covenants. As of December 31, 2016, an amount of $60,750 was outstanding.DVB Bank S.E. and ABN AMRO Bank N.V.: On May 28, 2010, Navios Acquisition entered into a loan agreement with DVB Bank S.E. and ABN AMROBank N.V. of up to $52,000 (divided into two tranches of $26,000 each) to partially finance the acquisition costs of two product tanker vessels. Therepayment of each tranche started three months after the delivery date of the respective vessel and bore an interest at a rate of LIBOR plus 275 bps. The loanalso required compliance with certain financial covenants. After various amendments, on November 13, 2014, the Company prepaid an amount of $18,379which was the entire amount outstanding under one of the two tranches using a portion of the proceeds received from Navios Midstream’s IPO. In June 2015,the Company fully prepaid the outstanding balance under this loan facility. The repayment of the loan agreement was accounted for as a debt extinguishmentin accordance with ASC470 Debt and the remaining unamortized balance of $91 was written-off from the deferred financing fees.Eurobank Ergasias S.A.: On October 26, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52,200, ofwhich $51,600 has been drawn (divided into two tranches of $26,100 and $25,500, respectively) to partially finance the acquisition costs of two LR1 producttanker vessels. Each tranche of the facility is repayable in 32 quarterly installments of $345 and $337, respectively, with a final balloon payment of $15,060and $14,716, respectively, to be repaid on the last repayment date. The repayment of each tranche started three months after the delivery date of therespective vessel. The loan bears interest at a rate of LIBOR plus (i) 250 bps for the period prior to the delivery date in respect of the vessel being financed,and (ii) thereafter 275 bps. The loan also requires compliance with certain financial covenants. The amount of $38,297 was outstanding as of December 31,2016, under this facility. F-32Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Eurobank Ergasias S.A.: On December 6, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52,000 out ofwhich $46,200 has been drawn (divided into two tranches of $23,100 each) to partially finance the acquisition costs of two LR1 product tanker vessels. Eachtranche of the facility is repayable in 32 equal quarterly installments of $306 each with a final balloon payment of $13,308, to be repaid on the lastrepayment date. The repayment of each tranche started three months after the delivery date of the respective vessel. It bears interest at a rate of LIBOR plus300 bps. The loan also requires compliance with certain financial covenants. The amount of $36,102 was outstanding as of December 31, 2016, under thisfacility.Norddeutsche Landesbank Girozentrale: On December 29, 2011, Navios Acquisition entered into a loan agreement with Norddeutsche LandesbankGirozentrale of up to $28,125 to partially finance the purchase price of one MR2 product tanker vessel. The facility is repayable in 32 quarterly installmentsof $391 each with a final balloon payment of $15,625 to be repaid on the last repayment date. The repayment started three months after the delivery of thevessel and bears interest at a rate of LIBOR plus: (a) up to but not including the drawdown date of, 175 bps per annum; (b) thereafter until, but not including,the tenth repayment date, 250 bps per annum; and (c) thereafter 300 bps per annum. The loan also requires compliance with certain financial covenants.During the first quarter of 2015, the facility was fully drawn and as of December 31, 2016, an amount of $25,391 was outstanding under this loan agreement.DVB Bank S.E. and Credit Agricole Corporate and Investment Bank: On December 29, 2011, Navios Acquisition entered into a loan agreement withDVB Bank SE and Credit Agricole Corporate and Investment Bank of up to $56,250 (divided into two tranches of $28,125 each) to partially finance thepurchase price of two MR2 product tanker vessels. Each tranche of the facility is repayable in 32 quarterly installments of $391 each with a final balloonpayment of $15,625 to be repaid on the last repayment date. The repayment started three months after the delivery of the respective vessel and bears interestat a rate of LIBOR plus: (a) up to but not including the drawdown date of, 175 bps per annum; (b) thereafter until, but not including, the tenth repaymentdate, 250 bps per annum; and (c) thereafter 300 bps per annum. The loan also requires compliance with certain financial covenants. As of December 31, 2016,an amount of $48,828 was outstanding.Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB: In November 2015, Navios Acquisition, entered into a termloan facility of up to $125,000 (divided into five tranches) with Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB forthe: (i) financing of the purchase price of the Nave Spherical; and (ii) the refinancing of the existing facility with Deutsche Bank AG FilialeDeutschlandgescäft and Skandinaviska Enskilda Banken AB, dated July 18, 2014. The four of the five tranches of the facility are repayable in 20 quarterlyinstallments of between approximately $435 and $1,896, each with a final balloon repayment to be made on the last repayment date. The fifth tranche isrepayable in 16 quarterly installments of between approximately $709 and $803, each. The maturity date of the loan is in the fourth quarter of 2020. Thecredit facility bears interest at LIBOR plus 295 bps per annum.On January 27, 2016, Navios Acquisition sold the Nave Lucida to an unaffiliated third party for net cash proceeds of $18,449. Navios Acquisitionprepaid $12,097 being the respective tranche of the Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB facility that wasdrawn to finance the Nave Lucida. Following the prepayment in January 2016, an amount of $214 was written-off from the deferred financing cost. As ofDecember 31, 2016, an amount of $97,615 was outstanding under this facility.The Navios Holdings Credit Facilities: On November 11, 2014, Navios Acquisition entered into a short term credit facility with Navios Holdingspursuant to which Navios Acquisition may borrow up to $200,000 for general corporate purposes. The loan provided for an arrangement fee of $4,000 andbore a fixed interest of 600 bps. On November 13, 2014, the Company drew an amount of $169,650 from the facility. The facility matured and was fullyrepaid by December 29, 2014. F-33Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) HSH Nordbank AG: On August 20, 2013, Navios Acquisition entered into a loan agreement with HSH Nordbank AG of up to $40,300 (divided in twotranches of $20,150 each), to partially finance the acquisition of two chemical tanker vessels. Each tranche of the facility was repayable in 28 quarterlyinstallments of $315 with a final balloon payment of $11,334 to be paid on the last repayment date. The facility bore interest at a rate of LIBOR plus 320 bps.The loan also required compliance with certain financial covenants.On October 4, 2016, Navios Acquisition sold the Nave Universe to an unaffiliated third party for net cash proceeds of $35,768. Navios Acquisitionprepaid $16,372 being the respective tranche of the HSH Nordbank AG facility that was drawn to finance the acquisition of the Nave Universe.On November 15, 2016, Navios Acquisition sold the Nave Constellation to an unaffiliated third party for net cash proceeds of $35,771. NaviosAcquisition prepaid $16,372 being the respective tranche of the HSH Nordbank AG facility that was drawn to finance the acquisition of the NaveConstellation.Following these prepayments in 2016, an amount of $240 was written-off from the deferred financing cost. As of December 31, 2016, no amount wasoutstanding.BNP Paribas S.A. Bank: On December 18, 2015, Navios Acquisition, through certain of its wholly owned subsidiaries, entered into a term loan facilityagreement of up to $44,000 with BNP Paribas, as agent and the lenders named therein, for the partial post-delivery financing of a LR1 product tanker and aMR2 product tanker. The facility is repayable in 12 equal consecutive semi-annual installments in the amount of $2,000 in aggregate, with a final balloonpayment of $20,000 to be repaid on the last repayment date. The maturity date of the loan is in December 2021. The loan bears interest at LIBOR plus 230bps per annum. As of December 31, 2016, an amount of $40,000 was outstanding under this facility.The loan facilities include, among other things, compliance with loan to value ratios and certain financial covenants: (i) minimum liquidity higher of$40,000 or $1,000 per vessel; (ii) net worth ranging from $50,000 to $135,000; and (iii) total liabilities divided by total assets, adjusted for market values tobe lower than 75%. It is an event of default under the credit facilities if such covenants are not complied with, including the loan to value ratios for which theCompany may provide sufficient additional security to prevent such an event.As of December 31, 2016, the Company was in compliance with its covenants.Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisition’s vessels and other collateral and are guaranteed byeach vessel-owning subsidiary. The credit facilities contain a number of restrictive covenants that prohibit or limit Navios Acquisition from, among otherthings: incurring or guaranteeing indebtedness; entering into affiliate transactions; changing the flag, class, management or ownership of NaviosAcquisition’s vessels; changing the commercial and technical management of Navios Acquisition’s vessels; selling Navios Acquisition’s vessels; andsubordinating the obligations under each credit facility to any general and administrative costs relating to the vessels, including the fixed daily fee payableunder the management agreement. The credit facilities also require Navios Acquisition to comply with the ISM Code and ISPS Code and to maintain validsafety management certificates and documents of compliance at all times. F-34Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) The maturity table below reflects the principal payments of all notes and credit facilities outstanding as of December 31, 2016 for the next five yearsand thereafter and is based on the repayment schedule of the respective loan facilities (as described above) and the outstanding amount due under the 2021Notes. December 31,2016 Long-Term Debt Obligations: Year December 31, 2017 $56,402 December 31, 2018 68,194 December 31, 2019 126,004 December 31, 2020 111,164 December 31, 2021 698,688 December 31, 2022 and thereafter 50,781 Total $1,111,233 NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTSFair Value of Financial InstrumentsThe following methods and assumptions were used to estimate the fair value of each class of financial instruments:Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their fair valuebecause of the short maturity of these investments.Restricted Cash: The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their fair value because ofthe short maturity of these investments.Due from related parties, short-term: The carrying amount of due from related parties, short-term reported in the balance sheet approximates its fairvalue due to the short-term nature of these receivables.Due from related parties, long-term: The carrying amount of due from related parties, long-term reported in the balance sheet approximates its fairvalue.Other long-term debt, net of deferred finance cost: As a result of the adoption of ASU 2015-03, the book value has been adjusted to reflect the netpresentation of deferred financing costs. The outstanding balance of the floating rate loans continues to approximate its fair value, excluding the effect of anydeferred finance cost.Ship Mortgage Notes and premiums: The fair value of the 2021 Notes, which has a fixed rate, was determined based on quoted market prices, asindicated in the table below. December 31, 2016 December 31, 2015 Book Value Fair Value Book Value Fair Value Cash and cash equivalents $49,292 $49,292 $54,805 $54,805 Restricted cash $7,366 $7,366 $6,840 $6,840 Ship mortgage notes and premium $659,684 $571,597 $658,048 $589,185 Other long-term debt, net of deferred finance cost $436,254 $441,233 $539,535 $546,614 Due from related parties, long-term $80,068 $80,646 $16,474 $16,474 Due from related parties, short-term $25,047 $25,047 $17,837 $17,837 F-35Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Fair Value MeasurementsThe estimated fair value of our financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair valuehierarchy, is as follows:Level I: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets that we have the ability to access. Valuation of theseitems does not entail a significant amount of judgment.Level II: Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at themeasurement date.Level III: Inputs that are unobservable. The Company did not use any Level III inputs as of December 31, 2016. Fair Value Measurements at December 31, 2016 Using Total Level I Level II Level III Cash and cash equivalents $49,292 $49,292 $— $— Restricted cash $7,366 $7,366 $— $— Ship mortgage notes and premium $571,597 $571,597 $— $— Other long-term debt(1) $441,233 $— $441,233 $— Due from related parties, long-term(2) $80,646 $— $80,646 $— Fair Value Measurements at December 31, 2015 Using Total Level I Level II Level III Cash and cash equivalents $54,805 $54,805 $— $— Restricted cash $6,840 $6,840 $— $— Ship mortgage notes and premium $589,185 $589,185 $— $— Other long-term debt(1) $546,614 $— $546,614 $— Due from related parties, long-term(2) $16,474 $— $16,474 $— (1)The fair value of the Company’s other long-term debt is estimated based on currently available debt with similar contract terms, interest rate andremaining maturities as well as taking into account the Company’s creditworthiness.(2)The fair value of the Company’s long term amounts due from related parties is estimated based on currently available debt with similar contract terms,interest rate and remaining maturities as well as taking into account the counterparty’s creditworthiness. F-36Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) NOTE 14: LEASESChartered-out:The future minimum contractual lease income (charter-out rates is presented net of commissions) is as follows: Amount 2017 $136,405 2018 19,546 2019 6,218 2020 — 2021 — Thereafter — Total minimum lease revenue, net of commissions $162,169 Revenues from time charters are not generally received when a vessel is off-hire, including time required for scheduled maintenance of the vessel.NOTE 15: TRANSACTIONS WITH RELATED PARTIESThe Navios Holdings Credit Facilities: On September 19, 2016, Navios Acquisition entered into a $70,000 secured loan facility with NaviosHoldings. The loan facility is secured by all of Navios Holdings’ interest in Navios Acquisition and 78.5% of Navios Holdings’ interest in Navios SouthAmerican Logistics Inc. “Navios Logistics”, representing a majority of the shares outstanding of Navios Logistics. The secured loan facility provided for anarrangement fee of $700, is available for up to five drawings and has a fixed interest rate of 8.75% with a maturity date of November 15, 2018. As ofDecember 31, 2016, the outstanding receivable balance of $50,661, included in the consolidated balance sheets under “Due from related parties, long-term”,consisted of the drawdown of $50,000 on September 20, 2016 net of the arrangement fee, upon deduction of the applicable expenses for the origination ofthe loan facility and the accrued interest of $1,240. The arrangement fee is deferred and amortized using the effective interest rate method.In March 2016, Navios Acquisition entered into the $50,000 Revolver with Navios Holdings, which was available for multiple drawings up to a limitof $50,000. The Revolver had a margin of LIBOR plus 300bps and a maturity until December 2018. On April 14, 2016, Navios Acquisition and NaviosHoldings announced that the Revolver was terminated. No borrowings had been made under the Revolver. Please refer to “Legal Proceedings” in Note 16.On November 11, 2014, Navios Acquisition entered into a short term credit facility with Navios Holdings pursuant to which Navios Acquisition mayborrow up to $200,000 for general corporate purposes. The loan provided for an arrangement fee of $4,000 and bore a fixed interest of 600 bps. OnNovember 13, 2014, the Company drew an amount of $169,650 from the facility. The facility matured and was fully repaid by December 29, 2014.In 2010, Navios Acquisition entered into a $40,000 credit facility with Navios Holdings, which matured in December 2015. The facility was availablefor multiple drawings up to a limit of $40,000 and had a margin of LIBOR plus 300 basis points. As of its maturity date, December 31, 2015, all amountsdrawn had been fully repaid. F-37Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Management fees: Pursuant to the Management Agreement dated May 28, 2010 and as amended in May 2012 and May 2014, the Manager providedcommercial and technical management services to Navios Acquisition’s vessels for a fixed daily fee of: (a) $6.0 per MR2 product tanker and chemical tankervessel; (b) $7.0 per LR1 product tanker vessel; and (c) $9.5 per VLCC, through May 2016.Pursuant to an amendment to the Management Agreement dated as of May 19, 2016, Navios Acquisition fixed the fees for commercial and technicalship management services of its fleet for two additional years from May 29, 2016, through May 2018, at a daily fee of: (a) $6.35 per MR2 product tanker andchemical tanker vessel; (b) $7.15 per LR1 product tanker vessel; and (c) $9.5 per VLCC.Dry docking expenses are reimbursed by Navios Acquisition at cost.Total management fees for each of the years ended December 31, 2016, 2015 and 2014 amounted to $97,866, $95,336 and $95,827, respectively.Included in direct vessel expenses is an amount of $730 for the year ended December 31, 2016, that was incurred for specialized work performed inconnection with certain vessels of our fleet.General and administrative expenses: On May 28, 2010, Navios Acquisition entered into an Administrative Services Agreement with NaviosHoldings, pursuant to which Navios Holdings provides certain administrative management services to Navios Acquisition which include: bookkeeping,audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client andinvestor relations and other services. Navios Holdings is reimbursed for reasonable costs and expenses incurred in connection with the provision of theseservices. In May 2014, Navios Acquisition extended the duration of its existing Administrative Services Agreement with Navios Holdings, until May 2020.For each of the years ended December 31, 2016, 2015 and 2014 the expense arising from administrative services rendered by Navios Holdingsamounted to $9,427, $7,608 and $7,314, respectively.Balance due from related parties (excluding Navios Europe I, Navios Europe II and Navios Holdings Credit Facility): Balance due from relatedparties as of December 31, 2016 and December 31, 2015 was $25,760 and $15,520, respectively, and included the short-term and long-term amounts duefrom Navios Holdings and Navios Midstream. The balances mainly consisted of administrative expenses and special survey and dry docking expenses forcertain vessels of our fleet, as well as management fees, in accordance with the Management Agreement.Omnibus AgreementsAcquisition Omnibus Agreement: Navios Acquisition entered into an omnibus agreement (the “Acquisition Omnibus Agreement”) with NaviosHoldings and Navios Partners in connection with the closing of Navios Acquisition’s initial vessel acquisition, pursuant to which, among other things,Navios Holdings and Navios Partners agreed not to acquire, charter-in or own liquid shipment vessels, except for container vessels and vessels that areprimarily employed in operations in South America without the consent of an independent committee of Navios Acquisition. In addition, NaviosAcquisition, under the Acquisition Omnibus Agreement, agreed to cause its subsidiaries not to acquire, own, operate or charter-in drybulk carriers underspecific exceptions. Under the Acquisition Omnibus Agreement, Navios Acquisition and its subsidiaries grant to Navios Holdings and Navios Partners a rightof first offer on any proposed sale, transfer or other disposition of any of its drybulk carriers and related charters owned or acquired by Navios Acquisition.Likewise, Navios Holdings and F-38Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Navios Partners agreed to grant a similar right of first offer to Navios Acquisition for any liquid shipment vessels they might own. These rights of first offerwill not apply to a: (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the existing terms of any charter or otheragreement with a counterparty; or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.Midstream Omnibus Agreement: Navios Acquisition entered into an omnibus agreement (the “Midstream Omnibus Agreement”), with NaviosMidstream, Navios Holdings and Navios Partners in connection with the Navios Midstream IPO, pursuant to which Navios Acquisition, Navios Midstream,Navios Holdings, Navios Partners and their controlled affiliates generally have agreed not to acquire or own any VLCCs, crude oil tankers, refined petroleumproduct tankers, LPG tankers or chemical tankers under time charters of five or more years without the consent of the Navios Midstream General Partner. TheMidstream Omnibus Agreement contains significant exceptions that will allow Navios Acquisition, Navios Holdings, Navios Partners or any of theircontrolled affiliates to compete with Navios Midstream under specified circumstances.Under the Midstream Omnibus Agreement, Navios Midstream and its subsidiaries will grant to Navios Acquisition a right of first offer on any proposedsale, transfer or other disposition of any of its VLCCs or any crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers and relatedcharters owned or acquired by Navios Midstream. Likewise, Navios Acquisition will agree (and will cause its subsidiaries to agree) to grant a similar right offirst offer to Navios Midstream for any of the VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under charter forfive or more years it might own. These rights of first offer will not apply to a: (a) sale, transfer or other disposition of vessels between any affiliatedsubsidiaries, or pursuant to the terms of any charter or other agreement with a charter party, or (b) merger with or into, or sale of substantially all of the assetsto, an unaffiliated third-party.Backstop Agreement: On November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream. In accordance with theterms of the backstop agreements, Navios Acquisition has provided backstop commitments for a two-year period as of the redelivery of each of the NaveCeleste, the Shinyo Ocean and the Shinyo Kannika from their original charters, at a net rate of $35, $38.4 and $38, respectively. Navios Midstream hascurrently entered into new charter contracts for the above vessels with third parties upon their redelivery in first quarter of 2017. Those contracts provide forindex linked charter rates or pool earnings as the case may be. Backstop commitments will be triggered if the actual rates achieved are below the backstoprates.Navios Midstream General Partner Option Agreement with Navios Holdings: Navios Acquisition entered into an option agreement, datedNovember 18, 2014, with Navios Holdings under which Navios Acquisition grants Navios Holdings the option to acquire any or all of the outstandingmembership interests in Navios Midstream General Partner and all of the incentive distribution rights in Navios Midstream representing the right to receivean increasing percentage of the quarterly distributions when certain conditions are met. The option shall expire on November 18, 2024. Any such exerciseshall relate to not less than twenty-five percent of the option interest and the purchase price for the acquisition of all or part of the option interest shall be anamount equal to its fair market value.Option Vessels: In connection with the IPO of Navios Midstream, Navios Acquisition granted options to Navios Midstream, exercisable untilNovember 18, 2016, to purchase seven VLCCs (two of which, the Nave Celeste and the C. Dream were sold to Navios Midstream in June 2015 pursuant tosuch option) from Navios Acquisition at fair market value. On October 25, 2016, Navios Acquisition extended the option periods on three of the fiveremaining VLCCs, the Nave Buena Suerte, the Nave Neutrino and the Nave Electron, for an additional two-year period expiring on November 18, 2018. Thepurchase options pursuant to the extended period do not include any backstop commitments from Navios Acquisition. F-39Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Sale of C. Dream and Nave Celeste: On June 18, 2015, Navios Acquisition sold the vessel-owning subsidiaries of the C. Dream and the Nave Celesteto Navios Midstream for a sale price of $100,000 in total. Out of the $100,000 purchase price, $73,000 was paid in cash and the remaining amount was paidthrough the issuance of 1,592,920 subordinated Series A Units of Navios Midstream. In conjunction with the transaction, Navios Midstream also issued32,509 general partner units to the General Partner, in order for the General Partner to maintain its 2.0% general partnership interest, for $551.The Company recognized its incremental investment in Navios Midstream, which amounted to $27,665 under “Investment in affiliates”. Theinvestment was recognized at fair value at $17.02 per unit. The incremental investment included the Company’s share of the basis difference between the fairvalue and the underlying book value of Navios Midstream’s assets at the transaction date, which amounted to $2,554. Of this difference an amount of $(72)was allocated to the intangibles assets and $2,626 was allocated to the tangible assets. This difference is amortized through “Equity in net earnings ofaffiliated companies” over the remaining life of Navios Midstream’s tangible and intangible assets.The transaction resulted in a gain on sale of $14,742, of which $5,771 was recognized at the time of sale in the statements of income under “Gain onsale of vessels” and the remaining $8,971 representing profit of Navios Acquisition’s 60.9% interest in Navios Midstream has been deferred under “Deferredgain on sale of assets” and is being amortized over the vessels’ remaining useful life or until the vessels are sold. Subsequently, the deferred gain is amortizedto income over the remaining useful life of the vessel. The recognition of the deferred gain is accelerated in the event that (i) the vessel is subsequently soldor otherwise disposed of by Navios Midstream or (ii) the Company’s ownership interest in Navios Midstream is reduced.In connection with the public offerings of common units by Navios Midstream, a pro rata portion of the deferred gain is released to income upondilution of the Company’s ownership interest in Navios Midstream. As of December 31, 2016 and 2015, the unamortized deferred gain for all vessels andrights sold totaled $8,823 and $8,982, respectively, of which an amount of $994 and $0, respectively, was included in “Deferred revenue”. For the yearsended December 31, 2016 and 2015, Navios Acquisition recognized $159 and $11 of the deferred gain, respectively, in “Equity in net earnings of affiliatedcompanies”.Participation in offerings of affiliates: On July 29, 2016, Navios Midstream launched a continuous public offering of its common units for anaggregate offering of up to $25,000. (Refer also to Note 8 “Investment in affiliates”.)On September 30, 2016 and December 30, 2016, Navios Acquisition entered into securities purchase agreements with Navios Midstream pursuant towhich Navios Acquisition made an investment in Navios Midstream by purchasing 5,655 and 1,143 general partnership interests, respectively, for anaggregate consideration of $75 and $14, respectively, in order to maintain its 2.0% partnership interest in Navios Midstream in light of such continuouspublic offering.The Company determined, under the equity method, that the issuance of common units of Navios Midstream qualified as a sale of shares by theinvestee. As a result, a net loss of $246 was recognized in “Equity in net earnings of affiliated companies” for the year ended December 31, 2016.Balance due from Navios Europe I: Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe I revolvingloans up to $24,100 to fund working capital requirements (collectively, the “Navios Revolving Loans I”). See Note 8 for the Investment in Navios Europe I. F-40Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Balance due from Navios Europe I as of December 31, 2016 amounted to $12,301 (December 31, 2015: $10,266) which included the NaviosRevolving Loans I of $7,125 (December 31, 2015: $7,125), the non-current amount of $2,231 (December 31, 2015: $1,398) related to the accrued interestincome earned under the Navios Term Loans I under the caption “Due from related parties, long-term” and the accrued interest income earned under theNavios Revolving Loans I of $2,945 (December 31, 2015: $1,743) under the caption “Due from related parties, short-term.”The Navios Revolving Loans I and the Navios Term Loans I earn interest and an annual preferred return, respectively, at 12.7% per annum, on aquarterly compounding basis and are repaid from free cash flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter.There are no covenant requirements or stated maturity dates. As of December 31, 2016, the amount undrawn under the Navios Revolving Loans I was $9,100,of which Navios Acquisition was committed to fund $4,323.Balance due from Navios Europe II: Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe II revolvingloans up to $43,500 to fund working capital requirements (collectively, the “Navios Revolving Loans II”). In March 2017 the availability under the NaviosRevolving Loans II was increased by $14,000. See Note 8 for the Investment in Navios Europe II.Balance due from Navios Europe II as of December 31, 2016 amounted to $16,393 (December 31, 2015: $8,525) which included the Navios RevolvingLoans II of $11,602 (December 31, 2015: $7,327), the non-current amount of $2,050 (December 31, 2015: $625) related to the accrued interest income earnedunder the Navios Term Loans II under the caption “Due from related parties, long-term” and the accrued interest income earned under the Navios RevolvingLoans II of $2,741 (December 31, 2015: $573) under the caption “Due from related parties, short-term.”The Navios Revolving Loans II and the Navios Term Loans II earn interest and an annual preferred return, respectively, at 18% per annum, on aquarterly compounding basis and are repaid from free cash flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter.There are no covenant requirements or stated maturity dates. As of December 31, 2016, the amount undrawn under the Navios Revolving Loans II was$19,075, of which Navios Acquisition was committed to fund $9,061.NOTE 16: COMMITMENTS AND CONTINGENCIESOn November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream. In accordance with the terms of the backstopagreements, Navios Acquisition has provided backstop commitments for a two-year period as of the redelivery of each of the Nave Celeste, the Shinyo Oceanand the Shinyo Kannika from their original charters, at a net rate of $35, $38.4 and $38, respectively. Navios Midstream has currently entered into newcharter contracts for the above vessels with third parties upon their redelivery in first quarter of 2017. Those contracts provide for index linked charter rates orpool earnings as the case may be. Backstop commitments will be triggered if the actual rates achieved are below the backstop rates.The Company is involved in various disputes and arbitration proceedings arising in the ordinary course of business. Provisions have been recognizedin the financial statements for all such proceedings where the Company believes that a liability may be probable, and for which the amounts are reasonablyestimable, based upon facts known at the date of the financial statements were prepared. In the opinion of the management, the ultimate disposition of thesematters individually and in aggregate will not materially affect the Company’s financial position, results of operations or liquidity. F-41Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Legal ProceedingsOn April 1, 2016, Navios Holdings was named as a defendant in a putative shareholder derivative lawsuit brought by two alleged shareholders ofNavios Acquisition purportedly on behalf of nominal defendant, Navios Acquisition, in the United States District Court for the Southern District of NewYork, captioned Metropolitan Capital Advisors International Ltd., et al. v. Navios Maritime Holdings, Inc. et al., No. 1:16-cv-02437. The lawsuit challengedthe March 9, 2016 loan agreement between Navios Holdings and Navios Acquisition pursuant to which Navios Acquisition agreed to provide a $50,000credit facility (the “Revolver”) to Navios Holdings.On April 14, 2016, Navios Holdings and Navios Acquisition announced that the Revolver had been cancelled, and that no borrowings had been madeunder the Revolver. In June 2016, the parties reached an agreement resolving the plaintiffs’ application for attorneys’ fees and expenses which was approvedby an order of the Court. The litigation was dismissed upon notice of the order being provided to Navios Acquisition’s shareholders via the inclusion of theorder as an attachment to a Navios Acquisition Form 6-K and the payment of $775 by Navios Acquisition in satisfaction of the plaintiffs’ request forattorneys’ fees and expenses. A copy of the order was provided as an exhibit to Navios Acquisition’s Form 6-K filed with the Securities and ExchangeCommission on June 9, 2016.NOTE 17: PREFERRED AND COMMON STOCKPreferred StockOn March 30, 2011, pursuant to an Exchange Agreement Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s common stock it heldfor 1,000 non-voting Series C Convertible Preferred Stock of Navios Acquisition. Each holder of shares of Series C Convertible Preferred Stock shall beentitled at their option at any time, after March 31, 2013 to convert all or any of the outstanding shares of Series C Convertible Preferred Stock into a numberof fully paid and non-assessable shares of Common Stock determined by multiplying each share of Series C Convertible Preferred Stock to be converted by7,676, subject to certain limitations. Upon the declaration of a common stock dividend, the holders of the Series C Convertible Preferred Stock are entitled toreceive dividends on the Series C Convertible Preferred Stock in an amount equal to the amount that would have been received in the number of shares ofCommon Stock into which the Shares of Series C Convertible Preferred Stock held by each holder thereof could be converted. For the purpose of calculatingearnings / (loss) per share this preferred stock is treated as in-substance common stock and is allocated income / (losses) and considered in the dilutedcalculation.On September 17, 2010, Navios Acquisition issued 3,000 shares of the Company’s authorized Series A Convertible Preferred Stock to an independentthird party as a consideration for certain consulting and advisory fees related to the VLCC acquisition. The preferred stock has no voting rights, is onlyconvertible into shares of common stock and does not participate in dividends until such time as the shares are converted into common stock. The Series Ashares of preferred stock were fully converted to common stock that was issued on March 11, 2016.On October 29, 2010, Navios Acquisition issued 540 shares of the Company’s authorized Series B Convertible Preferred Stock to the seller of the twoLR1 product tankers. The preferred stock contains a 2% per annum dividend payable quarterly starting on January 1, 2011 and upon declaration by theCompany’s Board commences payment on March 31, 2011. The Series B Convertible Preferred Stock, plus any accrued but unpaid dividends, willmandatorily convert into shares of common stock as follows: 30% of the outstanding amount will convert on June 30, 2015 and the remaining outstandingamounts will convert on June 30, 2020 at a price per share of common stock not less than $25.00. The holder of the preferred stock shall have the right toconvert the F-42Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) shares of preferred stock into common stock prior to the scheduled maturity dates at a price of $35.00 per share of common stock. The preferred stock doesnot have any voting rights.On June 30, 2015, 162 shares of Series B Convertible Preferred Stock (being 30% of the 540 shares originally issued), with nominal value of $10 pershare, were mandatorily converted into 64,800 shares of common stock at a conversion ratio of 1:25.On October 27, 2015, the remaining 378 shares of Series B Convertible Preferred Stock (being 70% of the 540 shares originally issued), with nominalvalue of $10 per share, were converted into 108,000 shares of common stock at a conversion ratio of 1:35.On March 11, 2016, 1,200,000 shares of common stock were issued as a result of the conversion of 3,000 shares of Series A Convertible PreferredStock.The Company was authorized to issue up to 10,000,000 shares of $0.0001 par value preferred stock in total with such designations, voting and otherrights and preferences as may be determined from time to time by the Board of Directors.As of December 31, 2016, the Company’s issued and outstanding preferred stock consisted of the 1,000 Series C Convertible Preferred Stock. As ofDecember 31, 2015, the Company’s issued and outstanding preferred stock consisted of the 1,000 Series C Convertible Preferred Stock and the 3,000 Series AConvertible Preferred Stock.Series D Convertible Preferred StockOn each of August 31, 2012, October 31, 2012, February 13, 2013 and April 24, 2013, Navios Acquisition issued 300 shares of its authorized Series DConvertible Preferred Stock (nominal and fair value $3,000) to a shipyard, in partial settlement of the purchase price of each of the newbuilding LR1 producttankers, Nave Cassiopeia, Nave Cetus, Nave Atropos and Nave Rigel. The preferred stock includes a 6% per annum dividend payable quarterly, starting oneyear after delivery of each vessel. The Series D Convertible Preferred Stock mandatorily converted into shares of common stock 30 months after issuance at aprice per share of common stock equal to $10.00. The holder of the preferred stock shall have the right to convert such shares of preferred stock into commonstock prior to the scheduled maturity dates at a price of $7.00 per share of common stock. The Series D Convertible Preferred Stock does not have any votingrights. Navios Acquisition is obligated to redeem the Series D Convertible Preferred Stock (or converted common shares) at their nominal value of $10.00 atthe holder’s option. Beginning 18 months and no later than 60 months after the issuance of the preferred stock, the holder can exercise the option to requestthe redemption of up to 250 shares of preferred stock (or such number that has been converted to common shares) on a quarterly basis.The fair value was determined using a combination of the Black-Scholes model and discounted projected cash flows for the conversion option and put,respectively. The model used takes into account the credit spread of Navios Acquisition, the volatility of its stock, as well as the price of its stock at theissuance date. The convertible preferred stock is classified as temporary equity (i.e., apart from permanent equity) as a result of the redemption feature uponexercise of the put option granted to the holder of the preferred stock.In January 2015, Navios Acquisition redeemed, through the holder’s put option, 250 shares of the Series D Convertible Preferred Stock and paid$2,500 to the holder upon redemption. F-43Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) In March 2015, 200 shares of Series D Convertible Preferred Stock were mandatorily converted into 200,000 shares of common stock. In conjunctionwith the conversion, the 200,000 shares of common stock have been reclassified to puttable common stock within temporary equity, as a result of anembedded put option of the holder for up to 30 months after the conversion date.In April 2015, Navios Acquisition redeemed, through the holder’s put option, 75 shares of the Series D Convertible Preferred Stock and paid $750 tothe holder upon redemption.In April 2015, 200 shares of Series D Convertible Preferred Stock were mandatorily converted into 200,000 shares of common stock. In conjunctionwith the conversion, the 200,000 shares of common stock have been reclassified to puttable common stock within temporary equity, as a result of anembedded put option of the holder for up to 30 months.In July 2015, Navios Acquisition redeemed, through the holder’s put option 50 shares of its Series D Convertible Preferred Stock and paid $500 to theholder upon redemption.In August 2015, 200 shares of Series D Convertible Preferred Stock were mandatorily converted into 200,000 shares of common stock. In conjunctionwith the conversion, the 200,000 shares of common stock have been reclassified to puttable common stock within temporary equity, as a result of anembedded put option of the holder for up to 30 months after the conversion date.In October 2015, Navios Acquisition redeemed, through the holder’s put option 25 shares of its Series D Convertible Preferred Stock and paid $250 tothe holder upon redemption.In October 2015, 200 shares of Series D Convertible Preferred Stock were converted into 200,000 shares of common stock. In conjunction with theconversion, the 200,000 shares of common stock have been reclassified to puttable common stock within temporary equity, as a result of an embedded putoption of the holder for up to 30 months after the conversion date.As of each of December 31, 2016 and December 31, 2015, no shares of Series D Convertible Preferred Stock were outstanding: Series D Preferred Stock Number ofpreferred shares Amount Balance at December 31, 2014 1,200 $12,000 Conversion of 800 shares of the Series D Preferred Stock into 800,000 shares of puttable common stock (800) (8,000) Redemption of Series D Preferred Stock (400) (4,000) Balance at December 31, 2015 — $— Balance at December 31, 2016 — $— F-44Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) As of December 31, 2016 and December 31, 2015, the following shares of puttable common stock were outstanding: Puttable Common Stock Number ofcommon shares Amount Balance at December 31, 2014 — $— Conversion of 800 shares of the Series D Preferred Stock into 800,000 shares of puttable common stock 800,000 8,000 Redemption of puttable common stock (150,000) (1,500) Balance at December 31, 2015 650,000 $6,500 Redemption of 400,000 shares of the puttable common stock (400,000) (4,000) Balance at December 31, 2016 250,000 $2,500 Common Stock and puttable common stockPursuant to an Exchange Agreement entered into on March 30, 2011, Navios Holdings exchanged 7,676,000 shares of Navios Acquisition’s commonstock it held for 1,000 non-voting shares of Series C Convertible Preferred Stock of Navios Acquisition.On February 20, 2014, Navios Acquisition completed the public offering of 14,950,000 shares of its common stock at $3.85 per share, raising grossproceeds of $57,556. These figures include 1,950,000 shares sold pursuant to the underwriters’ option, which was exercised in full. Total net proceeds of theabove transactions, net of agents’ costs of $3,022 and offering costs of $247, amounted to $54,289.On March 2, 2015, 200 shares of the Series D Convertible Preferred Stock were mandatorily converted into 200,000 shares of puttable common stockand on April 24, 2015, 25,000 shares of such puttable common stock were redeemed for $250.On April 30, 2015, 200 shares of the Series D Convertible Preferred Stock were mandatorily converted into 200,000 shares of puttable common stock.On June 30, 2015, 162 shares of Series B Convertible Preferred Stock were converted into 64,800 shares of common stock.On July 15, 2015, Navios Acquisition redeemed, through the holder’s put option, 50,000 shares of the puttable common stock and paid $500 to theholder upon redemption.On August 13, 2015, 200 shares of the Series D Convertible Preferred Stock were mandatorily converted into 200,000 shares of puttable common stock.On October 2, 2015, Navios Acquisition redeemed, through the holder’s put option, 75,000 shares of the puttable common stock and paid $750 to theholder upon redemption.On October 26, 2015, 200 shares of the Series D Convertible Preferred Stock were converted into 200,000 shares of puttable common stock.On October 27, 2015, 378 shares of Series B Convertible Preferred Stock were mandatorily converted into 108,000 shares of common stock. F-45Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Under the share repurchase program, for up to $50,000, approved and authorized by the Board of Directors, Navios Acquisition has repurchased2,704,752 shares for a total cost of approximately $9,904, as of December 31, 2015. The share repurchase program expired in December 2016.On January 6, 2016, Navios Acquisition redeemed, through the holder’s put option, 100,000 shares of the puttable common stock and paid cash of$1,000 to the holder upon redemption.On March 11, 2016, 1,200,000 shares of common stock were issued as a result of the conversion of 3,000 shares of Series A Convertible PreferredStock.On April 1, 2016, Navios Acquisition redeemed, through the holder’s put option, 100,000 shares of the puttable common stock and paid cash of $1,000to the holder upon redemption.On July 1, 2016, Navios Acquisition redeemed, through the holder’s put option, 100,000 shares of the puttable common stock and paid cash of $1,000to the holder upon redemption.On October 3, 2016, Navios Acquisition redeemed, through the holder’s put option, 100,000 shares of the puttable common stock and paid cash of$1,000 to the holder upon redemption.As of December 31, 2016, the Company was authorized to issue 250,000,000 shares of $0.0001 par value common stock of which 150,582,990 wereissued and outstanding.Stock based compensationIn October 2013, Navios Acquisition authorized and issued to its directors in the aggregate of 2,100,000 restricted shares of common stock and optionsto purchase 1,500,000 shares of common stock having an exercise price of $3.91 per share and an expiration term of 10 years. These awards of restrictedcommon stock and stock options are based on service conditions only and vest ratably over a period of three years (33.33% each year). The holders ofrestricted stock are entitled to dividends paid on the same schedule as paid to the common stockholders of the company. The fair value of restricted stock wasdetermined by reference to the quoted stock price on the date of grant of $3.99 per share (or total fair value of $8,379).The fair value of stock option grants was determined with reference to the option pricing model, and principally adjusted Black-Scholes models, usinghistorical volatility, historical dividend yield, zero forfeiture rate, risk free rate equal to 10-year U.S. treasury bond and the simplified method for determiningthe expected option term since the Company did not have sufficient historical exercise data upon which to have a reasonable basis to estimate the expectedoption term. The fair value of stock options was calculated at $0.79 per option (or $1,188). Compensation expense is recognized based on a graded expensemodel over the vesting period of three years from the date of the grant.The effect of compensation expense arising from the stock based arrangements described above amounted to $864, $2,362 and $5,254 for the yearsended December 31, 2016, 2015 and 2014, respectively, and was reflected in general and administrative expenses on the statements of income. Therecognized compensation expense for the year was presented as an adjustment to reconcile net income to net cash provided by operating activities on thestatements of cash flows.There were no restricted stock or stock options exercised, forfeited or expired during the year ended December 31, 2016. F-46Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) On October 24, 2016, 2015 and 2014, 700,005, 700,001 and 699,994 shares of restricted stock, respectively, were vested. Accordingly, there are norestricted shares outstanding and non-vested shares as of December 31, 2016 (outstanding and non-vested restricted shares as of December 31, 2015amounted to 700,005).On each of October 24, 2016, 2015 and 2014, 500,000 stock options were vested. Accordingly, there were no stock options outstanding andnon-vested as of December 31, 2016 (outstanding and non-vested stock options as of December 31, 2015 amounted to 500,000).The weighted average contractual life of stock options outstanding as of December 31, 2016 was 6.8 years.NOTE 18: SEGMENT INFORMATIONNavios Acquisition reports financial information and evaluates its operations by charter revenues. Navios Acquisition does not use discrete financialinformation to evaluate operating results for each type of charter. As a result, management reviews operating results solely by revenue per day and operatingresults of the fleet and thus Navios Acquisition has determined that it operates under one reportable segment.The following table sets out operating revenue by geographic region for Navios Acquisition’s reportable segment. Revenue is allocated on the basis ofthe geographic region in which the customer is located. Tanker vessels operate worldwide. Revenues from specific geographic regions which contribute over10% of total revenue are disclosed separately.Revenue by Geographic RegionVessels operate on a worldwide basis and are not restricted to specific locations. Accordingly, it is not possible to allocate the assets of these operationsto specific countries. Year EndedDecember 31,2016 Year EndedDecember 31,2015 Year EndedDecember 31,2014 Asia $179,256 $208,690 $167,670 Europe 40,237 40,147 40,875 United States 70,752 64,559 56,332 Total Revenue $290,245 $313,396 $264,877 NOTE 19: EARNINGS PER COMMON SHAREEarnings per share is calculated by dividing net income attributable to common stockholders by the weighted average number of shares of commonstock of Navios Acquisition outstanding during the period. F-47Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) Net income for the years ended December 31, 2016, 2015 and 2014 was adjusted for the purposes of earnings per share calculation, for the dividendson Series B Preferred Shares, Series D preferred shares, restricted shares and for the undistributed (income) that is attributable to Series C preferred stock. Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Numerator: Net income $62,878 $89,737 $13,047 Less: Dividend declared on preferred shares Series B — (78) (108) Dividend declared on preferred shares Series D — (281) (642) Dividend declared on restricted shares (105) (245) (385) Undistributed (income) attributable to Series C participating preferred shares (3,058) (4,337) (541) Net income attributable to common stockholders, basic $59,715 $84,796 $11,371 Plus: Dividend declared on preferred shares Series B — 78 — Dividend declared on preferred shares Series D — 281 — Dividend declared on restricted shares 105 245 — Undistributed income attributable to Series C participating preferred shares — — 541 Net income attributable to common stockholders, diluted 59,820 85,400 11,912 Denominator: Denominator for basic net income per share — weighted average shares 149,932,713 150,025,086 147,606,448 Series A preferred stock 232,787 1,200,000 1,200,000 Series B preferred stock — 156,893 — Series C preferred stock — — 7,676,000 Series D preferred stock — 647,758 — Restricted shares 570,656 1,270,658 — Denominator for diluted net income per share — adjusted weighted average shares 150,736,156 153,300,395 156,482,448 Basic net earnings per share $0.40 $0.57 $0.08 Diluted net earnings per share $0.40 $0.56 $0.08 Potential common shares of 9,176,000 for the year ended December 31, 2016 (which includes Series C Preferred Stock and stock options) andDecember 31, 2015 (which includes Series C Preferred Stock and stock options), and 4,830,286 for the year ended December 31, 2014 (which includes SeriesB and Series D Preferred Stock, restricted stock and stock options) have an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss pershare) and are therefore excluded from the calculation of diluted earnings per share.NOTE 20: INCOME TAXESMarshall Islands, Cayman Islands, British Virgin Islands, and Hong Kong, do not impose a tax on international shipping income. Under the laws ofthese countries, the countries of incorporation of the Company and its subsidiaries and /or vessels’ registration, the companies are subject to registration andtonnage taxes which have been included in the daily management fee. F-48Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companieshaving established an office in Greece are subject to duties towards the Greek state which are calculated on the basis of the relevant vessels’ tonnage. Thepayment of said duties exhausts the tax liability of the foreign ship owning company and the relevant manager against any tax, duty, charge or contributionpayable on income from the exploitation of the foreign flagged vessel. In case that tonnage tax and/or similar taxes/duties are paid to the vessel’s flag state,these are deducted from the amount of the duty to be paid in Greece. The amount included in Navios Acquisition’s statements of income for each of the yearsended December 31, 2016 and 2015, related to the Greek Tonnage tax was $612 and $551, respectively.Pursuant to Section 883 of the Internal Revenue Code of the United States (the “Code”), U.S. source income from the international operation of ships isgenerally exempt from U.S. income tax if the company operating the ships meets certain incorporation and ownership requirements. Among other things, inorder to qualify for this exemption, the company operating the ships must be incorporated in a country, which grants an equivalent exemption from incometaxes to U.S. corporations. All the Navios Acquisition’s ship-operating subsidiaries satisfy these initial criteria. In addition, these companies must meet anownership test. Subject to proposed regulations becoming finalized in their current form, the management of Navios Acquisition believes by virtue of aspecial rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company like Navios Acquisition, thesecond criterion can also be satisfied based on the trading volume and ownership of the Company’s shares, but no assurance can be given that this willremain so in the future.NOTE 21: RECENT ACCOUNTING PRONOUNCEMENTSIn January 2017, the FASB issued Accounting Standard Update (“ASU”) 2017-01, “Business Combinations” to clarify the definition of a business withthe objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets orbusinesses. Under current implementation guidance the existence of an integrated set of acquired activities (inputs and processes that generate outputs)constitutes an acquisition of business. This ASU provides a screen to determine when a set of assets and activities does not constitute a business. The screenrequires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group ofsimilar identifiable assets, the set is not a business. This update is effective for public entities with reporting periods beginning after December 15, 2017,including interim periods within those years. The amendments of this ASU should be applied prospectively on or after the effective date. Early adoption ispermitted, including adoption in an interim period (i) for transactions for which the acquisition date occurs before the issuance date or effective date of theASU, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (ii) for transactions inwhich a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only whenthe transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently assessing theimpact that adopting this new accounting guidance will have on its consolidated financial statements.In January 2017, the FASB issued ASU 2017-03 “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and JointVentures (Topic 323).” The ASU amends the Codification for SEC staff announcements made at recent Emerging Issues Task Force (EITF) meetings. The SECguidance that specifically relates to our Consolidated Financial Statements was from the September 2016 meeting, where the SEC staff expressed theirexpectations about the extent of disclosures registrants should make about the effects of the new FASB guidance as well as any amendments issued prior toadoption, on revenue (ASU 2014-09), leases (ASU 2016-02) and credit losses on financial instruments (ASU 2016-13) in accordance with SAB Topic 11.M.Registrants are required to disclose the effect that recently issued accounting standards will have on their F-49Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, then additionalqualitative disclosures should be considered. The ASU incorporates these SEC staff views into ASC 250 and adds references to that guidance in the transitionparagraphs of each of the three new standards. The adoption of this new accounting guidance did not have a material effect on the Company’s ConsolidatedFinancial Statements.In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. This Update addresses the classificationand presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments are effective forpublic business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for allentities. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This updateaddresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for public businessentities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for all entities. TheCompany is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718)”. ASU 2016-09 simplifies several aspects ofaccounting for stock based compensation including the tax consequences, classification of awards as equity or liabilities, forfeitures and classification on thestatement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlyapplication is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. ASU 2016-02 will apply to both types of leases — capital (or finance) leasesand operating leases. According to the new Accounting Standard, lessees will be required to recognize assets and liabilities on the balance sheet for the rightsand obligations created by all leases with terms of more than 12 months. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018,including interim periods within those fiscal years. Early application is permitted. The Company is currently assessing the impact that adopting this newaccounting guidance will have on its consolidated financial statements and footnotes disclosures.In January 2016, FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10)—Recognition and Measurement of Financial Assetsand Financial Liabilities”. The amendments in this ASU require an entity (i) to measure equity investments (except those accounted for under the equitymethod of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (ii) to perform aqualitative assessment to identify impairment in equity investments without readily determinable fair values; (iii) to present separately in othercomprehensive income the fair value of a liability resulting from a change in the instrument-specific credit risk; and (iv) to present separately financial assetsand financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet. Theamendments also eliminate the requirement, for public business entities, to disclose the methods and significant assumptions used to estimate the fair valueof financial instruments measured at amortized cost on the balance sheet and clarify that an entity should evaluate the need for a valuation allowance on adeferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, ASU 2016-01is effective for fiscal years F-50Table of ContentsNAVIOS MARITIME ACQUISITION CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except share and per share data) beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this new standard is not expected to have a materialimpact on the Company’s results of operations, financial position or cash flows.In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure ofUncertainties About an Entity’s Ability to Continue as a Going Concern”. This standard requires management to assess an entity’s ability to continue as agoing concern, and to provide related footnote disclosures in certain circumstances. Before this new standard, no accounting guidance existed formanagement on when and how to assess or disclose going concern uncertainties. The amendments are effective for annual periods ending after December 15,2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The adoption of the new standard had noimpact on the Company’s results of operations, financial position or cash flows.In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” clarifying the method used to determine the timing andrequirements for revenue recognition on the statements of income. Under the new standard, an entity must identify the performance obligations in a contract,the transaction price and allocate the price to specific performance obligations to recognize the revenue when the obligation is completed. The amendmentsin this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cashflow arising from contracts. The new accounting guidance was originally effective for interim and annual periods beginning after December 15, 2016. InAugust 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 for all entities by one year. The standard will be effective forpublic entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. The Company is currently assessing the impactthat adopting this new accounting guidance will have on its consolidated financial statements.NOTE 22: SUBSEQUENT EVENTSOn January 17, 2017, Navios Acquisition redeemed, through the holder’s put option, 100,000 shares of the puttable common stock and paid cash of$1,000 to the holder upon redemption.On February 3, 2017, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2016 of $0.05 per share of commonstock payable on March 14, 2017 to stockholders of record as of March 7, 2017. The declaration and payment of any further dividends remain subject to thediscretion of the Board of Directors and will depend on, among other things, Navios Acquisition’s cash requirements as measured by market opportunitiesand restrictions under its credit agreements and other debt obligations and such other factors as the Board of Directors may deem advisable.In February 2017, the Company drew $26,650 under the new credit facility with ABN AMRO Bank N.V. which is secured with its two chemicaltankers, following the full repayment of the previous financing arrangements. The facility is repayable in four equal consecutive quarterly installmentsof $650 each, with a final balloon payment of the balance to be repaid on the last repayment date. The maturity date of the loan is in February 2018. The loanbears interest at LIBOR plus 400 bps per annum.On February 16, 2017 Navios Acquisition entered into securities purchase agreements with Navios Midstream pursuant to which Navios Acquisitionmade an investment in Navios Midstream by purchasing 6,446 general partnership interests, respectively, for an aggregate consideration of $79 in order tomaintain its 2.0% partnership interest in Navios Midstream in light of such continuous public offering. F-51EXHIBIT 4.54Private and ConfidentialDATED 31 January 2017AMORGOS SHIPPING CORPORATIONandANDROS SHIPPING CORPORATION (1)ABN AMRO BANK N.V. (2) FACILITY AGREEMENTin respect of a loan of up toUSD26,650,000 INCE & COPIRAEUS Index Clause Page 1 Purpose and definitions 3 2 The Bank’s Commitment, Advance and Use of Proceeds 19 3 Interest and Interest Periods 20 4 Repayment and prepayment 22 5 Fees and expenses 24 6 Payments and taxes; Accounts and calculations 25 7 Representations and warranties 28 8 Undertakings 36 9 Conditions 48 10 Events of Default 49 11 Indemnities 53 12 Unlawfulness and increased costs mitigation 53 13 Security, set-off and miscellaneous 55 14 Accounts 57 15 Assignment, transfer and lending office 59 16 Notices 61 17 Borrowers’ obligations 62 18 Governing law 64 19 Jurisdiction 64 Schedule 1 Form of Drawdown Notice Schedule 2 Conditions precedent Schedule 3 Vessel details Schedule 4 Manadatory Cost Schedule 5 Form of Compliance Certificate Execution page 67 2THIS AGREEMENT is dated 31 January 2017 and made BETWEEN: (1)AMORGOS SHIPPING CORPORATION and ANDROS SHIPPING CORPORATION as joint and several Borrowers; and (2)ABN AMRO BANK N.V. as Bank.IT IS AGREED as follows: 1PURPOSE AND DEFINITIONS 1.1PurposeThis Agreement sets out the terms and conditions upon which the Bank agrees to make available to the Borrowers a facility in an amount notexceeding the lesser of (i) twenty six million six hundred and fifty thousand Dollars (USD26,650,000) and (ii) 65% of the aggregate ValuationAmounts of the Vessels (to be determined no more than 30 days prior to the Drawdown Date) in one advance, to be used for general corporatepurposes of the Borrowers. 1.2DefinitionsIn this Agreement, unless the context otherwise requires:“Accounts” means together the Earnings Accounts and the Retention Account;“Account Security” means a deed or other instrument in respect of each Earnings Account and the Retention Account executed or to beexecuted by the Borrowers in favour of the Bank in such form as the Bank may require in its sole discretion;“Affiliate” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of thatHolding Company;“Approved Broker” means each of (i) H. Clarkson & Co. Ltd. of St Magnus House, 3 Lower Thames Street, London EC3R 6HE, England,(ii) Arrow Sale & Purchase (UK) Limited of Harbour House, Chelsea Harbour, London SW10 0XE, England, (iii) SSY Valuation Services Limitedof Lloyds Chambers, 1 Portsoken Street, London E1 8PH, England, (iv) Fearnleys of P.O. Box 1158 Sentrum, 0107 Oslo, Norway, (v) MaerskBroker K/S, Midtermolen 1, 2100 Copenhagen, Denmark, (vi) Braemar Seascope Limited of One Strand, Trafalgar Square, London WC2N 5HR,England and (vii) E.A. Gibson Shipbrokers Ltd., Audrey House, 16-20 Ely Place, London EC1N 6SN, England, or such other reputable,independent and first class firm of shipbrokers specialising in the valuation of vessels of the relevant type appointed by the Bank and agreedwith the Borrowers;“Assignee” is defined in clause 15.3;“Bank” means ABN AMRO Bank N.V., duly incorporated under the laws of Netherlands, having its registered office at Gustav Mahlerlaan 10,1082 PP Amsterdam, The Netherlands, acting for the purposes of this Agreement through its office at Coolsingel 93, 3012, AE Rotterdam, TheNetherlands (or of such other address as may last have been notified to the Borrowers pursuant to clause 16.2.3);“Banking Day” means a day on which dealings in deposits in USD are carried on in the London Interbank Eurocurrency Market and a day (otherthan Saturday or Sunday) on which banks are open for general business in London, Athens, Piraeus, Amsterdam, Rotterdam and New York City(or any other relevant place of payment under clause 6); 3“Basel III” means: (a)the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A global regulatory frameworkfor more resilient banks and banking systems”, “Basel III: International framework for liquidity risk measurement, standards andmonitoring” and “Guidance for national authorities operating the countercyclical capital buffer” published by the Basel Committee onBanking Supervision in December 2010, each as amended, supplemented or restated; (b)the rules for global systemically important banks contained in “Global systemically important banks: assessment methodology and theadditional loss absorbency requirement - Rules text” published by the Basel Committee on Banking Supervision in November 2011, asamended, supplemented or restated; and (c)any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III”;“Basel IV” means any amendment, replacement or refinement of Basel III known or to be known as “Basel IV”;“Borrowed Money” means Indebtedness in respect of (i) money borrowed and debit balances at banks, (ii) any bond, note, loan stock, debentureor similar debt instrument, (iii) acceptance or documentary credit facilities, (iv) receivables sold or discounted (otherwise than on a non-recoursebasis), (v) deferred payments for assets or services acquired, (vi) finance leases and hire purchase contracts, (vii) swaps, forward exchangecontracts, futures and other derivatives, (viii) any other transaction (including without limitation forward sale or purchase agreements) havingthe commercial effect of a borrowing or of any of (ii) to (vii) above and (ix) guarantees in respect of Indebtedness of any person falling withinany of (i) to (viii) above;“Borrowers” means each of Amorgos Shipping Corporation (“Amorgos”) and Andros Shipping Corporation (“Andros”), each of which isincorporated in the Marshall Islands and has its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MarshallIslands, MH96960, and in the plural means both of them;“Break Costs” means the aggregate amount of all losses, premiums, penalties, costs and expenses whatsoever certified by the Bank at any timeand from time to time as having been incurred by it in maintaining or funding the Loan or in liquidating or re employing fixed deposits acquiredto maintain the same as a result of either: (a)any repayment or prepayment of the Loan or any part thereof otherwise than in accordance with, respectively, clause 4.1 or clause 4.3whether on a voluntary or involuntary basis or otherwise howsoever or (b)of the Borrowers failing or being incapable of drawing the Loan after a Drawdown Notice has been given;“Casualty Amount” means five hundred thousand Dollars (USD500,000) (or the equivalent in any other currency); 4“Certified Copy” means in relation to any document delivered or issued by or on behalf of any company, a copy of such document certified as atrue, complete and up to date copy of the original by any of the directors or officers for the time being of such company or by such company’sattorneys or solicitors;“Change of Control Event” means the occurrence after the Execution Date of any of the following: (i)the Permitted Owners sell any shares in the Corporate Guarantor which would reduce the proportion of issued shares owned by them inaggregate in the Corporate Guarantor to below 30%; or (ii)the Corporate Guarantor issues further shares which would reduce the proportion of issued shares in the Corporate Guarantor owned bythe Permitted Owners in aggregate to below 30%;“Charter Assignment” means a specific assignment of each Extended Employment Contract required to be executed hereunder by either Ownerin favour of the Bank (including any notices and/or acknowledgements and/or undertakings associated therewith) in such form as the Bank mayrequire in its sole discretion;“Classification” means, in relation to each Vessel, the highest class available for a vessel of her type with the relevant Classification Society;“Classification Society” means, in relation to each Vessel, any IACS classification society which the Bank shall, at the request of the Borrowers,have agreed in writing shall be treated as the classification society in relation to such Vessel for the purposes of the relevant Ship SecurityDocuments;“Code” means the US Internal Revenue Code of 1986, as amended, and the regulations promulgated and rulings issued thereunder;“Commitment” means the maximum amount which the Bank has agreed to lend to the Borrowers under clause 2.1 as reduced by any relevantterm of this Agreement;“Compliance Certificate” means a certificate substantially in the form set out in schedule 5 signed by the chief financial officer of the CorporateGuarantor;“Compulsory Acquisition” means, in respect of a Vessel, requisition for title or other compulsory acquisition including, if that ship is notreleased therefrom within the Relevant Period, capture, appropriation, forfeiture, seizure, detention, deprivation or confiscation howsoever forany reason (but excluding requisition for use or hire) by or on behalf of any Government Entity or other competent authority or by pirates,hijackers, terrorists or similar persons; “Relevant Period” means for the purposes of this definition of Compulsory Acquisition either (i) ninety(90) days or, (ii) if relevant underwriters confirm in writing (in terms satisfactory to the Bank) prior to the end of such ninety (90) day period thatsuch capture, seizure, detention or confiscation will be fully covered (subject to any applicable deductible) by the relevant Owner’s war risksinsurance if continuing for a further period exceeding ten (10) calendar months, the shorter of twelve (12) months and such period at the end ofwhich cover is confirmed to attach; 5“Corporate Guarantee” means the guarantee required to be executed hereunder by the Corporate Guarantor in such form as the Bank mayrequire in its sole discretion;“Corporate Guarantor” means Navios Maritime Acquisition Corporation, a corporation incorporated in the Marshall Islands and having itsregistered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960;“CRD IV” means: (a)Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for creditinstitutions and investment firms and amending regulation (EU) No. 648/2012; (b)Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions andthe prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives2006/48/EC and 2006/49/EC; and (c)any other law or regulation which implements Basel III;“CRR” means Regulations (EU) No. 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investment firms andamending regulation (EU) No. 648/2012;“Deed of Covenant” means, in respect of Vessel A, the deed of covenant collateral to the Mortgage in respect thereof executed or to be executedby the Owner thereof in favour of the Bank in such form as the Bank may require in its sole discretion;“Default” means any Event of Default or any event or circumstance which with the giving of notice or lapse of time or the satisfaction of anyother condition (or any combination thereof) would constitute an Event of Default;“Dollars” and “USD” mean the lawful currency of the USA and in respect of all payments to be made under any of the Security Documentsmeans funds which are for same day settlement in the New York Clearing House Interbank Payments System (or such other US dollar funds asmay at the relevant time be customary for the settlement of international banking transactions denominated in US dollars);“Drawdown Date” means any date being a Banking Day falling during the Drawdown Period, on which the Loan is, or is to be, made available;“Drawdown Notice” means a notice substantially in the form of schedule 1;“Drawdown Period” means the period commencing on the Execution Date and ending on the earlier of (i) 29 May 2017 and (ii) any date onwhich the Commitment is finally cancelled or fully drawn under the terms of this Agreement;“Earnings Account” means, in respect of each Borrower, a USD Account required to be opened hereunder with the Bank in the name of thatBorrower designated “[NAME OF BORROWER] - Earnings Account” and includes any other account designated in writing by the Bank to be anEarnings Account for the purposes of this Agreement;“Encumbrance” means any mortgage, charge, pledge, lien, hypothecation, assignment, title retention, preferential right, option, trustarrangement or security interest or any other encumbrance, security or arrangement conferring howsoever a priority of payment in respect of anyobligation of any person; 6“Environmental Affiliate” means any agent or employee of either Borrower, the Manager or any other Group Member or any other personhaving a contractual relationship with either Borrower, the Manager or any other Group Member in connection with any Relevant Vessel or itsoperation or the carriage of cargo and/or passengers thereon and/or the provision of goods and/or services on or from any Relevant Vessel;“Environmental Approval” means any consent, authorisation, licence or approval of any governmental or public body or authorities or courtsapplicable to any Relevant Vessel or its operation or the carriage of cargo and/or passengers thereon and/or the provision of goods and/orservices on or from any Relevant Vessel required under any Environmental Law;“Environmental Claim” means (i) any claim by, or directive from, any applicable Government Entity alleging breach of, or non-compliancewith, any Environmental Laws or Environmental Approvals or otherwise howsoever relating to or arising out of an Environmental Incident or(ii) any claim by any other third party howsoever relating to or arising out of an Environmental Incident (and, in each such case, “claim” shallinclude a claim for damages and/or direction for and/or enforcement relating to clean-up costs, removal, compliance, remedial action orotherwise) or (iii) any Proceedings arising from any of the foregoing;“Environmental Incident” means, regardless of cause, (i) any discharge or release of Environmentally Sensitive Material from any RelevantVessel; (ii) any incident in which Environmentally Sensitive Material is discharged or released from a vessel other than a Relevant Vessel whichinvolves collision between a Relevant Vessel and such other vessel or some other incident of navigation or operation, in either case, where theRelevant Vessel, the Manager and/or the relevant Owner and/or the relevant Group Member and/or the relevant Operator are actually,contingently or allegedly at fault or otherwise howsoever liable (in whole or in part) or (iii) any incident in which Environmentally SensitiveMaterial is discharged or released from a vessel other than a Relevant Vessel and where such Relevant Vessel is actually or potentially liable tobe arrested as a result and/or where the Manager and/or the relevant Owner and/or other Group Member and/or the relevant Operator are actually,contingently or allegedly at fault or otherwise howsoever liable;“Environmental Laws” means all laws, regulations, conventions and agreements whatsoever relating to pollution, human or wildlife well-beingor protection of the environment (including, without limitation, the United States Oil Pollution Act of 1990 and any comparable laws of theindividual States of the USA);“Environmentally Sensitive Material” means oil, oil products or any other products or substance which are polluting, toxic or hazardous or anysubstance the release of which into the environment is howsoever regulated, prohibited or penalised by or pursuant to any Environmental Law;“Event of Default” means any of the events or circumstances listed in clause 10.1;“Execution Date” means the date on which this Agreement has been executed by all the parties hereto; 7“Extended Employment Contract” means, in respect of a Mortgaged Vessel, any time charterparty, contract of affreightment or other contract ofemployment of such ship (including the entry of either Vessel in any pool) which has a tenor exceeding twelve (12) months (including anyoptions to renew or extend such tenor);“Facility Period” means the period starting on the Drawdown Date and ending on such date as all obligations whatsoever of all of the SecurityParties under or pursuant to the Security Documents whensoever arising, actual or contingent, have been irrevocably paid, performed and/orcomplied with;“FATCA” means: (a)sections 1471 to 1474 of the Code or any associated regulations; (b)any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any otherjurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or (c)any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the USInternal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.“FATCA Application Date” means: (d)in relation to a “withholdable payment” described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certainother payments from sources within the US), 1 July 2014; (e)in relation to a “withholdable payment” described in section 1473(1)(A)(ii) of the Code (which relates to “gross proceeds” from thedisposition of property of a type that can produce interest from sources within the US), 1 January 2019; or (f)in relation to a “passthru payment” described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January2019,or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result ofany change in FATCA after the date of this Agreement.“FATCA Deduction” means a deduction or withholding from a payment under a Security Document required by or under FATCA;“FATCA Exempt Party” means a party to a Security Document that is entitled to receive payments free from any FATCA Deduction;“FATCA FFI” means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if the Bank is not a FATCA ExemptParty, could be required to make a FATCA Deduction;“Flag State” means Malta, the Republic of the Marshall Islands or such other state or territory agreed by the Bank, at the request of theBorrowers, as the “Flag State” of the Vessels for the purposes of the Security Documents; 8“General Assignment” means, in respect of each Vessel, the deed of assignment of its earnings, insurances and requisition compensationexecuted or to be executed by the relevant Owner in favour of the Bank in such form as the Bank may require in its sole discretion, and in theplural means both of them;“Government Entity” means any national or local government body, tribunal, court or regulatory or other agency and any organisation of whichsuch body, tribunal, court or agency is a part or to which it is subject;“Group” means at any relevant time the Corporate Guarantor and its Subsidiaries but excluding any company which is publicly listed;“Group Member” means any member of the Group;“Holding Company” means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.“IACS” means the International Association of Classification Societies;“Indebtedness” means any obligation howsoever arising (whether present or future, actual or contingent, secured or unsecured as principal,surety or otherwise) for the payment or repayment of money;“Interest Payment Date” means the last day of an Interest Period and, if an Interest Period is longer than 3 months, the date falling at the end ofeach successive period of 3 months during such Interest Period starting from its commencement;“Interest Period” means each period for the calculation of interest in respect of the Loan ascertained in accordance with the provisions of clause3;“ISM Code” means in relation to its application to the Borrowers, the Vessels and their operation: (a)‘The International Management Code for the Safe Operation of Ships and for Pollution Prevention’, currently known or referred to as the‘ISM Code’, adopted by the Assembly of the International Maritime Organisation by Resolution A.741(18) on 4 December 1993 andincorporated on 19 May 1994 into Chapter IX of the International Convention for Safety of Life at Sea 1974 (SOLAS 1974); and (b)all further resolutions, circulars, codes, guidelines, regulations and recommendations which are now or in the future issued by or onbehalf of the International Maritime Organisation or any other entity with responsibility for implementing the ISM Code, including,without limitation, the ‘Guidelines on implementation or administering of the International Safety Management (ISM) Code byAdministrations’ produced by the International Maritime Organisation pursuant to Resolution A.788(19) adopted on 25 December 1995,as the same may be amended, supplemented or replaced from time to time;“ISM Code Documentation” means, in relation to each Vessel, the document of compliance (DOC) and safety management certificate (SMC)issued by a Classification Society pursuant to the ISM Code in relation to such Vessel within the periods specified by the ISM Code; 9“ISM SMS” means the safety management system which is required to be developed, implemented and maintained under the ISM Code;“ISPS Code” means the International Ship and Port Security Code of the International Maritime Organisation and includes any amendments orextensions thereto and any regulations issued pursuant thereto;“ISSC” means an International Ship Security Certificate issued in respect of a Vessel pursuant to the ISPS Code;“Joint Venture” means any joint venture entity, whether a company, unincorporated firm, undertaking, association, partnership or any otherentity;“Latest Accounts” means, in respect of any financial quarter or year of the Group, the latest unaudited (in respect of each financial quarter) oraudited (in respect of each financial year) financial statements required to be prepared pursuant to clause 8.1.6;“LIBOR” means, in relation to the Loan, any part of the Loan or any Unpaid Sum: (a)the applicable Screen Rate; or (b)(if no Screen Rate is available for dollars for the Interest Period of the Loan, that part of the Loan or that Unpaid Sum ) the ReferenceBank Rate,as of the Specified Time on the Quotation Day for dollars and for a period comparable to the Interest Period of the Loan, that part of the Loan orthat Unpaid Sum and if any such rate is less than zero LIBOR shall be deemed to be zero;“Loan” means the principal amount borrowed by the Borrowers under this Agreement or (as the context may require) the principal amount inrespect of the Loan Facility owing to the Bank under this Agreement at any relevant time;“Loan Facility” means the loan facility provided by the Bank on the terms and subject to the conditions of this Agreement in the amount of thelesser of (i) twenty six million six hundred and fifty thousand Dollars (USD26,650,000) and (ii) 65% of the aggregate Valuation Amounts of theVessels (to be determined no more than 30 days prior to the Drawdown Date);“Liquidity” means: (a)cash in hand legally and beneficially owned by any Group Member; and (b)cash deposits legally and beneficially owned by any Group Member and which are deposited with (A) the Bank or (B) any other bank orfinancial institution,which in each case is at the free and unrestricted disposal of the relevant Group Member by which it is owned;“Management Agreement” means, in respect of each Vessel, the agreement between the relevant Owner and the Manager in a form previouslyapproved in writing by the Bank;“Manager” means Navios Tankers Management Inc., a company incorporated in the Marshall Islands and having its registered office at TrustCompany Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 or any other person appointed by an Owner, with theprior written consent of the Bank, as the manager of the relevant Mortgaged Vessel; 10“Manager’s Undertakings” means, collectively, the undertakings and assignments required to be executed hereunder by the Manager in favourof the Bank in respect of each of the Vessels each in such form as the Bank may require in its sole discretion (and “Managers’ Undertakings”means both of them);“Mandatory Cost” means in relation to any period a percentage calculated for such period at an annual rate determined by the application of theformula set out in schedule 4;“Margin” means four per cent (4%) per annum;“Material Adverse Effect” means any event or occurrence which the Bank reasonably determines has had or could reasonably be expected tohave a material adverse effect on (i) the validity, enforceability, effectiveness or ranking of any Security Document or the Bank’s rights under, orthe security provided by, or purported to be provided by, any Security Document or (ii) the ability of any Security Party to perform or complywith any of its obligations under any Security Document;“MII & MAP Policy” means a mortgagee’s interest and pollution risks insurance policy (including additional perils (pollution) cover) in respectof each Mortgaged Vessel to be effected by the Bank to cover the Mortgaged Vessels as the same may be renewed or replaced annually thereafterand maintained throughout the Facility Period through such brokers, with such underwriters and containing such coverage as may be acceptableto the Bank in its sole discretion, insuring a sum of at least one hundred and ten per cent (110%) of the Loan;“month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to theday of the calendar month on which it started, provided that (i) if the period started on the last Banking Day in a calendar month or if there is nosuch numerically corresponding day, it shall end on the last Banking Day in the such next calendar month and (ii) if such numericallycorresponding day is not a Banking Day, the period shall end on the next following Banking Day in the same calendar month but if there is nosuch Banking Day it shall end on the preceding Banking Day and “months” and “monthly” shall be construed accordingly;“Mortgage” means: (i)in relation to Vessel A, the first priority statutory Maltese mortgage thereof; and (ii)in relation to Vessel B, the first preferred Marshall Islands mortgage thereof,each required to be executed hereunder by the Owner thereof, in such form as the Bank may agree or require, and in the plural means both ofthem;“Mortgaged Vessel” means, at any relevant time, a Vessel which is at such time subject to a Mortgage and/or the Earnings, Insurances andRequisition Compensation (each such term as defined in the relevant Ship Security Documents) of which are subject to an Encumbrancepursuant to the relevant Ship Security Documents and a Vessel shall, for the purposes of this Agreement, be regarded as a Mortgaged Vessel asfrom the date on which the Mortgage of that Vessel has been executed and registered in accordance with this Agreement until 11whichever shall be the earlier of (i) the payment in full of the amount required to be paid to the Bank pursuant to clause 4.3 or 4.4 following theTotal Loss or sale respectively of such Vessel and (ii) the end of the Facility Period“Navios Group” means Navios Holdings and its Subsidiaries;“Navios Holdings” means Navios Maritime Holdings Inc., a corporation incorporated in the Marshall Islands and having its registered office atTrust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960“Net Worth” means, by reference to the Latest Accounts in respect of the Group, the Total Assets (based on book values) less Total Liabilities ofthe Group;”Notes” means together (i) the USD610,000,000 in aggregate principal amount of 8.125% First Priority Ship Mortgage Notes due in 2021 issuedby the Corporate Guarantor and Navios Acquisition Finance (US) Inc. (the “Issuers”) on 13 November 2013 pursuant to an indenture dated as of13 November 2013 (as amended by a first supplemental indenture dated as of 8 January 2014, a second supplemental indenture dated as of20 February 2014 a third supplemental indenture dated as of 31 March 2014, and a fourth supplemental indenture dated as of 28 May 2014) and(ii) the USD60,000,000 in aggregate principal amount of 8.125% First Priority Ship Mortgage Notes due in 2021 issued by the Issuers on31 March 2014;“Operator” means any person who is from time to time during the Facility Period concerned in the operation of a Relevant Vessel and fallswithin the definition of “Company” set out in rule 1.1.2 of the ISM Code;“Owner” means, in relation to: (a)Vessel A, Amorgos; and (b)in relation to Vessel B, Andros,and in the plural means both of them;“Party” means a party to this Agreement.“Permitted Encumbrance” means any Encumbrance created pursuant to or expressly permitted by the Security Documents and Permitted Liensor otherwise permitted by the Bank or any rights of pledge and/or set off of the Bank under and pursuant to its general banking conditions(algemene bankvoorwaarden);“Permitted Liens” means any lien on a Vessel for master’s, officer’s or crew’s wages outstanding in the ordinary course of trading, any lien forsalvage and any ship repairer’s or outfitter’s possessory lien for a sum not (except with the prior written consent of the Bank) exceeding theCasualty Amount;“Permitted Owners” means, in relation to the Corporate Guarantor, any one or more of Navios Holdings, Mrs Angeliki Frangou and theirrespective Affiliates;“Pertinent Jurisdiction” means any jurisdiction in which or where any Security Party is incorporated, resident, domiciled, has a permanentestablishment or assets, carries on, or has a place of business or is otherwise howsoever effectively connected; 12“Proceedings” means any litigation, arbitration, legal action or complaint or judicial, quasi-judicial or administrative proceedings whatsoeverarising or instigated by anyone in any court, tribunal, public office or other forum whatsoever and wheresoever (including, without limitation,any action for provisional or permanent attachment of any thing or for injunctive remedies or interim relief and any action instigated on an exparte basis);“Quotation Day” means, in relation to any period for which an interest rate is to be determined, two (2) Banking Days before the first day of thatperiod unless market practice differs in the Relevant Interbank Market, in which case the Quotation Day will be determined by the Bank inaccordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the RelevantInterbank Market on more than one day, the Quotation Day will be the last of those days);“Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Bank at its requestby the Reference Banks as the rate at which the relevant Reference Bank could borrow funds in the Interbank Market, in the relevant currencyand for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in thatcurrency and for that period;“Reference Banks” means the branch of ABN AMRO Bank N.V. at 93 Coolsingel, 3012 AE Rotterdam, The Netherlands and the London branchof ABN AMRO Bank N.V. or such other banks as may be appointed by the Bank in consultation with the Borrowers;“Registry” means, in relation to each Vessel, the office of the registrar, commissioner or representative of the Flag State, who is duly empoweredto register such Vessel, the relevant Owner’s title thereto and the relevant Mortgage under the laws and flag of the Flag State;“Relevant Interbank Market” means the London interbank market;“Relevant Vessel” means each of the Vessels and any other ship from time to time (whether before or after the date of this Agreement) owned,managed or crewed by, or chartered to, any Group Member;“Repayment Dates” means subject to clause 6.3, each of the dates falling at quarterly intervals after the Drawdown Date, up to and including theearlier of (a) the date falling 12 months following the Drawdown Date and (b) 30 March 2018;“Required Authorisation” means any authorisation, consent, declaration, licence, permit, exemption, approval or other document, whetherimposed by or arising in connection with any law, regulation, custom, contract, security or otherwise howsoever which must be obtained at anytime from any person, Government Entity or central bank or other self-regulating or supra-national authority in order to enable the Borrowerslawfully to draw the Loan and/or to enable any Security Party lawfully and continuously to continue its corporate existence and/or perform allits obligations whatsoever whensoever arising and/or grant security under the relevant Security Documents and/or to ensure the continuousvalidity and enforceability thereof;“Required Security Amount” means the amount in USD (as certified by the Bank) which is at any relevant time 133% of the Loan; 13“Restricted Person” means a person that is: (i)listed on any Sanctions List; (ii)located in, incorporated under the laws of, or to the knowledge of the Borrowers and/or Corporate Guarantor, owned or controlled by, oracting on behalf of, a person located in or organised under the laws of a country or territory that is the target of country-wide Sanctions;“Retention Account” a USD Account required to be opened hereunder with the Bank in the joint names of the Borrowers designated “[NAME OFBORROWERS] – Retention Account” and includes any other account designated in writing by the Bank to be a Retention Account for thepurposes of this Agreement;“Sanctions” means any economic or trade sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by: (i)the United States government; (ii)the United Nations; (iii)the European Union or any of its Member States; (iv)the United Kingdom; (v)any country to which any Security Party or any other member of the Group or any of their Affiliates is bound; or (vi)the respective governmental institutions and agencies of any of the foregoing, including without limitation, the Office of Foreign AssetsControl of the US Department of Treasury (“OFAC”), the United States Department of State, and Her Majesty’s Treasury (“HMT”)(together “Sanctions Authorities” and each, “Sanctions Authority”);“Sanctions List” means the “Specially Designated Nationals and Blocked Persons” list issued by OFAC, the “Consolidated List of FinancialSanctions Targets and Investment Ban List” issued by HMT, or any similar list issued or maintained or made public by any of the SanctionsAuthorities;“Screen Rate” means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person whichtakes over the administration of that rate) for dollars for the relevant period displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (orany replacement Reuters page which displays that rate), or on the appropriate page of such other information service which publishes that ratefrom time to time in place of Reuters. If such page or service ceases to be available, the Bank may specify another page or service displaying theappropriate rate after consultation with the Borrowers;“Security Documents” means this Agreement, the Mortgages, the Deed of Covenant, the Corporate Guarantee, the General Assignments, theCharter Assignments, the Account Security, the Manager’s Undertakings, the Shares’ Charges, any Subordinated Debt Security and any otherdocuments as may have been or shall from time to time after the date of this Agreement be executed in favour of the Bank to guarantee and/or togovern and/or to secure payment of all or any part of the Loan, interest thereon and other moneys from time to time owing by the Borrowerspursuant to this Agreement (whether or not any such document also guarantees and/or secures moneys from time to time owing pursuant to anyother document or agreement); 14“Security Party” means the Borrowers, the Corporate Guarantor, the Shareholder, the Manager or any other person who may at any time be aparty to any of the Security Documents (other than the Bank);“Security Value” means the amount in USD (as certified by the Bank) which, at any relevant time, is the aggregate of (i) the Valuation Amountsof the Mortgaged Vessels as most recently determined in clause 8.2.2 and (ii) the market value of any additional security (or, in the case of cash,Dollars, at its face value) at that time held by the Bank and provided under clause 8.2.1 or otherwise;“Shareholder” means Aegean Sea Maritime Holdings Inc., a company incorporated in the Marshall Islands and having its registered office atTrust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960;“Shares Charge” means in respect of each Borrower, the first priority charge of all the shares of and in that Borrower executed or to be executedby the Shareholder in favour of the Bank in such form as the Bank may agree or require in its sole discretion and in the plural means both ofthem;“Ship Security Documents” means in relation to each Vessel, the Mortgage, the General Assignment, the Charter Assignment, the Deed ofCovenant (in relation to Vessel A) and the Manager’s Undertaking in respect of such Vessel;“Specified Time” means 11:00 am London time;“Subordinated Creditor” means: (a)the Shareholder; or (b)the Corporate Guarantor; or (c)the Manager; or (d)any other member of the Group.“Subordinated Debt Security” means a Security over Subordinated Liabilities entered into or to be entered into by a Subordinated Creditor infavour of the Bank in such form as the Bank may agree or require in its sole discretion.“Subordinated Finance Document” means any document relating to or evidencing Subordinated Liabilities.“Subordinated Liabilities” means all indebtedness owed or expressed to be owed by the Borrower to a Subordinated Creditor whether under theSubordinated Finance Documents or otherwise.“Subordination Deed” means a subordination deed entered into or to be entered into by each Subordinated Creditor and the Bank in such formas the Bank may agree or require in its sole discretion.“Subsidiary” of a person means any company or entity directly or indirectly controlled by such person, and for this purpose “control” means theownership of more than fifty per cent (50%) of the voting share capital (or equivalent rights of ownership) of such company or entity; 15“Taxes” includes all present and future income, corporation, capital or value-added taxes and all stamp and other taxes and levies, imposts,deductions, duties, charges and withholdings whatsoever together with interest thereon and penalties in respect thereto, if any, and charges, feesor other amounts made on or in respect thereof (and “Taxation” shall be construed accordingly);“Total Assets” and “Total Liabilities” mean, respectively, the total assets and total liabilities of the Group as evidenced at any relevant time bythe Latest Accounts, provided that cash (which shall have the meaning given thereto under US GAAP) shall be deducted from Total Assets andTotal Liabilities;“Total Loss” means, in respect of each Vessel: (c)actual, constructive, compromised, agreed or arranged total loss of such Vessel; or (d)Compulsory Acquisition; or (e)any hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation of such Vessel not falling within the definition ofCompulsory Acquisition by any Government Entity, or by persons allegedly acting or purporting to act on behalf of any GovernmentEntity, unless such Vessel be released and restored to the relevant Owner within thirty (30) (or, in the case of seizure of the Vessel bypirates, ninety (90)) days after such incident;“Transferee” is defined in clause 15.4;“U.S.” means the United States of America;“Unlawfulness” means any event or circumstance which either is or, as the case may be, might in the reasonable opinion of the Bank become thesubject of a notification by the Bank to the Borrowers under clause 12.1; and“Underlying Documents” means, together, any Extended Employment Contracts and the Management Agreements ;“Unpaid Sum” means any sum due and payable but unpaid by a Security Party under the Security Documents;“Valuation Amount” means, in respect of each Mortgaged Vessel, the value thereof as most recently determined under clause 8.2.2; and“Vessel” means each of Vessel A and Vessel B and in the plural means both of them;Words and expressions defined in Schedule 3 (Vessel Details) shall have the meanings given to them therein as if the same were set out in full inthis clause 1.2. 1.3ConstructionIn this Agreement, unless the context otherwise requires: 1.3.1clause headings and the index are inserted for convenience of reference only and shall be ignored in the construction of this Agreement; 161.3.2references to clauses and schedules are to be construed as references to clauses of, and schedules to, this Agreement and references to thisAgreement include its schedules and any supplemental agreements hereto executed from time to time; 1.3.3references to (or to any specified provision of) this Agreement or any other document shall be construed as references to this Agreement, thatprovision or that document as in force for the time being and as duly amended and/or supplemented and/or novated; 1.3.4references to a “regulation” include any present or future regulation, rule, directive, requirement, request or guideline (whether or not having theforce of law) of any Government Entity, central bank or any self-regulatory or other supra-national authority (including, without limitation anypresent or future regulation, rule, directive, requirement, request or guideline (whether or not having the force of law) of any Government Entity,central bank or any self-regulatory or other supra-national authority (including, without limitation, any regulation implementing or complyingwith (1) the “International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the BaselCommittee on Banking Supervision in June 2004, in the form existing on the date of this Agreement (“Basel II”) and/or (2) Basel III and/or(3) Basel IV and/or (4) any other law or regulation which, at any time and from time to time, implements and/or amends and/or supplementsand/or re-enacts and/or supersedes, whether in whole or in part, Basel II and/or Basel III and/or Basel IV (including CRD IV and CRR), andwhether such implementation, application or compliance is by a Government Entity, a lender or any company affiliated to it); 1.3.5references to any person in or party to this Agreement shall include reference to such person’s lawful successors and assigns and references to theBank shall also include a Transferee; 1.3.6words importing the plural shall include the singular and vice versa; 1.3.7references to a time of day are, unless otherwise stated, to Rotterdam time; 1.3.8references to a person shall be construed as references to an individual, firm, company, corporation or unincorporated body of persons or anyGovernment Entity; 1.3.9references to a “guarantee” include references to an indemnity or any other kind of assurance whatsoever (including, without limitation, anykind of negotiable instrument, bill or note) against financial loss or other liability including, without limitation, an obligation to purchase assetsor services as a consequence of a default by any other person to pay any Indebtedness and “guaranteed” shall be construed accordingly; 1.3.10references to any statute or other legislative provision are to be construed as references to any such statute or other legislative provision as thesame may be re enacted or modified or substituted by any subsequent statute or legislative provision (whether before or after the date hereof) andshall include any regulations, orders, instruments or other subordinate legislation issued or made under such statute or legislative provision; 1.3.11a certificate by the Bank as to any amount due or calculation made or any matter whatsoever determined in connection with this Agreement shallbe conclusive and binding on the Borrowers except for manifest error; 171.3.12if any document, term or other matter or thing is required to be approved, agreed or consented to by the Bank such approval, agreement orconsent must be obtained in writing unless the contrary is stated; 1.3.13time shall be of the essence in respect of all obligations whatsoever of the Borrowers under this Agreement, howsoever and whensoever arising; 1.3.14the words “other” and “otherwise” shall not be construed eiusdem generis with any foregoing words where a wider construction is possible and 1.3.15a Default is “continuing” if it has not been remedied or waived and an Event of Default is “continuing” if it has not been waived. 1.4Accounting Terms and references to currenciesAll accounting terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally acceptedinternational accounting principles (or such other accounting principles as the Bank deems appropriate). Currencies are referred to in thisAgreement by the three letter currency codes (ISO 4217) allocated to them by the International Organisation for Standardisation. 1.5Contracts (Rights of Third Parties Act) 1999No part of this Agreement shall be enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to thisAgreement. 1.6Bail-inNotwithstanding any other term of any Security Document or any other agreement, arrangement or understanding between the Parties, each Partyacknowledges and accepts that any liability of any Party to any other Party under or in connection with the Security Documents may be subjectto Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of: (a)any Bail-In Action in relation to any such liability, including (without limitation): (i)a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) inrespect of any such liability; (ii)a conversion of all, or part of any such liability into shares or other instruments of ownership that may be issued to, or conferred on,it; and (iii)a cancellation of any such liability; and (b)a variation of any term of any Security Document to the extent necessary to give effect to any Bail-In Action in relation to any suchliability.In this clause:“Bail-In Action” means the exercise of any Write-down and Conversion Powers. 18“Bail-In Legislation” means: (a)in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EUestablishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law orregulation as described in the EU Bail-In Legislation Schedule from time to time; and (b)in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation.“EEA Member Country” means any member state of the European Union, Iceland, Liechtenstein and Norway.“EU Bail-In Legislation Schedule” means the document described as such and published by the Loan Market Association (or any successorperson) from time to time.“Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers.”Write-down and Conversion Powers” means in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from timeto time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule. 2THE BANK’S COMMITMENT, ADVANCE AND USE OF PROCEEDS 2.1The CommitmentThe Bank, in reliance upon each of the representations and warranties in clause 7, agrees to lend to the Borrowers upon and subject to the termsof this Agreement, the principal sum of the lesser of (i) twenty six million six hundred and fifty thousand Dollars (USD26,650,000) and (ii) 65%of the aggregate Valuation Amounts of the Vessels (to be determined no more than 30 days prior to the Drawdown Date) in one advance. 2.2DrawdownOn the terms and subject to the conditions of this Agreement, the Loan shall be advanced on the Drawdown Date following receipt by the Bankfrom the Borrowers of a Drawdown Notice not later than 10 a.m. on the second Banking Day before the proposed Drawdown Date. TheDrawdown Notice shall be effective on actual receipt by the Bank and, once given, shall, subject as provided in clause 3.6.1, be irrevocable. 2.3AvailabilityUpon receipt of the Drawdown Notice complying with the terms of this Agreement the Bank shall, subject to the provisions of clause 9, make theLoan available to the Borrowers on the Drawdown Date in accordance with clause 2.2. The Borrowers acknowledge that payment of the Loan inaccordance with clause 2.2 shall satisfy the obligation of the Bank to lend the Loan to the Borrowers under this Agreement. 2.4CancellationIf any part of the Loan is not drawn down by the end of the Drawdown Period, the Commitment shall thereupon be automatically cancelled andthe Bank shall have no further obligation under this Agreement. 192.5Use of proceeds 2.5.1Without prejudice to the Borrowers’ obligations under clause 8.1.4, the Bank shall have no responsibility for the Borrowers’ use of the proceedsof the Loan. 2.5.2The Borrower shall not, and shall procure that no Security Party or other Group Member or any affiliate of any of them shall, permit or authoriseany other person to, directly or indirectly, use, lend, make payments of, contribute or otherwise make available, all or any part of the proceeds ofthe Loan or other transactions contemplated by this Agreement to fund or facilitate trade, business or other activities: (i) involving or for thebenefit of any Restricted Person; or (ii) in any other manner that could result in the Borrower, any other Security Party or the Bank being inbreach of any Sanctions or becoming a Restricted Person. 3INTEREST AND INTEREST PERIODS 3.1Normal interest rateThe Borrowers agree to pay interest on the Loan or part thereof in respect of each Interest Period relating thereto on each Interest Payment Date(or, in the case of Interest Periods of more than three (3) months, by instalments, the first three (3) months from the commencement of the InterestPeriod and the subsequent instalments at intervals of three (3) months and on the last day of such Interest Period) at the rate per annumdetermined by the Bank to be the aggregate of (a) the Margin, (b) LIBOR and (c) Mandatory Cosy (if any) for that Interest Period. 3.2Selection of Interest PeriodsAn Interest Period shall have a duration of three (3) months or six (6) months or such other length as the Borrowers may select and the Bank mayagree, subject to (i) the same being available in the London Interbank Market and (ii) receipt of the Borrowers’ written request by the Bank notlater than 10 a.m. (Rotterdam time) on the third Banking Day before the start of each such Interest Period. 3.3Determination of Interest PeriodsThe length of each Interest Period shall be as requested by the Borrowers under clause 3.2 but so that: 3.3.1the first Interest Period starts on the Drawdown Date and each subsequent Interest Period shall start on the last day of the previous Interest Period; 3.3.2if any Interest Period would otherwise overrun a Repayment Date, then, in the case of the last Repayment Date, such Interest Period shall end onsuch Repayment Date, and in the case of any other Repayment Date the Loan shall be divided into parts so that there is one part in the amount ofthe repayment instalment due on each Repayment Date falling in that Interest Period and having an Interest Period ending on the relevantRepayment Date and another part consisting of the balance of the Loan having an Interest Period ascertained in accordance with the otherprovisions of this clause 3; and 3.3.3if the Borrowers fail to specify the length of an Interest Period in accordance with the provisions of clause 3.2 and this clause 3.3 such InterestPeriod shall last three months or such other period as complies with this clause 3.3. 203.4Default interestIf the Borrowers fail to pay any sum (including, without limitation, any sum payable pursuant to this clause 3.4) on its due date for paymentunder any of the Security Documents, the Borrowers must pay interest on such sum on demand from the due date up to the date of actualpayment (as well after as before judgment) at a rate determined by the Bank under this clause 3.4. The period starting on such due date andending on such date of payment shall be divided into successive periods of not more than three (3) months as selected by the Bank each of which(other than the first, which shall start on such due date) shall start on the last day of the preceding such period. The rate of interest applicable toeach such period shall be the aggregate (as determined by the Bank) of (a) two per cent (2%) per annum, (b) the Margin, (c) LIBOR and(d) Mandatory Costs (if any) for such periods. Such interest shall be due and payable on demand, or, if no demand is made, then on the last day ofeach such period as determined by the Bank and on the day on which all amounts in respect of which interest is being paid under this Clause arepaid, and each such day shall, for the purposes of this Agreement, be treated as an Interest Payment Date, provided that if such unpaid sum is anamount of principal which became due and payable, by reason of a declaration by the Bank under clause 10.2 or a prepayment pursuant toclauses 4.2, 4.3, 4.5, 8.2 or 12.1, on a date other than an Interest Payment Date relating thereto, the first such period selected by the Bank shall beof a duration equal to the period between the due date of such principal sum and such Interest Payment Date and interest shall be payable onsuch principal sum during such period at a rate of two per cent (2%) above the rate applicable thereto immediately before it shall have become sodue and payable. If, for the reasons specified in clause 3.6.1, the Bank is unable to determine a rate in accordance with the provisions of thisclause 3.4, interest on any sum not paid on its due date for payment shall be calculated at a rate determined by the Bank to be two per cent (2%)per annum above the aggregate of the Margin and the cost of funds to the Bank compounded at such intervals as the Bank selects. 3.5Notification of Interest Periods and interest rateThe Bank agrees to notify the Borrowers promptly of the duration of each Interest Period and of each rate of interest determined by it under thisclause 3. 3.6Market disruption; non-availability 3.6.1Whenever, at any time prior to the commencement of any Interest Period, the Bank determines: (a)that adequate and fair means do not exist for determining LIBOR during such Interest Period; or (b)that deposits in USD are not available to the Bank in the London Interbank Market in its ordinary course of business in sufficient amounts tofund the Loan for such Interest Period;the Bank shall promptly give notice (a “Determination Notice”) thereof to the Borrowers. A Determination Notice shall contain particulars ofthe relevant circumstances giving rise to its issue. After the giving of any Determination Notice, regardless of any other provision of thisAgreement, any undrawn amount of the Commitment may not be borrowed until notice to the contrary is given to the Borrowers by the Bank; 3.6.2within ten (10) days of any Determination Notice being given by the Bank under clause 3.6.1, the Bank must certify an alternative basis (the“Substitute Basis”) for maintaining its Commitment or the Loan (as the case may be). The Substitute Basis may at the Bank’s sole 21 discretion include (without limitation) alternative interest periods, alternative currencies or alternative rates of interest but shall include a marginabove the cost of funds to the Bank. The Substitute Basis so certified shall be binding upon the Borrowers, and shall take effect in accordancewith its terms from the date specified in the Determination Notice until such time as the Bank notifies the Borrowers that none of thecircumstances specified in clause 3.6.1 continues to exist whereupon the normal interest rate fixing provisions of this Agreement shall againapply and, subject to the other provisions of this Agreement, the Commitment may again be borrowed, Provided that the Banks shall try toensure that any loss suffered by the Borrower as a result of the circumstances referred to above are kept to a minimum. If the Borrowers do notagree with any Substitute Basis certified by the Bank and if there is no agreement between the parties, then the Borrowers may prepay the Loanor the relevant part thereof, and the terms of clause 4.5 and 4.6 shall apply to any such prepayment. 4REPAYMENT AND PREPAYMENT 4.1Repayment 4.1.1Subject as otherwise provided in this Agreement, the Borrowers must repay the Loan by (i) four (4) equal quarterly instalments of USD650,000each, one such instalment to be repaid on each Repayment Date and (ii) a balloon instalment of USD24,050,000 (the “Balloon Instalment”) tobe repaid on the final Repayment Date. 4.1.2The Borrowers shall on the Maturity Date also pay to the Bank all other amounts in respect of interest or otherwise then due and payable underthis Agreement and the Security Documents. 4.2Voluntary prepaymentThe Borrowers may prepay the Loan in whole or part (being USD500,000 or any larger sum which is a whole multiple of USD500,000) on anyInterest Payment Date relating to the part of the Loan to be repaid without premium or penalty. 4.3Mandatory Prepayment on Total Loss/sale of Mortgaged Vessel 4.3.1If a Mortgaged Vessel is sold or becomes a Total Loss, the Borrowers shall, on the Relevant Date, prepay the Loan by an amount equal to thegreater of (i) such amount of the Loan as would need to be prepaid to ensure that if the Security Value were determined as a percentage of theLoan immediately after such prepayment was made it would be no less than such percentage as determined immediately before such prepaymentwas made and (ii) such amount of the Loan as would need to be prepaid to ensure that after such prepayment there could be no security shortfallunder clause 8.2. 4.3.2If the last Mortgaged Vessel is sold or becomes a Total Loss, the Borrowers shall, on the Relevant Date, prepay the Loan in full. 4.3.3In this clause 4.3, “Relevant Date” means: (a)in the case of a sale of a Mortgaged Vessel, the earlier of (i) the date on which the sale is completed by delivery of that Vessel to the buyer and(ii) the date on which the sale proceeds are paid in freely available funds to the relevant Borrower; and (b)in the case of a Total Loss of a Mortgaged Vessel, the earlier of (i) the date falling 120 days after that on which that Vessel became a Total Lossand (ii) the date upon which the relevant 22 insurance proceeds are, or Requisition Compensation (as defined in the Mortgage or the Deed of Covenant (as the case may be) for such Vessel)is, received by the relevant Borrower (or the Bank pursuant to the Security Documents). 4.4InterpretationFor the purpose of this Agreement, a Total Loss shall be deemed to have occurred: (a)in the case of an actual total loss of a Vessel, on the actual date and at the time such Vessel was lost or, if such date is not known, on the date onwhich such Vessel was last reported; (b)in the case of a constructive total loss of a Vessel, upon the date and at the time notice of abandonment of the ship is given to the then insurers ofsuch Vessel (provided a claim for total loss is admitted by such insurers) or, if such insurers do not immediately admit such a claim, at the dateand at the time at which either a total loss is subsequently admitted by such insurers or a total loss is subsequently adjudged by a competentcourt of law or arbitration tribunal to have occurred; (c)in the case of a compromised or arranged total loss of a Vessel, on the date upon which a binding agreement as to such compromised or arrangedtotal loss has been entered into by the then insurers of such Vessel; (d)in the case of Compulsory Acquisition, on the last day of the Relevant Period relating thereto (as defined in the definition of “CompulsoryAcquisition”); and (e)in the case of hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation of a Vessel (other than within the definition ofCompulsory Acquisition) by any Government Entity, or by persons allegedly acting or purporting to act on behalf of any Government Entity,which deprives an Owner of the use of such Vessel for more than ninety (90) days, upon the expiry of the Relevant Period where “RelevantPeriod” means, for the purposes of this clause 4.4(e), either (i) the period of ninety (90) days after the date upon which the relevant incidentoccurred or, (ii) if relevant underwriters confirm in writing (in customary terms) prior to the end of such ninety (90) day period that such capture,seizure, detention or confiscation will be covered by the relevant Owner’s war risks insurance if continuing for a further period exceeding ten(10) calendar months, the shorter of twelve (12) months and such period at the end of which cover is confirmed to attach. 4.5Mandatory prepayment on Change of Control/illegality 4.5.1The Borrowers must prepay the Loan in full: (a)upon the occurrence of the circumstances referred to in clause 12.1 and then, in accordance with that clause; and (b)within 60 Banking Days of the occurrence of a Change of Control Event. 4.6Amounts payable on prepaymentAny prepayment of all or part of the Loan under this Agreement shall be made together with: 4.6.1accrued interest on the amount of the Loan to the date of such prepayment; 4.6.2any additional amount payable under clauses 3.6, 6.6 or 12.2; and 234.6.3all other sums payable by the Borrowers to the Bank under this Agreement or any of the other Security Documents including, without limitation,any accrued commitment commission payable under clause 5.1 and any Break Costs. 4.7Notice of prepayment; reduction of repayment instalments 4.7.1No prepayment may be effected under clause 4.2 unless the Borrowers shall have given the Bank at least five (5) days’ prior written notice oftheir intention to make such prepayment. Every notice of prepayment shall be effective only on actual receipt by the Bank, shall be irrevocable,shall specify the amount to be prepaid and shall oblige the Borrowers to make such prepayment on the date specified. 4.7.2Any amounts prepaid pursuant to clause 4.2 and 4.3 shall be applied against the Loan in reducing the repayment instalments thereof (includingthe Balloon Instalment) pro rata. 4.7.3The Borrowers may not prepay any part of the Loan except as expressly provided in this Agreement. 4.7.4No amount repaid or prepaid may be re-borrowed. 5FEES AND EXPENSESCommission 5.1.1The Borrowers agree to pay to the Bank quarterly in arrears from the Execution Date until the end of the Drawdown Period and on the last day ofthe Drawdown Period, commitment commission computed from 20 January 2017 at a rate of two per cent. (2%) per annum on the daily amount ofthe Commitment. 5.1.2The commission referred to in clause 5.1.1 must be paid by the Borrowers to the Bank, whether or not any part of the total Commitment is everadvanced and shall be non-refundable. 5.2FeeThe Borrower shall pay to the Bank on the Drawdown Date a non-refundable arrangement fee in an amount equal to 1.25% of the amount of theLoan Facility. 5.3ExpensesThe Borrowers agree to reimburse the Bank on a full indemnity basis within ten (10) days of demand all expenses and/or disbursementswhatsoever (including without limitation legal, printing, travel and out of pocket expenses and expenses related to the provision of legal andinsurance opinions referred to in schedule 2) certified by the Bank as having been incurred by it from time to time: 5.3.1in connection howsoever with the negotiation, preparation, execution and, where relevant, registration of the Security Documents and of anycontemplated or actual amendment, indulgence or the granting of any waiver or consent howsoever in connection with any of the SecurityDocuments (including legal fees and any travel expenses); and 5.3.2in contemplation or furtherance of, or otherwise howsoever in connection with, the exercise or enforcement of, or preservation of any rights,powers, remedies or discretion under any of the 24 Security Documents or any amendment thereto or consideration of the Bank’s rights thereunder or any action proposed or taken following theoccurrence of a Default or otherwise in respect of the moneys owing under any of the Security Documents,together with interest at the rate referred to in clause 3.4 from the date on which reimbursement of such expenses and/or disbursements wereincurred to the date of payment (as well after as before judgment). 5.4Value Added TaxAll fees and expenses payable under to this clause 5 must be paid with value added tax or any similar tax (if any) properly chargeable thereon.Any value added tax chargeable in respect of any services supplied by the Bank under this Agreement must, on delivery of the value added taxinvoice, be paid in addition to any sum agreed to be paid hereunder. 5.5Stamp and other dutiesThe Borrowers must pay all stamp, documentary, registration or other like duties or taxes (including any duties or taxes payable by the Bank butexcluding any FACTA Deduction) imposed on or in connection with any of the Underlying Documents, the Security Documents or the Loan andagree to indemnify the Bank against any liability arising by reason of any delay or omission by either Borrower to pay such duties or taxes. 6PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS 6.1No set-off or counterclaimAll payments to be made by the Borrowers under any of the Security Documents must be made in full, without any set-off or counterclaimwhatsoever and, subject to clause 6.6, free and clear of any deductions or withholdings, to such account at the Bank or to such other account atsuch other bank in such place as the Bank may from time to time notify to the Borrowers. 6.2Payment by the BankThe proceeds of the Loan to be advanced by the Bank to the Borrowers under this Agreement must be remitted in USD on the Drawdown Date tothe account or accounts specified in the Drawdown Notice. 6.3Non-Banking DaysWhen any payment under any of the Security Documents would otherwise be due on a day which is not a Banking Day, the due date for paymentshall be extended to the next following Banking Day unless such Banking Day falls in the next calendar month in which case payment shall bemade on the immediately preceding Banking Day. 6.4CalculationsAll interest and other payments of an annual nature under any of the Security Documents shall accrue from day to day and be calculated on thebasis of actual days elapsed and a 360 day year. 256.5Currency of accountIf any sum due from the Borrowers under any of the Security Documents, or under any order or judgment given or made in relation thereto or forany other reason whatsoever, must be converted from the currency (“the first currency”) in which the same is payable thereunder into anothercurrency (“the second currency”) for the purpose of (i) making or filing a claim or proof against the Borrowers, (ii) obtaining an order orjudgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation thereto, the Borrowers undertake toindemnify and hold harmless the Bank from and against any loss suffered as a result of any discrepancy between (a) the rate of exchange used forsuch purpose to covert the sum in question from the first currency into the second currency and (b) the rate or rates of exchange at which theBank may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction,in whole or in part, of any such order, judgment, claim or proof. Any amount due from the Borrowers under this clause 6.5 shall be due as aseparate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of any of the Security Documentsand the term “rate of exchange” includes any premium and costs of exchange payable in connection with the purchase of the first currency withthe second currency. 6.6Grossing-up for TaxesIf at any time the Borrowers must make any deduction or withholding in respect of Taxes from any payment due under any of the SecurityDocuments, the sum due from the Borrowers in respect of such payment must then be increased to the extent necessary to ensure that, after themaking of such deduction or withholding, the Bank receives on the due date for such payment (and retains, free from any liability in respect ofsuch deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been made andthe Borrowers agree to indemnify the Bank on demand against any losses or costs certified by the Bank to have been incurred by it by reason ofany failure of the Borrowers to make any such deduction or withholding or by reason of any increased payment not being made on the due datefor such payment. The Borrowers must promptly deliver to the Bank any receipts, certificates or other proof evidencing the amounts (if any) paidor payable in respect of any deduction or withholding as aforesaid. 6.7Loan accountThe Bank agrees to maintain a control account showing the Loan and other sums owing by the Borrowers under the Security Documents and allpayments in respect thereof being made from time to time. The control account shall, in the absence of manifest error, be conclusive as to theamount from time to time owing by the Borrowers under the Security Documents. 6.8Bank may assume receiptWhere any sum is to be paid under the Security Documents to the Bank, the Bank may assume that the payment will be made when due and theBank may (but shall not be obliged to) make such sum available to the person so entitled. If it proves to be the case that such payment was notmade to the Bank, then the person to whom such sum was so made available must on request refund such sum to the Bank together with interestthereon sufficient to compensate the Bank for the cost of making available such sum up to the date of such repayment and the person by whomsuch sum was payable must indemnify the Bank for any and all loss or expense which the Bank may sustain or incur as a consequence of suchsum not having been paid on its due date. 266.9Partial paymentsIf, on any date on which a payment is due to be made by the Borrowers under any of the Security Documents, the amount received by the Bankfrom the Borrowers falls short of the total amount of the payment due to be made by the Borrowers on such date then, without prejudice to anyrights or remedies available to the Bank under any of the Security Documents, the Bank must apply the amount actually received from theBorrowers in or towards discharge of the obligations of the Borrowers under the Security Documents in the following order, notwithstanding anyappropriation made, or purported to be made, by the Borrowers: 6.9.1first, in or towards payment, on a pro-rata basis, of any unpaid costs and expenses of the Bank under any of the Security Documents; 6.9.2secondly, in or towards payment of any fees payable to the Bank under, or in relation to, the Security Documents which remain unpaid; 6.9.3thirdly, in or towards payment to the Bank of any accrued interest owing in respect of the Loan which shall have become due under any of theSecurity Documents but remains unpaid; 6.9.4fourthly, in or towards payment to the Bank of any principal in respect of the Loan which shall have become due but remains unpaid; 6.9.5fifthly, in or towards payment to the Bank for any loss suffered by reason of any such payment in respect of principal not being effected on anInterest Payment Date relating to the part of the Loan repaid and which amounts are so payable under this Agreement; and 6.9.6sixthly, in or towards payment to the relevant person of any other sum which shall have become due under any of the Security Documents butremains unpaid (and, if more than one such sum so remains unpaid, on a pro rata basis).The order of application set out in clauses 6.9.1 to 6.9.6 may be varied by the Bank without any reference to, or consent or approval from, theBorrowers. 6.10FATCA 6.10.1FACTA Information (a)Subject to sub-clause (c) below, each Party shall, within ten (10) Banking Days of a reasonable request by another Party: (i)confirm to that other party whether it is: (A)a FATCA Exempt Party; or (B)not a FATCA Exempt Party; and (ii)supply to that other party such forms, documentation and other information relating to its status under FATCA (including its applicablepassthru percentage or other information required under the Treasury Regulations or other official guidance including intergovernmentalagreements) as that other party reasonably requests for the purposes of that other party’s compliance with FATCA (iii)supply to the requesting party such forms, documentation and other information relating to its status as the requesting party reasonablyrequests for the purposes of the requesting party’s compliance with any other law, regulation, or exchange of information regime. 27(b)If a Party confirms to another party pursuant to paragraph (a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it isnot, or has ceased to be a FATCA Exempt Party, that party shall notify that other party reasonably promptly. (c)Paragraph (a) above shall not oblige the Bank to do anything, and paragraph (a)(iii) above shall not oblige any other Party to do anything, whichwould or might in its reasonable opinion constitute a breach of: (i)any law or regulation; (ii)any policy of the Bank; (iii)any fiduciary duty; or (iv)any duty of confidentiality. (d)If a Party fails to confirm whether or not it is a FACTA Exempt Party or to supply forms, documentation or other information requested inaccordance with paragraph (a) (i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such party shallbe treated for the purposes of the Security Documents (and payments under them) as if it is not a FATCA Exempt Part until such time as the Partyin question provides the requested confirmation, forms, documentation or other information 6.10.2Gross-up in the event of a FATCA Deduction – Borrowers (a)If a Borrower is required to make a FATCA Deduction, that Borrower shall make that FATCA Deduction and any payment required in connectionwith that FATCA Deduction within the time allowed and in the minimum amount required by FATCA; (b)If a FATCA Deduction is required to be made by a Borrower, the amount of the payment due from that Borrower shall be increased to an amountwhich (after making any FATCA Deduction) leaves an amount equal to the payment which would have been due if no FATCA Deduction hadbeen required; (c)Each Borrower shall promptly upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis ofa FATCA Deduction) notify the Bank accordingly; and (d)Within thirty days of making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the relevantBorrower shall deliver to the Bank evidence satisfactory to the Bank that the FATCA Deduction has been made or (as applicable) anyappropriate payment paid to the relevant governmental or taxation authority. 7REPRESENTATIONS AND WARRANTIES 7.1Continuing representations and warrantiesEach Borrowers represents and warrants to the Bank that: 7.1.1Due incorporation 28each of the Security Parties is duly incorporated or formed, as the case may be, and validly existing in good standing, under the laws of itsrespective country of incorporation or formation, in each case, as a corporation, as the case may be, and has power to carry on its respectivebusinesses as it is now being conducted and to own their respective property and other assets to which it has unencumbered legal and beneficialtitle except as disclosed to the Bank in writing; 7.1.2Corporate powereach of the Security Parties has power to execute, deliver and perform its obligations and, as the case may be, to exercise its rights under theUnderlying Documents and the Security Documents to which it is a party; all necessary corporate, shareholder and other action has been taken toauthorise the execution, delivery and on the execution of the Security Documents performance of the same and no limitation on the powers ofthe Borrowers to borrow or any other Security Party to howsoever incur liability and/or to provide or grant security will be exceeded as a result ofborrowing any part of the Loan; 7.1.3Binding obligationsthe Underlying Documents and the Security Documents, when executed, will constitute valid and legally binding obligations of the relevantSecurity Parties enforceable in accordance with their respective terms and the Mortgages, the Deed of Covenant, the General Assignments, theCharter Assignments, the Shares Pledges and the Account Security will create first priority Encumbrances; 7.1.4No conflict with other obligationsthe execution and delivery of, the performance of their obligations under, and compliance with the provisions of, the Underlying Documents andthe Security Documents by the relevant Security Parties will not (i) contravene any existing applicable law, statute, rule or regulation or anyjudgment, decree or permit to which any Security Party or other member of the Group is subject, (ii) conflict with, or result in any breach of anyof the terms of, or constitute a default under, any agreement or other instrument to which any Security Party or any other member of the Group isa party or is subject or by which it or any of its property is bound, (iii) contravene or conflict with any provision of the constitutional documentsof any Security Party or (iv) result in the creation or imposition of, or oblige any of the Security Parties to create, any Encumbrance (other than aPermitted Encumbrance) on any of the undertakings, assets, rights or revenues of any of the Security Parties; 7.1.5No default (a)no Default has occurred and is continuing or is reasonably likely to result from the advance of the Loan or the entry into, the performanceof, or any transaction contemplated by, any of the Security Documents; and (b)no other event or circumstance is outstanding which constitutes a default or termination event (howsoever described) under any otheragreement or instrument which is binding on any of the Security Parties or to which its assets are subject which has a Material AdverseEffect; 297.1.6No litigation or judgmentsno Proceedings are current, pending or, to the knowledge of the officers of either Borrower, threatened against any of the Security Parties or anyother Group Members or their assets which could have a Material Adverse Effect and there exist no judgments, orders, injunctions which wouldmaterially affect the obligations of the Security Parties under the Security Documents; 7.1.7No filings requiredexcept for the registration of the Mortgages in the relevant register under the laws of the relevant Flag State through the relevant Registry, it isnot necessary to ensure the legality, validity, enforceability or admissibility in evidence of any of the Underlying Documents or any of theSecurity Documents that they or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewherein any Pertinent Jurisdiction or that any stamp, registration or similar tax or charge be paid in any Pertinent Jurisdiction on or in relation to anyof the Underlying Documents or the Security Documents and each of the Underlying Documents and the Security Documents is in proper formfor its enforcement in the courts of each Pertinent Jurisdiction; 7.1.8Required Authorisations and legal complianceall Required Authorisations have been obtained or effected and are in full force and effect and no Security Party has in any way contravened anyapplicable law, statute, rule or regulation (including all such as relate to money laundering); 7.1.9Choice of lawthe choice of English law to govern the Underlying Documents and the Security Documents (other than the Mortgages and the AccountSecurity), the choice of the law of the relevant Flag State to govern the Mortgages, the choice of Dutch law to govern the Account Security andthe submission by the Security Parties to the jurisdiction of the English courts and the obligations of such Security Parties associated therewith,are valid and binding; 7.1.10No immunityno Security Party nor any of their assets is entitled to immunity on the grounds of sovereignty or otherwise from any Proceedings whatsoever; 7.1.11Financial statements correct and completethe latest audited and unaudited consolidated financial statements of the Group in respect of the relevant financial year as delivered to the Bankpresent or will present fairly and accurately the financial position of the Corporate Guarantor and the consolidated financial position of theGroup as at the date thereof and the results of the operations of the Corporate Guarantor and the consolidated results of the operations of theGroup for the financial year ended on such date and, as at such date, neither the Corporate Guarantor nor any of its Subsidiaries had anysignificant liabilities (contingent or otherwise) or any unrealised or anticipated losses which are not disclosed by, or reserved against or providedfor in, such financial statements; 7.1.12Pari passuthe obligations of the Borrowers under this Agreement are direct, general and unconditional obligations of the Borrowers and rank at least paripassu with all other present and future unsecured and unsubordinated Indebtedness of the Borrowers except for obligations which aremandatorily preferred by operation of law and not by contract; 307.1.13Information / Material Adverse Effectall information, whatsoever provided by any Security Party to the Bank in connection with the negotiation and preparation of the SecurityDocuments or otherwise provided hereafter in relation to, or pursuant to this Agreement is, or will be, true and accurate in all material respectsand not misleading, does or will not omit material facts and all reasonable enquiries have been, or shall have been, made to verify the facts andstatements contained therein and there has not occurred any event which could have a Material Adverse Effect on any Security Party since suchinformation was provided to the Bank; there are, or will be, no other facts the omission of which would make any fact or statement thereinmisleading; 7.1.14No withholding Taxesno Taxes anywhere are imposed whatsoever by withholding or otherwise on any payment to be made by any Security Party under the UnderlyingDocuments or the Security Documents to which such Security Party is or is to be a party or are imposed on or by virtue of the execution ordelivery by the Security Parties of the Underlying Documents or the Security Documents or any other document or instrument to be executed ordelivered under any of the Security Documents; 7.1.15Use of proceedsthe Borrowers shall apply the Loan only for the purposes specified in clause 1.1; 7.1.16No Encumbrance/no Borrowed MoneyNone of the assets of either Borrower is subject to any Encumbrance (save for permitted Encumbrances), and no Borrower has any obligations inrespect of Borrowed Money other than under the Security Documents; 7.1.17The Mortgaged Vesselsthroughout the Facility Period, each Mortgaged Vessel will be: (i)in the absolute sole, legal and beneficial ownership of the relevant Owner; (ii)registered through the offices of the relevant Registry as a ship under the laws and flag of the relevant Flag State; (iii)in compliance with the ISM Code and the ISPS Code and operationally seaworthy and in every way fit for service; (iv)in good and sea-worthy and cargo-worthy condition; (v)classed with the relevant Classification free of all requirements and recommendations of the relevant Classification Society which havenot been complied with in accordance with their terms (save as agreed by the Bank in writing); (vi)insured in accordance with the Mortgage or Deed of Covenant (as the case may be); and 31 (vii)managed by the Manager in accordance with the terms of the relevant Management Agreement. 7.1.18Sharing of Earningsexcept with the prior written consent of the Bank, there will not be any agreement or arrangement whereby the Earnings (as defined in therelevant Ship Security Documents) of either Mortgaged Vessel may be shared or pooled howsoever with any other person except for customaryprofit sharing arrangements under a charterparty (it being understood that any arrangement under which a Borrower receives a share of incomereceived by a charterer of its Vessel is not subject to this Clause); 7.1.19Freedom from Encumbrancesneither Mortgaged Vessel nor its Earnings, Insurances or Requisition Compensation (each as defined in the relevant Ship Security Documents)nor the Accounts nor any Extended Employment Contract in respect of the Mortgaged Vessel nor any other properties or rights which are, or areto be, the subject of any of the Security Documents nor any part thereof will be subject to any Encumbrance except Permitted Encumbrances andthe security created by the Security Documents will constitute perfected security on the assets described in the Security Documents; 7.1.20Environmental Mattersexcept as may already have been disclosed by the Borrowers in writing to, and acknowledged and accepted in writing by, the Bank: (a)the Borrowers and, to the best of the Borrowers’ knowledge and belief (having made due enquiry), their respective EnvironmentalAffiliates, have complied with the provisions of all Environmental Laws; (b)the Borrowers and, to the best of the Borrowers’ knowledge and belief (having made due enquiry), their respective EnvironmentalAffiliates have obtained all Environmental Approvals and are in compliance with all such Environmental Approvals; (c)no Environmental Claim has been made or threatened or pending against either Borrower, or, to the best of the Borrowers’ knowledgeand belief (having made due enquiry), any of their respective Environmental Affiliates; and (d)there has been no Environmental Incident; 7.1.21ISM and ISPS Codeeach of the Borrowers has complied with and continues to comply with and has procured that the Manager has complied with and continues tocomply with the ISM Code, the ISPS Code and all other statutory and other requirements relative to its business and in particular each Borroweror the Manager has obtained and maintains a valid DOC and SMC for each Mortgaged Vessels and that it and the Manager has implemented andcontinues to implement an ISM SMS; 327.1.22No adverse consequencesthe jurisdiction of incorporation of each Borrower will not in any way adversely affect the Bank or its rights under the Security Documents; 7.1.23Copies true and completethe Certified Copies of the constitutional documents of the Security Parties and the Certified Copies or originals of the Underlying Documentsdelivered or to be delivered to the Bank pursuant to clause 9.1 are, or will when delivered be, true and complete copies or, as the case may be,originals of such documents; and such documents constitute valid and binding obligations of the parties thereto enforceable in accordance withtheir respective terms and there have been no amendments or variations thereof or defaults thereunder; 7.1.24No breach of lawsto the best of its knowledge, no title in any property or other assets subject to an Encumbrance created by a Security Document has beenobtained in breach of any existing applicable law, statute, rule or regulation; 7.1.25Beneficiary of Loanthe Borrowers and other members of the Group are the ultimate beneficiaries of the Loan; 7.1.26Indebtednessno Security Party has incurred any Indebtedness save under this Agreement or as otherwise disclosed to the Bank or as disclosed in the Group’spublic filings; 7.1.27Filings/Tax complianceeach Borrower and the Corporate Guarantor has filed all tax and other fiscal returns required to be filed by any tax authority to which it issubject; 7.1.28No office in Englandneither Borrower has an office in England; 7.1.29Legal compliance.no Security Party has in any way contravened any applicable law, statute, rule or regulation (including, but not limited to, the Uniting andStrengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, the Foreign Corrupt PracticesAct of 1977 of the USA and all such as relate to money laundering, terrorism and/or bribery); 7.1.30Restricted Persons, unlawful activity (a)to the best of its knowledge, none of the shares in either Borrower, any Security Party or either Vessel are or will be at any time during theFacility Period legally and beneficially owned and controlled by a Restricted Person; (b)to the best of its knowledge, no Restricted Person has or will have at any time during the Facility Period any legal or beneficial interest of anynature whatsoever in any of the shares of any of the Security Parties; 337.1.31Anti-briberyto the best of its knowledge and belief, none of the improper or illegal acts referred to in clause 8.1.28 (Anti-bribery) have occurred prior to thedate of execution of this Agreement; 7.1.32Insolvencynone of the Security Parties is unable or has admitted inability to pay its debts as they fall due, has suspended making payments on any of itsdebts or has announced an intention to do so, is or has become insolvent; or has suffered the declaration of a moratorium in respect of any of itsIndebtedness; 7.1.33No businessneither Borrower has undertaken any business or employed any person or incurred any obligations in respect of any pension scheme, save inrespect of the Master, officers and crew of the Vessel owned by it; 7.1.34Money launderingin relation to the borrowing by the Borrowers of the Loan, the performance and discharge of their obligations and liabilities under thisAgreement or any of the Security Documents and the transactions and other arrangements effected or contemplated by this Agreement or any ofthe Security Documents to which either Borrower is a party, it is acting for its own account and that the foregoing will not involve or lead to acontravention of any law, official requirement or other regulatory measure or procedure which has been implemented to combat MoneyLaundering; 7.1.35Accounting reference dateeach Borrower’s and the Corporate Guarantor’s accounting reference date is 31 December; 7.1.36Managersthe Manager is fit and proper commercial and technical manager of the Vessels, with the sufficient and fully trained personnel, experience andability to perform its obligations in accordance with all applicable laws and regulations and in accordance with first class international shipmanagement practice; 7.1.37Sanctionsno Security Party nor other Group Member nor any director, officer, agent, employee of any Security Party or other Group Member or any personacting on behalf of any Security Party or other Group Member, is a Restricted Person nor acts directly or indirectly on behalf of a RestrictedPerson; 7.1.38FATCAnone of the Security Parties is a FATCA FFI or a US Tax Obligor; and 7.1.39Address commissionthere are no rebates, commissions or other payments in connection with any Underlying Document other than those referred to in it; 347.1.40Disclosure of material factsno Borrower is aware of any material facts or circumstances which have not been disclosed to the Bank and which might, if disclosed, haveadversely affected the decision of a person considering whether or not to make loan facilities of the nature contemplated by this Agreementavailable to the Borrowers; 7.1.41Anti-corruption lawseach Security Party has conducted its business in compliance with applicable anti-corruption laws and has instituted and maintained policiesand procedures designed to promote and achieve compliance with such laws; 7.1.42Sharesthe shares of each Borrower are fully paid and not subject to any option to purchase or similar rights. The constitutional documents of eachBorrower do not and could not restrict or inhibit any transfer of those shares on creation or enforcement of the Security Documents. There are noagreements in force which provide for the issue or allotment of, or grant any person the right to call for the issue or allotment of, any share or loancapital of each Borrower (including any option or right of pre-emption or conversion); 7.1.43Legal and beneficial ownershipeach Security Party is the sole legal and beneficial owner of the respective assets over which it purports to grant an Encumbrance under theSecurity Documents; 7.1.44Vessel’s employmentEach Vessel shall on the first day of the Facility Period be free of any other charter commitment which, if entered into after that date, wouldrequire approval under the Security Documents; and 7.1.45Taxation (a)no Borrower is materially overdue in the filing of any tax returns nor overdue in the payment of any amount in respect of tax; (b)no claims or investigations are being, or are reasonably likely to be, made or conducted against either Borrower with respect to taxes such that aliability of, or claim against, it is reasonably likely to arise for an amount for which is reasonably likely to have a Material Adverse Effect; (c)each Borrower is resident for tax purposes only in the jurisdiction of its incorporation. 7.2Repetition of representations and warrantiesOn each day throughout the Facility Period the Borrowers shall be deemed to repeat the representations and warranties in clause 7 updatedmutatis mutandis as if made with reference to the facts and circumstances existing on such day. 358UNDERTAKINGS 8.1GeneralEach Borrower undertakes with the Bank that, from the Execution Date until the end of the Facility Period, it will: 8.1.1Notice of Default and Proceedingspromptly inform the Bank (a) of any Default and of any other circumstances or occurrence which might adversely affect the ability of anySecurity Party to perform its obligations under any of the Security Documents and (b) as soon as the same is instituted or threatened, of details ofany Proceedings involving any Security Party which could have a material adverse effect on that Security Party and/or the operation of either ofthe Vessels (including, but not limited to any Total Loss of a Vessel or the occurrence of any Environmental Incident) and will from time to time,if so requested by the Bank, confirm to the Bank in writing that, save as otherwise stated in such confirmation, no Default has occurred and iscontinuing and no such Proceedings are on foot or threatened and (c) if it knows that any of the financial covenants referred to in clause 8.1.17will not be complied with; 8.1.2Authorisationobtain or cause to be obtained, maintain in full force and effect and comply fully with all Required Authorisations, provide the Bank withCertified Copies of the same and do, or cause to be done, all other acts and things which may from time to time be necessary or desirable underany applicable law (whether or not in the Pertinent Jurisdiction) for the continued due performance of all the obligations of the Security Partiesunder each of the Security Documents; 8.1.3Corporate Existence / Ownershipensure that each Security Party maintains its existence as a body corporate duly organised and validly existing and in good standing under thelaws of the Pertinent Jurisdiction and ensure that each Borrower is owned, directly or through other companies, by the Corporate Guarantor; 8.1.4Use of proceedsuse the Loan exclusively for the purposes specified in clause 1.1; 8.1.5Pari passuensure that its obligations under this Agreement shall at all times rank at least pari passu with all its other present and future unsecured andunsubordinated Indebtedness with the exception of any obligations which are mandatorily preferred by law and not by contract; 8.1.6Provision of financial statementssend to the Bank (or procure that is sent): (a)as soon as possible, but in no event later than 120 days after the end of each of its financial years, annual audited (prepared in accordance withUS GAAP by a firm of accountants acceptable to the Bank) consolidated accounts of the Group (commencing with the financial year ending31 December 2016); 36(b)as soon as possible, but in no event later than 90 days after the end of each of its financial quarters, the Group’s unaudited management-preparedconsolidated balance sheets, cash flow statements and profit and loss accounts for (i) that 3 month period and (ii) the whole of the then currentfinancial year up to the end of that 3 month period, certified as to their correctness by the chief financial officer of the Corporate Guarantor; 8.1.7Compliance Certificatesdeliver to the Bank on (i) the date on which the annual audited accounts are delivered under clause 8.1.6(a) and (ii) on the date on which thequarterly reports are delivered under clause 8.1.6(b), a Compliance Certificate (which shall amongst other things set out computations as tocompliance with clause 8.1.17 (Financial Covenants)), together with such supporting information as the Bank may require, duly signed by anauthorised person on behalf of the Corporate Guarantor; 8.1.8Provision of further information (a)provide the Bank, and procure that the Corporate Guarantor provides the Bank, with such financial or other information concerning theBorrowers, the other Group Members and their respective affairs, activities, financial standing, Indebtedness and operations and the performanceof the Mortgaged Vessels and any other ship owned by any Group Member as the Bank may from time to time reasonably require and, withoutthe need for any request therefor provide to the Bank (unless disclosed in the Group’s public filings) information of any significant nature inrespect of a Borrower and/or any other Group Member including, but not limited to, details of any loans borrowed or repaid by any of them, thepurchase or sale of any substantial assets (including ships) by any of them and/or the restructuring of any loan of which any of them is aborrower; and (b)promptly upon becoming aware of them, the details of any inquiry, claim, action, suit, proceeding or investigation pursuant to Sanctions by anySanctions Authority against a Security Party, any of the direct or indirect owners of a Security Party, any Affiliate of a Security Party, any of theirjoint ventures or any of their respective directors, officers, employees, agents or representatives, as well as information on what steps are beingtaken with regards to answer or oppose the same; 8.1.9Reimbursement of MII & MAP Policy premiumswhether or not any amount is borrowed under this Agreement, reimburse the Bank on the Bank’s written demand the amount of the premiumpayable by the Bank for the inception or, as the case may be, extension and/or continuance of the MII & MAP Policy (including any insurancetax thereon); 8.1.10Obligations under Security Documentsduly and punctually perform each of the obligations expressed to be imposed or assumed by them under the Security Documents and UnderlyingDocuments and will procure that each of the other Security Parties will, duly and punctually perform each of the obligations expressed to beassumed by it under the Security Documents and the Underlying Documents to which it is a party; 378.1.11Compliance with ISM Codecomply with, and will procure that any Operator will comply with, and ensure that the Mortgaged Vessels and any Operator comply with therequirements of the ISM Code, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout theSecurity Period (as defined in the Mortgage or the Deed of Covenant (as the case may be)); 8.1.12Withdrawal of DOC and SMCimmediately inform the Bank if there is any actual withdrawal of their or any Operator’s DOC or the SMC of either Mortgaged Vessel; 8.1.13Issuance of DOC and SMCand will procure that any Operator will, promptly inform the Bank of the receipt by either Borrower or any Operator of notification that itsapplication for a DOC or any application for an SMC for any Mortgaged Vessel has been refused; 8.1.14ISPS Code Complianceand will procure that the Manager or any Operator will: (a)maintain at all times a valid and current ISSC in respect of each Mortgaged Vessel; (b)immediately notify the Bank in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC in respect ofa Mortgaged Vessel; and (c)procure that each Mortgaged Vessel will comply at all times with the ISPS Code; 8.1.15Compliance with Laws and payment of taxes (a)comply with, and will ensure that the Manager, the Corporate Guarantor and the Vessels comply with, all relevant Environmental Laws, laws,statutes and regulations and pay all taxes for which it is liable as they fall due and has or have at all times all trading certificates necessary tocarry out the trade in which the Vessel is engaged at any relevant time; and (b)comply, and will use best endeavours to procure that each Security Party and each other Group Member will, comply in all respect with allSanctions; 8.1.16Charters etc.(i) deliver to the Bank a Certified Copy of each Extended Employment Contract upon its execution, (ii) forthwith on the Bank’s request execute(a) a Charter Assignment in respect thereof and (b) any notice of assignment required in connection therewith and use reasonable efforts toprocure the acknowledgement of any such notice of assignment by the relevant charterer (provided that any failure to procure the same shall notconstitute an Event of Default) and (iii) pay all legal and other costs incurred by the Bank in connection with any such Charter Assignments,forthwith following the Bank’s demand; 8.1.17Financial Covenantsprocure that: (a)at no time shall the Liquidity of the Group be less than USD40,000,000; 38(b)the Net Worth of the Group shall at all times be equal to or more than USD125,000,000; (c)the Total Liabilities divided by the Total Assets (adjusted for market values of vessels calculated (a) in respect of VLCCs over which there is amortgage securing the Notes, in accordance with Clause 8.2.2 but taking into account the benefit or burden of any charterparty or otherengagement concerning those VLCCs and (b) in respect of all other vessels, in accordance with Clause 8.2.2) shall be at all times less than 75%;and (d)there is standing to the credit of each Earnings Account at all times throughout the Facility Period at least USD250,000; 8.1.18Indebtednessnot incur any Indebtedness other than (i) in the ordinary course of trading the Vessel of which it is the owner or (ii) with the prior written consentof the Bank; 8.1.19Tradingnot permit either Vessel to trade in any area prohibited by the government of the Flag State; 8.1.20Inspectionpermit the Bank, at the cost of the Borrowers and upon receipt of at least 15 days written notice, by surveyors or other persons appointed by it forsuch purpose, to board any Mortgaged Vessel (i) while no Event of Default has occurred or is continuing, no more than once per calendar yearduring the Facility Period and (ii) following the occurrence of an Event of Default which is continuing, unremedied and unwaived, at any time,provided in each case that the Bank shall use reasonable endeavours to ensure that such inspections or surveys shall not interfere with theoperation of each Vessel for the purpose of inspecting or surveying her and to afford all proper facilities for such inspections or survey and forthis purpose to give the Bank reasonable advance notice of any intended drydocking of each Vessel (whether for the purpose of classification,survey or otherwise) and to pay the costs in respect of each such inspection or survey; 8.1.21Class/managementensure that each Vessel maintains its Classification without any overdue recommendation (save as agreed by the Bank in writing) and that eachVessel is managed by the Manager at all relevant times; 8.1.22Subordination (a)procure that all claims of any Subordinated Creditor or (save for claims arising out of or incurred in the ordinary course of business) any othercreditor against either Borrower are fully subordinated by such Subordinated Creditor or creditor to the rights of the Bank under the SecurityDocuments on terms of a Subordination Deed; and (b)forthwith on the Bank’s request, procure that such Subordinated Creditor shall execute Subordinated Debt Security in favour of the Bank. 398.1.23Classification Society undertakingif so requested by the Bank, on or before the Drawdown Date, or immediately on any change of Classification Society for either Vessel,irrevocably instruct (in such form as the Bank may require in its sole discretion) the Classification Society of each Vessel to do all or any of thefollowing during the Facility Period (and use reasonable endeavours to procure that the Classification Society undertakes with the Bank at suchtime): (a)to send to the Bank, following receipt of a written request from the Bank, certified true copies of all original class records held by theClassification Society in relation to that Vessel; (b)to allow the Bank (or its agents), at any time and from time to time, to inspect the original class and related records of the relevant Ownerand that Vessel at the offices of the Classification Society and to take copies of them; (c)to notify the Bank immediately if the Classification Society: (i)receives notification from the relevant Owner or any person that that Vessel’s Classification Society is to be changed; (ii)becomes aware of any facts or matters which may result in or have resulted in a change, suspension, discontinuance, withdrawal orexpiry of that Vessel’s class under the rules or terms and conditions of that Owner’s or that Vessel’s membership of theclassification society; or (iii)has imposed any requirements or recommendations in respect of the Vessel which have not been complied with in accordance withtheir terms; (d)following receipt of a written request from the Bank: (i)to confirm that the relevant Owner is not in default of any of its contractual obligations or liabilities to the classification societyand, without limiting the foregoing, that it has paid in full all fees or other charges due and payable to the classification society; or (ii)if that Owner is in default of any of its contractual obligations or liabilities to the classification society, to specify to the Bank inreasonable detail the facts and circumstances of such default, the consequences thereof, and any remedy period agreed or allowedby the classification society; 8.1.24“Know your customer”promptly on the Bank’s request supply to it any documentation or other evidence that is reasonably required by the Bank (whether for itself oron behalf of any person to whom the Bank may, or may intend to, transfer any of its rights or obligations under this Agreement) to enable theBank: (a)to carry out and be satisfied it has complied with all necessary “know your customer” requirements that the Bank is obliged to carry outunder all applicable laws and regulations pursuant to or applicable to the transactions contemplated in this Agreement; and 40 (b)to comply with its obligations under all applicable laws and regulations to prevent money laundering and corruption and to conductongoing monitoring of the business relationship with the Security Parties.The Borrowers will promptly notify the Bank of any changes in any information supplied by any of them relating to any matter referredto in clause 8.1.24(a) or clause 8.1.24(b), such as: (i)a change in any Security Party’s board of directors. (ii)a change in the legal or beneficial ownership of 30% or more of the Corporate Guarantor’s issued share capital, as well asinformation about a natural person acquiring a legal or beneficial interest in 30% or more of the Corporate Guarantor’s issued sharecapital (iii)a change in the nature of any Security Party’s business from that which it carries on at the date of this Agreement, as well asinformation about any Security Party starting or ceasing to carry on business in a country apart from Greece; and (iv)a change in the any Security Party’s corporate objectives; 8.1.25Class recordsarrange for the Bank to have access electronically to the class records of either Vessel by either (i) arranging for the relevant ClassificationSociety to give the Bank direct access to such class records or (ii) designating the Bank as a user or administrator of the Borrowers’ electronicaccounts with the relevant Classification Society; 8.1.26Insurance opinionprovide the Bank on request, at the Borrowers’ cost, with an opinion from insurance consultants on the insurances effected or to be effected inrespect of each Vessel, confirming that each Vessel is insured on terms approved by the Bank or, if such insurance opinion has been obtained bythe Bank, shall reimburse the Bank for the cost of such opinion; 8.1.27Sanctions (a)not be, and shall procure that each other Group Member and each Affiliate of any of them and any director, officer, agent, employee orperson acting on behalf of the foregoing is not, a Restricted Person and does not act directly or indirectly on behalf of a RestrictedPerson; (b)not, and shall procure that no other Group Member or any Affiliate of any of them shall, use any revenue or benefit derived from anyactivity or dealing with a Restricted Person in discharging any obligation due or owing to the Bank; (c)procure that no proceeds from any activity or dealing with a Restricted Person are credited to any bank account held with the Bank in itsname or in the name of any other member of the Group or any Affiliate of any of them; (d)and shall procure that each other Group Member and any Affiliate of any of them will, to the extent permitted by law, promptly uponbecoming aware of them, supply to the Bank details of any claim, action, suit, proceedings or investigation against it with respect toSanctions by any Sanctions Authority; 41 (e)not, and shall procure that no other member of the Group or any Affiliate of any of them will, directly or indirectly, make available anyproceeds of the Loan to fund or facilitate trade, business or other activities (i) involving or for the benefit of any Restricted Person or(ii) in any other manner that could result in either Borrower or the Bank being in breach of any Sanctions or becoming a RestrictedPerson, or permit or authorise any other person to do either of (i) or (ii) above; 8.1.28Anti-briberythe Borrowers shall ensure that neither they nor any of their respective Affiliates, officers, directors, employees or agents acting on its behalf willoffer, give, insist on, receive or solicit any illegal payment or improper advantage to influence the action of any person in connection with any ofits business; 8.1.29Delivery of reportsat all times following the occurrence of an event of Default or otherwise on the Banks’ request, deliver to the Bank, and procure that theCorporate Guarantor shall deliver to the Bank, concurrently with the issue thereof as many Certified Copies as the Bank may reasonably requireof every report, circular, notice or like document issued by any Security Party to its shareholders or creditors generally; 8.1.30Vessel informationprovide the Bank promptly on request with all such information as it may from time to time require in relation to each Vessel, her Insurances (asdefined in, and in accordance with the requirements of, the Ship Security Documents), her employment, position and engagements, particulars ofall towages and salvages, and copies of all charters and other contracts for her employment, or otherwise howsoever concerning her, as well ascopies of all original class records held by the Classification Society in relation to each Vessel, all reports of port state control inspections ofeach Vessel and information on the financial and operating performance of each Vessel in such form as the Bank may approve or require and allsuch information as it may from time to time require to determine the Valuation Amount of each Vessel in accordance with clause 8.2.2 8.1.31Insolvencyprocure that none of the Corporate Guarantor or any other material creditor of either Borrower presents a petition or gives notice which couldresult in either Borrower being declared insolvent or being dissolved or in the appointment of an administrator of either Borrower or have aneffect equivalent or similar thereto; 8.1.32Transactions with associated companiesnot enter into any transactions with any Group Member, other than on arm’s length terms; 8.1.33Technical reportsdeliver to the Bank, and shall procure that the Manager shall deliver to the Bank, on request copies of the latest complete technical reports inrespect of each Vessel; 428.1.34Money Laundering (i)provide the Bank with information, certificates and any documents required by the Bank to ensure compliance with any law, officialrequirement or other regulatory measure or procedure implemented to combat Money Laundering; and (ii)notify the Bank as soon as it becomes aware of any matters evidencing that a breach of any law, official requirement or other regulatorymeasure or procedure implemented to combat Money Laundering may or is about to occur or that the person(s) who have or will receivethe commercial benefit of this Agreement have changed after the date of this Agreement; 8.1.35Further assuranceprocure that: (a)each Security Party shall promptly do all such acts or execute and (as appropriate) deliver all such documents (including assignments, transfers,mortgages, charges, notices and instructions) as the Bank may reasonably specify (and in such form as the Bank may reasonably require): (i)to perfect the Encumbrance created or intended to be created by that Security Party under or evidenced by the Security Documents(which may include the execution of a mortgage, charge, assignment or other security over all or any of the assets which are, or areintended to be, the subject of the Security Documents) or for the exercise of any rights, powers and remedies of the Bank provided by orpursuant to the Security Documents or by law; (ii)to confer on the Bank Encumbrance over any property and assets of that Security Party located in any jurisdiction equivalent or similarto the Encumbrance intended to be conferred by or pursuant to the Security Documents; and/or (iii)to facilitate the realisation of the assets which are, or are intended to be, the subject of the Security Documents. (b)each Security Party shall take all such action as is available to it (including making all filings and registrations) as may be necessary for thepurpose of the creation, perfection, protection or maintenance of any Encumbrance conferred or intended to be conferred on the Bank by orpursuant to the Security Documents; 8.1.36Loansprocure that the Corporate Guarantor will not make or maintain any loan or grant any credit to any member of the Navios Group or associatedcompany of any of them except, subject to there having occurred no breach of clause 8.1.17 and no such breach being thereby caused, in anaggregate amount of USD150,000,000 during the Facility Period; 8.1.37Share capital and distributionprocure that the Corporate Guarantor shall not declare or pay any dividends or distribute any of its present or future assets, undertakings, rightsor revenues to any of its partners, members or shareholders, as the case may be, except the Corporate Guarantor may pay dividends or make anydistributions to its partners, members or shareholders, as the case may be, only (i) if there has not occurred any Event of Default and (ii) no Eventof Default would occur as a result of such payment or distribution. 438.2Security value maintenance 8.2.1Security shortfallIf, at any time after the Drawdown Date the Security Value shall be less than the Required Security Amount, the Bank shall give notice to theBorrowers requiring that such deficiency be remedied and then the Borrowers must either: (a)prepay within a period of fifteen (15) Banking Days of the date of receipt by the Borrower of the Bank’s said notice such part of the Loan as willresult in the Security Value after such prepayment (taking into account any other repayment of the Loan made between the date of the notice andthe date of such prepayment) being equal to or higher than the Required Security Amount; or (b)within thirty (30) days of the date of receipt by the Borrower of the Bank’s said notice either constitute to the satisfaction of the Bank suchfurther security for the Loan as shall be acceptable to the Bank in its discretion having a value for security purposes at the date upon which suchfurther security shall be constituted which, when added to the Security Value, shall not be less than the Required Security Amount as at suchdate.The provisions of clauses 4.6 and 4.7 shall apply to prepayments under clause 8.2.1 provided that the Bank shall apply such prepayments inreduction of the repayment instalments under clause 4.1 pro rata and the amounts of the Loan prepaid hereunder shall not be available to bere-borrowed. 8.2.2Valuation of Mortgaged Vesselseach Vessel shall, for the purposes of this Agreement, be valued in USD by taking a valuation prepared by an Approved Broker appointed by theBorrowers, each such valuation to be made without physical inspection, and on the basis of a sale for prompt delivery for cash at arms’ length, onnormal commercial terms, as between a willing buyer and a willing seller, without taking into account the benefit or burden of any charterpartyor other engagement concerning the Vessels and if an Approved Broker gives a range of values, then the arithmetic mean of such values shall beused for the purposes of this clause,Provided that for the purpose of determining the Valuation Amounts of the Vessels prior to the Drawdown Date (as referred to in Schedule 2 PartB (j) (Valuation), each Vessel shall, for the purposes of this Agreement, be valued in USD by taking the arithmetic mean of valuations preparedby two Approved Brokers appointed by the Borrowers, each such valuation to be made without physical inspection, and on the basis of a sale forprompt delivery for cash at arms’ length, on normal commercial terms, as between a willing buyer and a willing seller, without taking intoaccount the benefit or burden of any charterparty or other engagement concerning the Vessels and if an Approved Broker gives a range of values,then the arithmetic mean of such values shall be used for the purposes of this clause, provided that if such two valuations vary by more than 10%then the Bank shall appoint a third Approved Broker to provide a valuation and the Valuation Amount shall be the average of such threevaluationsValuations shall be obtained and received by the Bank: (a)prior to (but dated no more than 30 days prior to) the Drawdown Date; 44 (b)at quarterly intervals (on each date on which the Borrowers are required pursuant to Clause 8.1.7 to deliver a Compliance Certificate tothe Bank); and (c)(in addition to (a) and (b) above) at any other time as the Bank shall require (in its absolute discretion).The Approved Brokers’ valuations for each Vessel on each such occasion shall constitute the Valuation Amount of that Vessel for the purposesof this Agreement until superseded by the next such valuation. 8.2.3InformationThe Borrowers undertake with the Bank to supply to the Bank and to the Approved Broker such information concerning the relevant MortgagedVessel and its condition as such shipbrokers may require for the purpose of determining any Valuation Amount. 8.2.4CostsAll costs in connection with the obtaining and any determining of any Valuation Amount pursuant to clause 8.2.2 must be paid by theBorrowers. 8.2.5Valuation of additional securityFor the purposes of this clause 8.2, the market value of any additional security over a ship (other than the Vessels) shall be determined inaccordance with clause 8.2.2 and if the additional security is in the form of cash it shall be (i) in USD and (ii) its face value. 8.3Negative undertakingsThe Borrowers jointly and severally undertake with the Bank that, from the Execution Date until the end of the Facility Period, they will not,without the prior written consent of the Bank: 8.3.1Negative pledgepermit any Encumbrance (other than a Permitted Encumbrance) to subsist, arise or be created or extended over all or any part of their respectivepresent or future undertakings, assets, rights or revenues to secure or prefer any present or future Indebtedness or other liability or obligation ofeither Borrower or any other person; 8.3.2No merger or transfermerge or consolidate with any other person or permit any change to the legal or beneficial ownership of their shares from that existing at theExecution Date; 8.3.3Disposalssell, transfer, assign, create security or option over, pledge, pool, abandon, lend or otherwise dispose of or cease to exercise direct control overany part of their present or future undertaking, assets, rights or revenues (otherwise than by transfers, sales or disposals for full consideration inthe ordinary course of trading) whether by one or a series of transactions 45related or not, which could have a material (in the reasonable opinion of the Bank) adverse effect on the ability of the Borrowers to perform theirobligations under the Security Documents to which they are a party; 8.3.4Other business or managerundertake any business other than the ownership and operation of the Vessels or employ anyone other than the Manager as commercial andtechnical manager of the Vessels; 8.3.5Acquisitions and investments (a)acquire any further assets other than the Vessels and rights arising under contracts entered into by or on behalf of the Borrowers in the ordinarycourse of their businesses of owning, operating and chartering the Vessels; (b)enter into, invest in or acquire (or agree to acquire) any shares, stocks, securities or other interest in any Joint Venture; or (c)transfer any assets or lend to or guarantee or give an indemnity for or give security for the obligations of a Joint Venture or maintain the solvencyof or provide working capital to any Joint Venture (or agree to do any of the foregoing); 8.3.6No borrowingand shall procure that the Corporate Guarantor will not, incur any Indebtedness unless, in the case of the Corporate Guarantor, incurring suchIndebtedness would not lead to a breach of the undertakings in clause 8.1.17, in which case the Corporate Guarantor may incur suchIndebtedness; 8.3.7Repayment of borrowingsrepay or prepay the principal of, or pay interest on or any other sum in connection with any of its Borrowed Money except for Borrowed Moneypursuant to the Security Documents or as otherwise disclosed in writing by the Borrowers to the Bank on or prior to the date of this Agreement; 8.3.8Guaranteesissue any guarantees or otherwise become directly or contingently liable, or give security or quasi security for the obligations of any person,firm, or corporation except pursuant to the Security Documents and except for (i) guarantees from time to time required in the ordinary course ofbusiness and/or by any protection and indemnity or war risks association with which a Vessel is entered, guarantees required to procure therelease of a Vessel from any arrest, detention, attachment or levy or guarantees required for the salvage of a Vessel and (ii) such other guaranteesto which the Bank shall have consented in writing; 8.3.9Loansmake any loans or grant any credit (save for normal trade credit in the ordinary course of business) to any person or agree to do so; 468.3.10Suretiespermit any Indebtedness of either Borrower to any person (other than the Bank pursuant to the Security Documents) to be guaranteed by anyperson (except for guarantees from time to time required in the ordinary course of business and in the ordinary course by any protection andindemnity or war risks association with which a Vessel is entered, guarantees required to procure the release of such Vessel from any arrest,detention, attachment or levy or guarantees or undertakings required for the salvage of a Vessel); 8.3.11Subsidiaries/sharesform or acquire any Subsidiaries or issue any new shares; 8.3.12Change of name, Manager, flag or classchange the name, Manager, flag, Classification or Classification Society of either Vessel; 8.3.13Charters (a)without the prior written consent of the Bank and then, if such consent is given, only subject to such conditions as the Bank may impose, let oragree to let a Vessel: (i)on demise charter for any period; or (ii)by any time or consecutive voyage charter for a term which exceeds or which by virtue of any optional extensions therein contained mayexceed eleven (11) months’ duration; or (iii)on terms whereby more than two (2) months’ hire (or the equivalent) is payable in advance; or (iv)below a fair and reasonable arm’s length rate obtainable at the time when the relevant Vessel is fixed 8.3.14Nuclear wastepermit either Vessel to carry nuclear waste or radioactive material; 8.3.15Underlying Documentsmake any material change to, or terminate any, Underlying Documents or waive or fail to enforce any breach by any party thereunder; 8.3.16Restricted Personshave, and shall use reasonable endeavours to procure that no Group Member will have, any course of dealings, directly or indirectly, with anyRestricted Person; 8.3.17Change in constitutional documentsamend or vary its constitutional documents; 8.3.18Employeesemploy any person except the Master, officers and crew of the Vessel owned by it; 478.3.19Civil merchant tradingpermit either Vessel to be used other than as a civil merchant trading vessel; 8.3.20Investmentsmake any investment of any kind or acquire any asset other than the Vessel owned by it without the prior written consent of the Bank; or 8.3.21FATCAbecome a FATCA FFI or a US Tax Obligor and shall procure that no Security Party shall do so. 9CONDITIONS 9.1Documents and evidenceThe Bank’s obligation to make available the Loan is subject to the following conditions precedent: 9.1.1that, on or before the service of the Drawdown Notice hereunder, the Bank has received the documents described in Part A of Schedule 2 in formand substance satisfactory to the Bank and its lawyers; 9.1.2that, on or before drawdown of the Loan the Bank has received the documents described in Part B of Schedule 2 in respect of each Vessel in formand substance satisfactory to the Bank and its lawyers; and 9.1.3no Default having occurred and being continuing and there being no Default which would result from the making of the Loan. 9.2Waiver of conditions precedentThe conditions specified in this clause 9 are inserted solely for the benefit of the Bank and may be waived by the Bank in whole or in part andwith or without conditions. 9.3Further conditions precedentNot later than five (5) Banking Days prior to the Drawdown Date and not later than five (5) Banking Days prior to each Interest Payment Date,the Bank may reasonably request and the Borrowers must, not later than two (2) Banking Days prior to such date, deliver to the Bank (at theBorrowers’ expense) on such request further favourable certificates and/or opinions as to any or all of the matters which are the subject of clauses7, 8, 9 and 10. 9.4Conditions subsequentThe Borrowers undertake to deliver or to cause to be delivered to the Bank on or as soon as practicable after the Drawdown Date the additionaldocuments and other evidence listed in Part C of Schedule 2. 489.5English languageAll documents required to be delivered under and/or supplied in connection with any of the Security Documents must either be in the Englishlanguage or accompanied by an English translation certified by a notary, lawyer or consulate acceptable to the Bank. 10EVENTS OF DEFAULT 10.1EventsEach of the following events shall constitute an Event of Default (whether such event shall occur voluntarily or involuntarily or by operation oflaw or regulation or in connection with any judgment, decree or order of any court or other authority or otherwise, howsoever): 10.1.1Non-payment: any Security Party fails to pay any sum payable by it under any of the Security Documents at the time, in the currency and in themanner stipulated in the Security Documents or the Underlying Documents (and so that, for this purpose, sums payable (i) under clauses 3.1 and4.1 shall be treated as having been paid at the stipulated time if (aa) received by the Bank within two (2) days of the dates therein referred to and(bb) such delay in receipt is caused by administrative or other delays or errors within the banking system and (ii) on demand shall be treated ashaving been paid at the stipulated time if paid within two (2) Banking Days of demand); or 10.1.2Breach of Insurance and certain other obligations: either Owner or, as the context may require, the Manager or any other person fails to obtainand/or maintain the Insurances (as defined in, and in accordance with the requirements of, the Ship Security Documents) for any of theMortgaged Vessels or if any insurer in respect of such Insurances cancels the Insurances or disclaims liability by reason, in either case, of mis-statement in any proposal for the Insurances or for any other failure or default on the part of the Borrower or any other person or the Borrower orany other person commits any breach of or omits to observe any of the obligations or undertakings expressed to be assumed by them underclause 8, or a breach occurs of clause 7.1.37; or 10.1.3Breach of other obligations: any Security Party commits any breach of or omits to observe any of its obligations or undertakings expressed tobe assumed by it under any of the Security Documents (other than those referred to in clauses 10.1.1 and 10.1.2 above and clause 10.1.30(Sanctions) below) unless such breach or omission, in the opinion of the Bank is capable of remedy, in which case the same shall constitute anEvent of Default if it has not been remedied within ten (10) days of the occurrence thereof; or 10.1.4Misrepresentation: any representation or warranty made or deemed to be made or repeated by or in respect of any Security Party in or pursuantto any of the Security Documents or in any notice, certificate or statement referred to in or delivered under any of the Security Documents is orproves to have been incorrect or misleading in any material respect; or 10.1.5Cross-default: any Indebtedness of either Borrower in an amount exceeding one million Dollars (USD1,000,000) or any Indebtedness of theCorporate Guarantor and/or any of its Subsidiaries in an amount exceeding ten million Dollars (USD10,000,000) is not paid when due (subject toapplicable grace periods) or any Indebtedness of such person becomes (whether by declaration or automatically in accordance with the relevantagreement or instrument constituting the same) due and payable prior to the date when it would otherwise have become due (unless as a result ofthe exercise by the relevant person of a voluntary right of prepayment or as a result of the sale or Total Loss of a ship pursuant to the terms of anyrelevant loan agreement), or any creditor of either Borrower and/or the Corporate Guarantor 49 and/or any of its Subsidiaries becomes entitled to declare any such Indebtedness due and payable or any facility or commitment available to anySecurity Party relating to Indebtedness is withdrawn, suspended or cancelled by reason of any default (however described) of the personconcerned; or 10.1.6Execution: any uninsured judgment or order made against any Security Party (other than the Manager) is not stayed, appealed against orcomplied with within fifteen (15) days or a creditor attaches or takes possession of, or a distress, execution, sequestration or other process islevied or enforced upon or sued out against, any of the undertakings, assets, rights or revenues of any Security Party (other than the Manager)and is not discharged within thirty (30) days; or 10.1.7Insolvency: any Security Party (other than the Manager) is unable or admits inability to pay its debts as they fall due; suspends makingpayments on any of its debts or announces an intention to do so; becomes insolvent; or suffers the declaration by any court, liquidator, receiveror administrator of a moratorium in respect of any of its Indebtedness; or 10.1.8Reduction or loss of capital: a meeting is convened by any Security Party (other than the Manager) without the Bank’s prior written consent, forthe purpose of passing any resolution to purchase, reduce or redeem any of its share capital without the Bank’s prior written consent; or 10.1.9Dissolution: any corporate action, Proceedings or other steps are taken to dissolve or wind-up any Security Party (other than the Manager) or anorder is made or resolution passed for the dissolution or winding up of any Security Party (other than the Manager) or a notice is issuedconvening a meeting for such purpose; or 10.1.10Administration: any petition is presented, notice given or other steps are taken anywhere to appoint an administrator of any Security Party(other than the Manager) or the Bank believes that any such petition or other step is imminent or an administration order is made in relation toany Security Party (other than the Manager); or 10.1.11Appointment of receivers and managers: any administrative or other receiver is appointed anywhere of any Security Party (other than theManager) or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets ofany Security Part(other than the Manager) y; or 10.1.12Compositions: any corporate action, legal proceedings or other procedures or steps are taken by any Security Party (other than the Manager) orby any of its creditors with a view to the general readjustment or rescheduling of all or a substantial part of its Indebtedness; or 10.1.13Analogous proceedings: there occurs, in relation to any Security Party (other than the Manager), in any country or territory in which any of themcarries on business or to the jurisdiction of whose courts any part of their assets is subject, any event which, in the reasonable opinion of theBank, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in clauses 10.1.6to 10.1.12 (inclusive) or any Security Party (other than the Manager) otherwise becomes subject, in any such country or territory, to the operationof any law relating to insolvency, bankruptcy or liquidation; or 5010.1.14Cessation of business: any Security Party (other than the Manager) suspends or ceases or threatens to suspend or cease to carry on its businesswithout the prior written consent of the Bank, such consent not to be unreasonably withheld; or 10.1.15Seizure: all or a material part of the undertaking, assets, rights or revenues of, or shares or other ownership interests in, any Security Party (otherthan the Manager) are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any Government Entity; or 10.1.16Invalidity: any of the Security Documents and the Underlying Documents shall at any time and for any reason become invalid or unenforceableor otherwise cease to remain in full force and effect, or if the validity or enforceability of any of the Security Documents and the UnderlyingDocuments shall at any time and for any reason be contested by any Security Party which is a party thereto, or if any such Security Party shalldeny that it has any, or any further, liability thereunder; or 10.1.17Unlawfulness: any Unlawfulness occurs or it becomes impossible or unlawful at any time for any Security Party, to fulfil any of the covenantsand obligations expressed to be assumed by it in any of the Security Documents or for the Bank to exercise the rights or any of them vested in itunder any of the Security Documents or otherwise; or 10.1.18Repudiation: any Security Party repudiates any of the Security Documents or does or causes or permits to be done any act or thing evidencing anintention to repudiate any of the Security Documents; or 10.1.19Encumbrances enforceable: any Encumbrance (other than Permitted Liens) in respect of any of the property (or part thereof) which is thesubject of any of the Security Documents becomes enforceable; or 10.1.20Arrest: a Mortgaged Vessel is arrested, confiscated, seized, taken in execution, impounded, forfeited, detained in exercise or purported exerciseof any possessory lien or other claim or otherwise taken from the possession of its Owner and that Owner shall fail to procure the release of suchMortgaged Vessel within a period of fifteen (15) Banking Days thereafter (this clause does not include capture of a Vessel by pirates for up to 12months (but does apply if such capture exceeds 12 months) if relevant underwriters confirm in writing (in customary terms) within ninety(90) day of capture, that such capture will be covered by the relevant Borrower’s war risks insurance); or 10.1.21Registration: the registration of a Mortgaged Vessel under the laws and flag of the relevant Flag State is cancelled or terminated without theprior written consent of the Bank; or 10.1.22Unrest: the Flag State of a Vessel or the country in which any Security Party is incorporated or domiciled becomes involved in hostilities or civilwar or there is a seizure of power in the Flag State by unconstitutional means unless the Owner of the Vessel registered in such Flag State shallhave transferred its Vessel onto a new flag acceptable to the Banks within sixty (60) days of the start of such hostilities or civil war or seizure ofpower; or 10.1.23Environmental Incidents: an Environmental Incident occurs which gives rise, or may give rise, to an Environmental Claim which could, in theopinion of the Bank be expected to have a material adverse effect (i) on the business, assets or financial condition of any Security Party or theGroup taken as a whole or (ii) on the security constituted by any of the Security Documents or the enforceability of that security in accordancewith its terms; or 5110.1.24P&I: an Owner or the Manager or any other person fails or omits to comply with any requirements of the protection and indemnity association orother insurer with which a Mortgaged Vessel is entered for insurance or insured against protection and indemnity risks (including oil pollutionrisks) to the effect that any cover (including, without limitation, any cover in respect of liability for Environmental Claims arising injurisdictions where such Mortgaged Vessel operates or trades) is or may be liable to cancellation, qualification or exclusion at any time; or 10.1.25Material events: any other event occurs or circumstance arises which, in the opinion of the Bank, is likely materially and adversely to affecteither (i) the ability of any Security Party to perform all or any of its obligations under or otherwise to comply with the terms of any of theSecurity Documents or (ii) the security created by any of the Security Documents; or 10.1.26Required Authorisations: any Required Authorisation is revoked or withheld or modified or is otherwise not granted or fails to remain in fullforce and effect or if any exchange control or other law or regulation shall exist which would make any transaction under the SecurityDocuments or the continuation thereof, unlawful or would prevent the performance by any Security Party of any term of any of the SecurityDocuments; 10.1.27Ownership/management: there is any change in the direct or indirect ownership of either Borrower or either Vessel or change of Manager ofeither Vessel without the prior written consent of the Bank; 10.1.28Money Laundering: any Security Party is in breach of or fails to observe any law, requirement, measure or procedure implemented to combat“money laundering” as defined in Article 1 of the Directive 2005/60/EC of the European Parliament and of the Council of the European Union; 10.1.29Material adverse change: there occurs a material adverse change in the financial prospects of the Borrowers or the Corporate Guarantor which,in the reasonable opinion of the Bank could prejudice the ability of the Borrowers and/or the Corporate Guarantor to fulfil their respectiveobligations under the Security Documents either on time or at all; 10.1.30Sanctions: a Security Party fails to comply with clause 7.1.37 (Sanctions) or clause 8.1.27 (Sanctions) of this Agreement. 10.2AccelerationThe Bank may, without prejudice to any other rights of the Bank, at any time after the happening of an Event of Default so long as the same iscontinuing: 10.2.1by notice to the Borrowers declare that: (i)the obligation of the Bank to make the Commitment available shall be terminated, whereupon the Commitment shall immediately becancelled; and/or (ii)the Loan and all interest and commitment commission accrued and all other sums payable whensoever under the Security Documentshave become due and payable, whereupon the same shall, immediately or in otherwise accordance with the terms of such notice, becomedue and payable; 10.2.2exercise any or all of its rights, remedies, powers or discretions under the Security Documents. 5210.3Demand basisIf, under clause 10.2.2, the Bank has declared the Loan to be due and payable on demand, at any time thereafter the Bank may by further noticeto the Borrowers demand repayment of the Loan on such date as may be specified whereupon the Loan shall become due and payableaccordingly with all interest and commitment commission accrued and all other sums payable under this Agreement. 11INDEMNITIES 11.1General indemnityEach Borrower agrees to indemnify the Bank on demand, without prejudice to any of the Bank’s other rights under any of the SecurityDocuments, against any loss (including loss of Margin) or expense (including, without limitation, any Break Costs) which the Bank shall certifyas sustained at any time by it in connection with this Agreement or Sanctions (unless such loss is caused by the Bank’s gross negligence or wilfulmisconduct. 11.2Environmental indemnityThe Borrowers shall indemnify the Bank on demand and hold it harmless from and against all costs, claims, expenses, payments, charges, losses,demands, liabilities, actions, Proceedings, penalties, fines, damages, judgements, orders, sanctions or other outgoings of whatever nature whichmay be incurred or made or asserted whensoever against the Bank at any time, whether before or after the repayment in full of principal andinterest under this Agreement, arising howsoever out of an Environmental Claim made or asserted against the Bank which would not have been,or been capable of being, made or asserted against the Bank had it not entered into any of the Security Documents or been involved in any of theresulting or associated transactions. 11.3Capital adequacy and reserve requirements indemnityThe Borrowers shall promptly indemnify the Bank on demand against any cost incurred or loss suffered by the Bank as a result of its complyingwith (i) the minimum reserve requirements from time to time of the European Central Bank (ii) any capital adequacy directive of the EuropeanUnion and/or (iii) any revised framework for international convergence of capital measurements and capital standards and/or any regulationimposed by any Government Entity in connection therewith, and/or in connection with maintaining required reserves with a relevant nationalcentral bank to the extent that such compliance or maintenance relates to the Commitment or deposits obtained by it to fund the whole or partthereof and to the extent such cost or loss is not recoverable by the Bank under clause 11.2. 12UNLAWFULNESS AND INCREASED COSTS MITIGATION 12.1UnlawfulnessRegardless of any other provision of this Agreement, in the event that the Bank notifies the Borrowers that by reason of: (a)the introduction of or any change in any applicable law or regulation or any change in the interpretation or application thereof; or 53 (b)compliance by the Bank with any directive, request or requirement (whether or not having the force of law) of any central bank orGovernment Entityit becomes unlawful or it is prohibited by or contrary to such directive request or requirement for the Bank to maintain or give effect to any of itsobligations in connection howsoever with this Agreement then (i) the Commitment shall be reduced to zero and (ii) the Borrowers shall beobliged to prepay the Loan either immediately or on a future date (specified in the Bank’s notice) not being earlier than the latest date permittedby the relevant law, regulation, directive, request or requirement with interest and commitment commission accrued to the date of prepaymentand all other sums payable whensoever by the Borrowers under this Agreement. 12.2Increased costsIf the Bank certifies to the Borrowers that at any time the effect of any applicable law, regulation or regulatory requirements or the interpretationor application thereof or compliance therewith or any change therein (including any change designed to strengthen any capital standards orintroduce minimum liquidity or other requirements referenced in any regulations and including the imposition upon whomsoever of Taxes onpayments hereunder or otherwise howsoever in connection with this Agreement other than taxes on the overall net income of the Bank) or theeffect of complying with any applicable directive, request or requirement (whether or not having the force of law) of any central bank orGovernment Entity (including any kind of liquidity, stock or capital adequacy controls or other banking or monetary controls or requirementswhich affect the manner in which the Bank or its holding company allocates capital resources to the Bank’s obligations hereunder) is to: 12.2.1subject the Bank to Taxes or change the basis of Taxation of the Bank relating to any payment under any of the Security Documents (other thanTaxes or Taxation on the overall net income of the Bank imposed in the jurisdiction in which its principal or lending office under thisAgreement is located); and/or 12.2.2increase the cost to, or impose an additional cost on, the Bank or its holding company in making or keeping the Commitment available ormaintaining or funding all or part of the Loan; and/or 12.2.3reduce the amount payable or the effective return to the Bank under any of the Security Documents; and/or 12.2.4reduce the Bank’s or its holding company’s rate of return on its overall capital by reason of a change in the manner in which it is required toallocate capital resources to the Bank’s obligations under any of the Security Documents; and/or 12.2.5require the Bank or its holding company to make a payment or forgo a return on or calculated by reference to any amount received or receivableby the Bank under any of the Security Documents; and/or 12.2.6require the Bank or its holding company to incur or sustain a loss (including a loss of future potential profits) by reason of being obliged todeduct all or part of the Commitment or the Loan from its capital for regulatory purposes, 54then and in each such case (subject to clause 12.3) the Borrowers must on demand either: (a)pay to the Bank the amount which the Bank certifies (in a certificate setting forth the basis of the computation of such amount but not includingany matters which the Bank or its holding company regards as confidential) is required to compensate the Bank and/or (as the case may be) itsholding company for such liability to Taxes, cost, reduction, payment, forgone return or loss; or (b)prepay the Loan, in respect of which prepayment the terms of clause 4.6 shall apply.For the purposes of this clause 12.2 and clause 12.4 “holding company” means the company or entity (if any) within the consolidatedsupervision of which the Bank is included. 12.3ExceptionNothing in clause 12.2 shall entitle the Bank to receive any amount relating to compensation for any such liability to Taxes, increased oradditional cost, reduction, payment, foregone return or loss to the extent that the same is the subject of an additional payment under clause 6.6. 13SECURITY, SET-OFF AND MISCELLANEOUS 13.1Application of moneysAll moneys received by the Bank under or pursuant to any of the Security Documents and expressed to be applicable in accordance with theprovisions of this clause 13.1 shall be applied by the Bank as follows, or in such other order as the Bank may require in its absolute discretion: 13.1.1first in or toward payment of all unpaid fees, commissions, sums which have been demanded by way of indemnity and expenses which may beowing to the Bank under any of the Security Documents; 13.1.2secondly in or towards payment of any arrears of interest owing in respect of the Loan or any part thereof; 13.1.3thirdly in or towards repayment of the Loan (whether the same is due and payable or not); 13.1.4fourthly in or towards payment to the Bank for any loss which the Bank certifies it has suffered by reason of any such payment in respect ofprincipal not being effected on an Interest Payment Date relating to the part of the Loan repaid; 13.1.5fifthly in or towards payment to the Bank of any other sums which the Bank certifies are owing to it under any of the Security Documents; and 13.1.6sixthly the surplus (if any) shall be paid to the Borrowers or to whomsoever else may appear to the Bank to be entitled to receive such surplus.The order of application set out in clauses 13.1.1 to 13.1.6 may be varied by the Bank without any reference to, or consent or approval from, theBorrowers upon the occurrence of an Event of Default. 5513.2Set-off 13.2.1Each Borrower authorises the Bank (without prejudice to any of the Bank’s rights at law, in equity or otherwise), at any time and without noticeto the Borrowers, to apply any credit balance to which either Borrower is then entitled standing upon any account of the Borrowers or either ofthem with any branch of the Bank in or towards satisfaction of any sum due and payable from the Borrowers to the Bank under any of theSecurity Documents. For this purpose, the Bank is authorised to purchase with the moneys standing to the credit of such account such othercurrencies as may be necessary to effect such application. 13.2.2The Bank shall not be obliged to exercise any right given to it by this clause 13.2. The Bank shall notify the Borrowers prior to or upon theexercise or purported exercise of any right of set-off. 13.2.3Nothing in this clause 13.2 shall be effective to create a charge or other security interest. 13.3Further assuranceThe Borrowers undertake with the Bank to ensure that, throughout the Facility Period, the Security Documents shall be valid and bindingobligations of the respective parties thereto and rights of the Bank enforceable in accordance with their respective terms and that they will, attheir expense, execute, sign, perfect and do, and will procure the execution, signing, perfecting and doing by each of the other Security Partiesof, any and every such further assurance, document, act or thing as in the reasonable opinion of the Bank may be necessary or desirable forperfecting the security contemplated or constituted by the Security Documents. 13.4ConflictsIn the event of any conflict between this Agreement and any of the other Security Documents, the provisions of this Agreement shall prevail. 13.5No implied waivers, remedies cumulativeNo failure or delay on the part of the Bank to exercise any power, right or remedy under any of the Security Documents shall operate as a waiverthereof, nor shall any single or partial exercise by the Bank of any power, right or remedy preclude any other or further exercise thereof or theexercise of any other power, right or remedy. The remedies provided in the Security Documents are cumulative and are not exclusive of anyremedies provided by law. No waiver by the Bank shall be effective unless it is in writing. 13.6SeverabilityIf any provision of this Agreement is prohibited, invalid, illegal or unenforceable in any jurisdiction, such prohibition, invalidity, illegality orunenforceability shall not affect or impair howsoever the remaining provisions thereof or affect the validity, legality or enforceability of suchprovision in any other jurisdiction. 13.7Force MajeureRegardless of any other provision of this Agreement the Bank shall not be liable for any failure to perform the whole or any part of thisAgreement resulting directly or indirectly from (i) the action or inaction or purported action of any governmental or local authority (ii) anystrike, lockout, boycott or blockade (including any strike, lockout, boycott or blockade effected by or upon the Bank or any of itsrepresentatives or employees) (iii) any act of God 56(iv) any act of war (whether declared or not) or terrorism (v) any failure of any information technology or other operational systems or equipmentaffecting the Bank or (vi) any other circumstances whatsoever outside the Bank’s control. 13.8AmendmentsThis Agreement may be amended or varied only by an instrument in writing executed by both parties hereto who irrevocably agree that theprovisions of this clause 13.8 may not be waived or modified except by an instrument in writing to that effect signed by both of them. 13.9CounterpartsThis Agreement may be executed in any number of counterparts and all such counterparts taken together shall be deemed to constitute one andthe same agreement which may be sufficiently evidenced by one counterpart. 13.10English languageAll documents required to be delivered under and/or supplied whensoever in connection howsoever with any of the Security Documents and allnotices, communications, information and other written material whatsoever given or provided in connection howsoever therewith must eitherbe in the English language or accompanied by an English translation certified by a notary, lawyer or consulate acceptable to the Bank. 14ACCOUNTS 14.1GeneralEach Borrower undertakes with the Bank that it will ensure that: 14.1.1it will on or before the Drawdown Date, open an Earnings Account in its name and the Retention Account in the joint name of the Borrowers; 14.1.2there is standing to the credit of each Earnings Account not less than USD250,000 at all times throughout the Facility Period; and 14.1.3all moneys payable to either Borrower in respect of the Earnings (as defined in the relevant Mortgage or Deed of Covenant (as the case may be))of its Mortgaged Vessel shall, unless and until the Bank directs to the contrary pursuant to the provisions of the relevant Mortgage or Deed ofCovenant (as the case may be), be paid to its Earnings Account, Provided however that if any of the moneys paid to either Earnings Account arepayable in a currency other than USD, they shall be paid to a sub-account of that Earnings Account denominated in such currency (except that ifthe Borrowers fail to open such a sub-account, the Bank shall then convert such moneys into USD at the Bank’s spot rate of exchange at therelevant time for the purchase of USD with such currency and the term “spot rate of exchange” shall include any premium and costs of exchangepayable in connection with the purchase of USD with such currency). 14.2Accounts: Application and withdrawalsAny sums standing to the credit of the Earnings Accounts may be applied from time to time: 14.2.1firstly to make the payments required under this Agreement; 5714.2.2secondly in or towards making the transfers to the Retention Account required to be made pursuant to clause 14.3; 14.2.3thirdly, subject to no Event of Default having occurred, in the operation of the Vessels; and 14.2.4fourthly, subject to (i) there being at any time sufficient funds to pay amounts due under 14.2.1 to 14.2.3 above as they fall due, (ii) clause8.1.17(d) and clause 14.1.2 being complied with and (ii) no Event of Default having occurred, for the general corporate purposes of theBorrowers.At any time after the occurrence of an Event of Default, the Bank may, without notice to the Borrowers, apply all moneys then standing to thecredit of the Earnings (together with interest from time to time accruing or accrued thereon) in or towards satisfaction of any sums due to theBank under the Security Documents in the manner specified in clause 13.1. 14.3Monthly retentionsThe Borrowers undertake with the Bank that, throughout the Facility Period, commencing on the date falling one month after the DrawdownDate and on the same day in each subsequent month, there is transferred to the Retention Account out of the aggregate Earnings received in eachEarnings Account during the preceding calendar month: (a)one-third of the amount of the repayment instalment falling due under clause 4.1 on the next Repayment Date; and (b)the applicable fraction of the aggregate amount of interest which is payable on the next due date for payment of interest for the Loanunder this Agreement.The “relevant fraction” is a fraction of which the numerator is 1 and the denominator the number of months comprised in the then currentInterest Period (or, if the current Interest Period ends after the next date for payment of interest under this Agreement, the number of months fromthe later of the commencement of the current Interest Period or the last due date for payment of interest to the next date for payment of interestunder this Agreement). 14.4Shortfall in EarningsIf the aggregate Earnings received in the Earnings Accounts are insufficient in any month for the required amount to be transferred to theRetention Account under clause 14.3, the Borrowers shall on demand from the Bank make up the amount of the insufficiency by payment inDollars to the Retention Account; but, without thereby prejudicing the Bank’s right to make such demand at any time, the Bank may permit theBorrowers to make up all or part of the insufficiency by increasing the amount of any transfer under clause 14.3 from the Earnings received in thenext or the subsequent months. 14.5Location of AccountsThe Borrowers shall promptly : (a)comply with any requirement of the Bank as to the location or re location of the Accounts; and (b)execute any documents which the Bank specifies to create or maintain in favour of the Bank an Encumbrance over the Accounts. 5814.6Charging of accountsThe Accounts and all amounts from time to time standing to the credit thereof shall be subject to the security constituted and the rights conferredby the Account Security. 15ASSIGNMENT, TRANSFER AND LENDING OFFICE 15.1Benefit and burdenThis Agreement shall be binding upon, and enure for the benefit of, the Bank and the Borrowers and their respective successors in title. 15.2No assignment by BorrowersThe Borrowers may not assign or transfer any of their respective rights or obligations under this Agreement without the prior written consent ofthe Bank. 15.3Assignment by BankThe Bank may, without the consent of the Borrowers, assign all or any part of its rights under any of the Security Documents to any other bank orfinancial institution (an “Assignee”). 15.4Transfer by BankThe Bank may transfer all or any part of its rights, benefits and/or obligations under this Agreement and/or any of the other Security Documentsto any one or more banks or other financial institutions (a “Transferee”) (i) if such transfer is to any bank or financial institution affiliated to theBank, or if made while an Event of Default is continuing, without the consent of the Borrowers or (ii) if such transfer is to any arm’s length bankor financial institution, with the prior consent of the Borrowers, such consent not to be unreasonably withheld, provided always that any suchTransferee, by delivery of such undertaking as the Bank may approve, becomes bound by the terms of this Agreement and agrees to perform allor, as the case may be, relevant part of the Bank’s obligations under this Agreement. 15.5DocumentationIf the Bank assigns all or any part of its rights or transfers all or any part of its rights, benefits and/or obligations as provided in clause 15.3 or15.4 the Borrowers undertake, immediately on being requested to do so by the Bank , to enter into, and procure that the other Security Partiesshall enter into, such documents as may be necessary or desirable to transfer to the Assignee or Transferee all or the relevant part of the Bank’sinterest in the Security Documents. Thereafter, all relevant references in this Agreement to the Bank shall be construed as a reference to the Bankand/or its Assignee or Transferee (as the case may be) to the extent of their respective interests. 15.6Lending officeThe Bank shall lend through its office at the address specified above or through any other office of the Bank selected from time to time by itthrough which the Bank wishes to lend for the purposes of this Agreement. 5915.7SecuritisationThe Bank may include all or any part of the Loan in a securitisation or similar transaction after consultation with, and after giving 45-day noticeto, the Borrowers but without the consent of the Borrowers. The Borrowers will assist the Bank as necessary to achieve a successful securitisation(or similar transaction) Provided that the Borrowers shall not be required to bear any third party costs related to any such securitisation and needonly provide such information which any third parties may reasonably request.Provided that the Bank may only give, divulge and reveal such information as the Borrowers would be authorised to disclose in accordance withthe rules and regulations of the public stock exchange in which it is listed and the recipient of such information which is not of a public natureshall execute a confidentiality agreement in relation to such information. 15.8Disclosure of informationThe Borrowers hereby do, and shall procure that the other Security Parties do, irrevocably authorise the Bank to give, divulge and reveal fromtime to time information and details relating to their accounts, the Vessels, the Security Documents, the Loan, the Commitments and anyagreement entered into by a Borrower and/or a Security Party or information provided by a Borrower or a Security Party in connection with theSecurity Documents to: (a)any public or internationally recognised authorities that are entitled to and have requested to obtain such information; (b)the Bank’s head office, branches and affiliates and professional advisors; (c)any other parties to the Security Documents; (d)a rating agency or their professional advisors; (e)any person with whom the Bank proposes to enter (or considers entering) into contractual relations in relation to the Loan and/or itsCommitment, and (f)any other person regarding the funding, re-financing, transfer, assignment, sale, sub-participation or operational arrangements or othertransaction in relation to the Loan or its Commitment, including without limitation, for purposes in connection with a securitisation orsimilar transaction or any enforcement, preservation, assignment, transfer, sale or sub-participation of any of the Bank’s rights andobligations, 60Provided that, in respect of paragraphs (d), (e) and (f) above, the Bank may only give, divulge and reveal such information as the Borrowerswould be authorised to disclose in accordance with the rules and regulations of the public stock exchange in which it is listed and the recipientof such information which is not of a public nature shall execute a confidentiality agreement in relation to such information. 15.9No additional costsIf at the time of, or immediately after, any assignment and/or transfer by the Bank of all or any part of its rights and/or benefits and/or obligationsunder this Agreement, or any change in the office through which the Bank lends for the purposes of this Agreement, the Borrowers would beobliged to pay to the Assignee or Transferee or (in the case of a change of lending office) the Bank under clause 6.6 or 12.2 any sum exceedingthe sum (if any) which it would have been obliged to pay to the Bank under the relevant clause had no such assignment, transfer or change takenplace, the Borrowers shall not be obliged to pay such excess. 16NOTICES 16.1General 16.1.1unless otherwise specifically provided herein, every notice under or in connection with this Agreement shall be given in English by letterdelivered personally and/or sent by post and/or transmitted by fax; 16.1.2in this clause “notice” includes any demand, consent, authorisation, approval, instruction, certificate, request, waiver or other communication. 16.2Addresses for communications, effective date of notices 16.2.1subject to clause 16.2.2 and clause 16.2.4 notices to the Borrowers shall be deemed to have been given and shall take effect when received in fulllegible form by the Borrowers at the address and/or the fax number appearing below (or at such other address or fax number as the Borrowers mayhereafter specify for such purpose to the Bank by notice in writing); Address c/o Navios Maritime Acquisition Corporation 85 Akti Miaouli Piraeus GreeceFax no: + 30 210 453 1984 16.2.2notwithstanding the provisions of clause 16.2.1 or clause 16.2.4, a notice of Default and/or a notice given pursuant to clause 10.2 or clause 10.3shall be deemed to have been given and shall take effect when delivered, sent or transmitted by the Bank to the Borrowers to the address or faxnumber referred to in clause 16.2.1; 16.2.3subject to clause 16.2.4, notices to the Bank shall be deemed to be given, and shall take effect, when received in full legible form by the Bank atthe address and/or the fax number appearing below (or at any such other address or fax number as the Bank may hereafter specify for suchpurpose to the Borrowers by notice in writing); Address Coolsingel 93 3012 AE Rotterdam The NetherlandsAttn: ECT Transportation ClientsFax no: +31 (0) 10 401 53 23 6116.2.4if under clause 16.2.1 or clause 16.2.3 a notice would be deemed to have been given and effective on a day which is not a working day in theplace of receipt or is outside the normal business hours in the place of receipt, the notice shall be deemed to have been given and to have takeneffect at the opening of business on the next working day in such place. 17BORROWERS’ OBLIGATIONS 17.1Joint and severalRegardless of any other provision in any of the Security Documents, all obligations and liabilities whatsoever of the Borrowers herein containedare joint and several and shall be construed accordingly. Each of the Borrowers agrees and consents to be bound by the Security Documents towhich it becomes a party notwithstanding that the other Borrower may not do so or be effectually bound and notwithstanding that any of theSecurity Documents may be invalid or unenforceable against the other Borrower, whether or not the deficiency is known to the Bank. 17.2Borrowers as principal debtorsEach Borrower acknowledges that it is a principal and original debtor in respect of all amounts which may become payable by the Borrowers inaccordance with the terms of any of the Security Documents and agrees that the Bank may continue to treat it as such, whether or not the Bank isor becomes aware that such Borrower is or has become a surety for the other Borrower. 17.3IndemnityThe Borrowers undertake to keep the Bank fully indemnified on demand against all claims, damages, losses, costs and expenses arising from anyfailure of either Borrower to perform or discharge any purported obligation or liability of that Borrower which would have been the subject ofthis Agreement or any other Security Document had it been valid and enforceable and which is not or ceases to be valid and enforceable againstthe other Borrower on any ground whatsoever, whether or not known to the Bank including, without limitation, any irregular exercise or absenceof any corporate power or lack of authority of, or breach of duty by, any person purporting to act on behalf of the other Borrower (or any legal orother limitation, whether under the Limitation Acts or otherwise or any disability or death, bankruptcy, unsoundness of mind, insolvency,liquidation, dissolution, winding up, administration, receivership, amalgamation, reconstruction or any other incapacity of any personwhatsoever (including, in the case of a partnership, a termination or change in the composition of the partnership) or any change of name or styleor constitution of any Security Party)). 6217.4Liability unconditionalNone of the obligations or liabilities of the Borrowers under any Security Document shall be discharged or reduced by reason of: 17.4.1the death, bankruptcy, unsoundness of mind, insolvency, liquidation, dissolution, winding-up, administration, receivership, amalgamation,reconstruction or other incapacity of any person whatsoever (including, in the case of a partnership, a termination or change in the compositionof the partnership) or any change of name or style or constitution of either Borrower or any other person liable; 17.4.2the Bank granting any time, indulgence or concession to, or compounding with, discharging, releasing or varying the liability of, eitherBorrower or any other person liable or renewing, determining, varying or increasing any accommodation, facility or transaction or otherwisedealing with the same in any manner whatsoever or concurring in, accepting, varying any compromise, arrangement or settlement or omitting toclaim or enforce payment from either Borrower or any other person liable; or 17.4.3anything done or omitted which but for this provision might operate to exonerate the Borrowers or either of them. 17.5Recourse to other securityThe Bank shall not be obliged to make any claim or demand or to resort to any security or other means of payment now or hereafter held by oravailable to them for enforcing any of the Security Documents against either Borrower or any other person liable and no action taken or omittedby the Bank in connection with any such security or other means of payment will discharge, reduce, prejudice or affect the liability of theBorrowers under the Security Documents to which either of them is, or is to be, a party. 17.6Waiver of Borrowers’ rightsEach Borrower agrees with the Bank that, throughout the Facility Period, it will not, without the prior written consent of the Bank: 17.6.1exercise any right of subrogation, reimbursement and indemnity against the other Borrower or any other person liable under the SecurityDocuments; 17.6.2demand or accept repayment in whole or in part of any Indebtedness now or hereafter due to such Borrower from the other Borrower or from anyother person liable for such Indebtedness or demand or accept any guarantee against financial loss or any document or instrument created orevidencing an Encumbrance in respect of the same or dispose of the same; 17.6.3take any steps to enforce any right against the other Borrower or any other person liable in respect of any such moneys; or 17.6.4claim any set-off or counterclaim against the other Borrower or any other person liable or claim or prove in competition with the Bank in theliquidation of the other Borrower or any other person liable or have the benefit of, or share in, any payment from or composition with, the otherBorrower or any other person liable or any security granted under any Security Document now or hereafter held by the Bank for any moneysowing under this Agreement or for the obligations or liabilities of any other person liable but so that, if so directed by the Bank, it will prove forthe whole or any part of its claim in the liquidation of the other Borrower or other person liable on terms that the benefit of such proof and allmoney received by it in respect thereof shall be held on trust for the Bank and applied in or towards discharge of any moneys owing under thisAgreement in such manner as the Bank shall require. 6318GOVERNING LAW 18.1LawThis Agreement and any non-contractual obligations arising out of or in connection with it is governed by and shall be construed in accordancewith English law. 19JURISDICTION 19.1Exclusive jurisdictionFor the benefit of the Bank, and subject to clause 19.4 below, the Borrowers hereby irrevocably agree that the courts of England shall haveexclusive jurisdiction: 19.1.1to settle any disputes or other matters whatsoever arising under or in connection with this Agreement or any non-contractual obligation arisingout of or in connection with this Agreement and any disputes or other such matters arising in connection with the negotiation, validity orenforceability of this Agreement or any part thereof, whether the alleged liability shall arise under the laws of England or under the laws of someother country and regardless of whether a particular cause of action may successfully be brought in the English courts; and 19.1.2to grant interim remedies or other provisional or protective relief. 19.2Submission and service of processThe Borrowers accordingly irrevocably and unconditionally submit to the jurisdiction of the English courts. Without prejudice to any othermode of service each Borrower: 19.2.1irrevocably empowers and appoints HFW Nominees Ltd at present of Friary Court, 65 Crutched Friars, London EC3N 2AE, England as its agentto receive and accept on its behalf any process or other document relating to any proceedings before the English courts in connection with thisAgreement; 19.2.2agrees to maintain such an agent for service of process in England from the date hereof until the end of the Facility Period; 19.2.3agrees that failure by a process agent to notify the Borrowers of service of process will not invalidate the proceedings concerned; 19.2.4without prejudice to the effectiveness of service of process on its agent under clause 19.2.1 above but as an alternative method, consents to theservice of process relating to any such proceedings by mailing or delivering a copy of the process to its address for the time being applyingunder clause 16.2; 19.2.5agrees that if the appointment of any person mentioned in clause 19.2.1 ceases to be effective, the Borrowers shall immediately appoint a furtherperson in England to accept service of process on its behalf in England and, failing such appointment with in seven (7) days the Bank shallthereupon be entitled and is hereby irrevocably authorised by the Borrowers in those circumstances to appoint such person by notice to theBorrowers. 6419.3Forum non conveniens and enforcement abroadThe Borrowers: 19.3.1waive any right and agree not to apply to the English court or other court in any jurisdiction whatsoever to stay or strike out any proceedingscommenced in England on the ground that England is an inappropriate forum and/or that proceedings have been or will be started in any otherjurisdiction in connection with any dispute or related matter falling within clause 19.1; and 19.3.2agree that a judgment or order of an English court in a dispute or other matter falling within clause 19.1 shall be conclusive and binding on theBorrowers and may be enforced against it in the courts of any other jurisdiction. 19.4Right of Bank, but not Borrowers, to bring proceedings in any other jurisdiction 19.4.1nothing in this clause 19 limits the right of the Bank to bring proceedings, including third party proceedings, against the Borrowers or either ofthem, or to apply for interim remedies, in connection with this Agreement in any other court and/or concurrently in more than one jurisdiction; 19.4.2the obtaining by the Bank of judgment in one jurisdiction shall not prevent the Bank from bringing or continuing proceedings in any otherjurisdiction, whether or not these shall be founded on the same cause of action. 19.5Enforceability despite invalidity of AgreementThe jurisdiction agreement contained in this clause 19 shall be severable from the rest of this Agreement and shall remain valid, binding and infull force and shall continue to apply notwithstanding this Agreement or any part thereof being held to be avoided, rescinded, terminated,discharged, frustrated, invalid, unenforceable, illegal and/or otherwise of no effect for any reason. 19.6Effect in relation to claims by and against non-parties 19.6.1for the purpose of this clause “Foreign Proceedings” shall mean any Proceedings except proceedings brought or pursued in England arising outof or in connection with or in any way related to any of the Security Documents or any assets subject thereto or any action of any kindwhatsoever taken by the Bank pursuant thereto or which would, if brought by the Borrowers or either of them against the Bank, have beenrequired to be brought in the English courts; 19.6.2neither Borrower shall bring or pursue any Foreign Proceedings against the Bank and each Borrower shall use its best endeavours to preventpersons not party to this Agreement from bringing or pursuing any Foreign Proceedings against the Bank; 19.6.3If, for any reason whatsoever, any Security Party and/or any third party brings or pursues against the Bank any Foreign Proceedings, theBorrowers shall indemnify the Bank on demand in respect of any and all claims, losses, damages, demands, causes of action, liabilities, costs andexpenses (including, but not limited to, legal costs) of whatsoever nature howsoever arising from or in connection with such Foreign Proceedingswhich the Bank certifies as having been incurred by it; 19.6.4the Bank and the Borrowers hereby agree and declare that the benefit of this clause 19 shall extend to and may be enforced by any officer,employee, agent or business associate of the Bank against whom either Borrowers brings a claim in connection howsoever with (i) any of 65 the Security Documents or any assets subject thereto or (ii) any action of any kind whatsoever taken by, or on behalf of or for the purportedbenefit of the Bank pursuant thereto, or which, if it were brought against the Bank, would fall within the material scope of clause 19.1. In thosecircumstances this clause 19 shall be read and construed as if references to the Bank were references to such officer, employee, agent or businessassociate, as the case may be.IN WITNESS whereof the parties to this Agreement have caused this Agreement to be duly executed on the date first above written. 66Execution page SIGNED as a DEED by PETER KALLIFIDASfor and on behalf ofAMORGOS SHIPPING CORPORATIONpursuant to a Power of Attorneydated 23 January 2017in the presence of: /s/ Ronan Le Dû )))))) /s/ Peter KallifidasAttorney-in-fact SIGNED as a DEED by PETER KALLIFIDASfor and on behalf ofANDROS SHIPPING CORPORATIONpursuant to a Power of Attorneydated 23 January 2017in the presence of: /s/ Ronan Le Dû )))))) /s/ Peter KallifidasAttorney-in-fact SIGNED by ROBIN PARRYfor and on behalf ofABN AMRO BANK N.V.in the presence of: /s/ Ronan Le Dû ))) /s/ Robin Parry Exhibit 8.1Subsidiaries of Navios Maritime Acquisition CorporationAegean Sea Maritime Holdings Inc., a Marshall Islands Holdings companyAlonnisos Shipping Corporation, a Marshall Islands corporationAmindra Navigation Co., a Marshall Islands corporationAmorgos Shipping Corporation, a Marshall Islands corporationAndros Shipping Corporation, a Marshall Islands corporationAntikithira Shipping Corporation, a Marshall Islands corporationAntiparos Shipping Corporation, a Marshall Islands corporationAntipaxos Shipping Corporation, a Marshall Islands corporationAntipsara Shipping Corporation, a Marshall Islands corporationCrete Shipping Corporation, a Marshall Islands corporationDonoussa Shipping Corporation, a Marshall Islands corporationFolegandros Shipping Corporation, a Marshall Islands corporationIkaria Shipping Corporation, a Marshall Islands corporationIos Shipping Corporation, a Cayman Islands corporationIraklia Shipping Corporation, a Marshall Islands corporationKerkyra Shipping Corporation, a Marshall Islands corporationKithira Shipping Corporation, a Marshall Islands corporationKimolos Shipping Corporation, a Marshall Islands corporationKos Shipping Corporation, a Marshall Islands corporationLefkada Shipping Corporation, a Marshall Islands corporationLeros Shipping Corporation, a Marshall Islands corporationLimnos Shipping Corporation, a Marshall Islands corporationMakronisos Shipping Corporation, a Marshall Islands corporationMytilene Shipping Corporation, a Marshall Islands corporationNavios Acquisition Europe Finance Inc., a Marshall Islands corporationNavios Acquisition Finance (US) Inc., a Delaware companyOinousses Shipping Corporation, a Marshall Islands corporationPaxos Shipping Corporation, a Marshall Islands corporationPsara Shipping Corporation, a Marshall Islands corporationRhodes Shipping Corporation, a Marshall Islands corporationSamothrace Shipping Corporation, a Marshall Islands corporationSamos Shipping Corporation, a Marshall Islands corporationSchinousa Shipping Corporation, a Marshall Islands corporationSerifos Shipping Corporation, a Marshall Islands corporationShinyo Loyalty Limited, a Hong Kong limited companyShinyo Navigator Limited, a Hong Kong limited companySifnos Shipping Corporation, a Marshall Islands corporationSkiathos Shipping Corporation, a Marshall Islands corporationSkopelos Shipping Corporation, a Cayman Islands corporationSkyros Shipping Corporation, a Marshall Islands corporationSyros Shipping Corporation, a Marshall Islands corporationThasos Shipping Corporation, a Marshall Islands corporationThera Shipping Corporation, a Marshall Islands corporationTinos Shipping Corporation, a Marshall Islands corporationZakynthos Shipping Corporation, a Marshall Islands corporationNavios Maritime Midstream Partners GP LLC, a Marshall Islands corporationTilos Shipping Corporation, a Marshall Islands corporationDelos Shipping Corporation, a Marshall Islands corporation Exhibit 12.1CERTIFICATION OF CHIEF EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Angeliki Frangou, certify that:1. I have reviewed this annual report on Form 20-F for the year ended December 31, 2016 of Navios Maritime Acquisition Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the companyand have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the company, including its consolidated subsidiary, is made known to us by others within those entities, particularly duringthe period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report on such evaluation; andd) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting: and5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal controls overfinancial reporting. /s/ Angeliki FrangouAngeliki FrangouChief Executive Officer(Principal Executive Officer)Date: April 5, 2017Exhibit 12.2CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Leonidas Korres, certify that:1. I have reviewed this annual report on Form 20-F for the year ended December 31, 2016 of Navios Maritime Acquisition Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the companyand have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the company, including its consolidated subsidiary, is made known to us by others within those entities, particularly duringthe period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report on such evaluation; andd) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual reportthat has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting: and5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal controls overfinancial reporting. /s/ Leonidas KorresLeonidas KorresChief Financial Officer(Principal Financial Officer)Date: April 5, 2017Exhibit 13.1CertificationPursuant To Section 906 of the Sarbanes-Oxley Act Of2002(Subsections (A) And (B) Of Section 1350,Chapter 63 of Title 18, United States Code)Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of theundersigned officers of Navios Maritime Acquisition Corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:(i) the Annual Report on Form 20-F for the fiscal year ended December 31, 2016 (the “Form 20-F”) of the Company fully complies with the requirements ofSection 13(a) or 15(d) of the Securities Exchange Act of 1934;(ii) and the information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: April 5, 2017 /s/ Angeliki Frangou Angeliki Frangou Chief Executive OfficerDated: April 5, 2017 /s/ Leonidas Korres Leonidas Korres Chief Financial OfficerExhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form F-3 (Nos. 333-214739 and 333-170896) of Navios MaritimeAcquisition Corporation of our report dated April 5, 2017 relating to the financial statements and the effectiveness of internal control over financialreporting, which appears in this Form 20-F. /s/ PricewaterhouseCoopers S.A.Athens, GreeceApril 5, 2017Exhibit 15.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements (Forms F-3 No. 333-214739 and 333-170896) of Navios Maritime AcquisitionCorporation and the related Prospectuses of our report dated March 8, 2017, with respect to the consolidated financial statements of Navios MaritimeMidstream Partners L.P. included as an exhibit in this Annual Report (Form 20-F) for the year ended December 31, 2016./s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.Athens, GreeceApril 5, 2017Exhibit 15.3CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form F-3 (Nos. 333-214739 and 333-170896) of Navios MaritimeAcquisition Corporation of our report dated March 17, 2015 relating to the financial statements of Navios Maritime Midstream Partners L.P., which appearsin this Form 20-F. /s/ PricewaterhouseCoopers S.A.Athens, GreeceApril 5, 2017Exhibit 15.4INDEX NAVIOS MARITIME MIDSTREAM PARTNERS L.P. REPORT OF ERNST & YOUNG (HELLAS) CERTIFIED AUDITORS ACCOUNTANTS S.A. INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM F-2 REPORT OF PRICEWATERHOUSECOOPERS S.A. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-3 CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2016 AND 2015 F-4 CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2016, 2015 AND2014 F-5 CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2016, 2015 AND2014 F-6 CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL AND OWNER’S NET INVESTMENT FOR EACH OFTHE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 F-7 NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS F-8 F-1Report of Independent Registered Public Accounting FirmTo the Board of Directors and Partners of Navios Maritime Midstream Partners L.P.:We have audited the accompanying consolidated balance sheet of Navios Maritime Midstream Partners L.P. as of December 31, 2016, and 2015, and therelated consolidated statements of operations, changes in partners’ capital and cash flows for each of the two years in the period ended December 31, 2016.These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statementsbased on our audit.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engagedto perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Navios MaritimeMidstream Partners L.P. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the two years in theperiod ended December 31, 2016, in conformity with U.S. generally accepted accounting principles./s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.Athens, GreeceMarch 8, 2017 F-2Report of Independent Registered Public Accounting FirmTo the Board of Directors and Partners of Navios Maritime Midstream Partners L.P.:In our opinion, the consolidated and combined statements of operations, changes in partners’ capital and of owner’s net investment and of cash flows for theperiod ended December 31, 2014 present fairly, in all material respects, the results of operations and cash flows of Navios Maritime Midstream Partners L.P.and its subsidiaries for the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statementsbased on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion./s/ PricewaterhouseCoopers S.A.Athens, GreeceMarch 17, 2015 F-3NAVIOS MARITIME MIDSTREAM PARTNERS L.P.CONSOLIDATED BALANCE SHEETS(Expressed in thousands of U.S. Dollars except unit data) Notes December 31,2016 December 31,2015 ASSETS Current assets Cash and cash equivalents 3 $52,791 $37,834 Accounts receivable, net 4 2,264 5,110 Prepaid expenses and other current assets 1,168 112 Due from related parties 10 4,864 2,804 Total current assets 61,087 45,860 Vessels, net 5 378,444 400,192 Intangible assets 6 25,164 28,450 Deferred dry dock and special survey costs, net 11,086 6,066 Total non-current assets 414,694 434,708 Total assets $475,781 $480,568 LIABILITIES AND PARTNERS’ CAPITAL Current liabilities Accounts payable $2,386 $412 Accrued expenses 602 654 Due to related parties 10 — 438 Deferred revenue 2,494 1,931 Current portion of long-term debt, net of deferred finance costs and discount 7 661 643 Total current liabilities 6,143 4,078 Long-term debt, net of deferred finance costs and discount 7 196,515 197,176 Total non-current liabilities 196,515 197,176 Total liabilities $202,658 $201,254 Commitments and contingencies 11 — — Total Partners’ capital Common Unitholders (9,675,795 units and 9,342,692 units issued and outstanding at December 31, 2016 andDecember 31, 2015, respectively) 125,635 126,317 Subordinated Series A Unitholders (1,592,920 units issued and outstanding at December 31, 2016 and none atDecember 31, 2015) 26,593 27,379 Subordinated Unitholders (9,342,692 units issued and outstanding at December 31, 2016 and December 31,2015) 115,552 120,154 General Partner (420,641 units issued and outstanding at December 31, 2016 and 413,843 issued andoutstanding at December 31, 2015) 5,343 5,464 Partners’ capital 273,123 279,314 Total liabilities and Partners’ capital $475,781 $480,568 See notes to consolidated and combined financial statements. F-4NAVIOS MARITIME MIDSTREAM PARTNERS L.P.CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS(Expressed in thousands of U.S. Dollars, except unit and per unit data) Notes Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Revenue $91,834 $83,362 $63,534 Time charter expenses (1,466) (1,100) (762) Direct vessel expenses (3,093) (1,602) (1,283) Management fees (entirely through related party transactions) 10 (20,862) (17,613) (14,166) General and administrative expenses 10 (2,968) (2,497) (1,296) Depreciation and amortization 5, 6 (25,534) (22,686) (19,509) Interest expenses and finance cost 7 (12,843) (10,830) (25,473) Interest income 190 — — Other income 4 88 119 Other expense (372) (50) — Net income $24,890 $27,072 $1,164 Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Net income $24,890 $27,072 $1,164 Add: Predecessor net loss prior to initial public offering on November 18, 2014 $— $— $1,387 Net income attributable to Navios Maritime Midstream Partners L.P. subsequent toinitial public offering and limited partners’ interest in net income: $24,890 $27,072 $2,551 Earnings attributable to: Common unit holders $11,306 $12,465 $1,250 Subordinated Series A unit holders $1,906 $1,598 $— Subordinated unit holders $11,186 $12,465 $1,250 General Partner $492 $544 $51 Earnings per unit (basic and diluted) Common unit holders $1.19 $1.33 $0.13 Subordinated Series A unit holders $1.20 $1.86 $— Subordinated unit holders $1.19 $1.33 $0.13 General Partner $1.19 $1.36 $0.13 Weighted average units outstanding (basic and diluted) Common unit holders 9,457,455 9,342,692 9,342,692 Subordinated Series A unit holders 1,592,920 859,740 — Subordinated unit holders 9,342,692 9,342,692 9,342,692 General Partner 415,286 398,880 381,334 See notes to consolidated and combined financial statements. F-5NAVIOS MARITIME MIDSTREAM PARTNERS L.P.CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS(Expressed in thousands of U.S. Dollars) Notes Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Operating Activities Net income $24,890 $27,072 $1,164 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5, 6 25,534 22,686 19,509 Amortization and write-off of deferred finance costs, discount and bond premium 1,407 2,676 712 Amortization of dry dock and special survey costs 3,093 1,602 1,283 Changes in operating assets and liabilities: Decrease in prepaid expenses and other current assets 94 100 7 Payments for Drydocking (8,113) (5,713) — Decrease/ (increase) in accounts receivable 4 2,846 (4,457) 164 Increase/ (decrease) in accounts payable 1,974 (310) 351 (Decrease)/ increase in accrued expenses (52) (1,040) 1,479 (Decrease)/ increase in due to/ from related parties 10 (2,498) (2,756) 2,592 Decrease/ (increase) in deferred revenue 563 (7) — Net cash provided by operating activities $49,738 $39,853 $27,261 Investing Activities Acquisition of vessels (500) (72,252) — Due from related parties — — (52,314) Net cash used in investing activities $(500) $(72,252) $(52,314) Financing Activities Proceeds from Long term debt, net of deferred finance costs and discount 7 — 198,081 124,027 Loan and other payments 7 (3,200) (127,025) — Cash remittance to Navios Acquisition — — (214,854) IPO proceeds, net of underwriting discount — — 113,906 IPO expenses — (3,347) (469) Dividend paid (35,180) (28,904) — Proceeds from issuance of general partner units 89 551 — Proceeds from issuance of common units 4,010 — — Owner’s net investment — — 24,168 Net cash (used in)/ provided by financing activities $(34,281) $39,356 $46,778 Net increase in cash and cash equivalents 14,957 6,957 21,725 Cash and cash equivalents, beginning of year 37,834 30,877 9,152 Cash and cash equivalents, end of year $52,791 $37,834 $30,877 Supplemental disclosures of cash flow information Cash interest paid $11,428 $8,100 $27,786 Non-cash financing activities Accrued IPO expenses $— $— $3,290 Assets and liabilities retained by Navios Acquisition: Long-term debt $— $— $341,034 Due from related parties $— $— $(88,070) Due to related parties $— $— $2,588 Deferred finance costs $— $— $(7,405) See notes to consolidated and combined financial statements. F-6NAVIOS MARITIME MIDSTREAM PARTNERS L.P.CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL ANDOWNER’S NET INVESTMENT(Expressed in thousands of U.S. Dollars except unit data) Limited Partners General Partner CommonUnitholders SubordinatedUnitholders SubordinatedSeries AUnitholders TotalPartners’Capital Owners’NetInvestment Total Units $ Units $ Units $ Units $ $ $ $ Combined Balance January 1, 2014 — — — — — — — — — 84,712 84,712 Net loss — — — — — — — — — (1,387) (1,387) Net transactions with owners — — — — — — — — — 24,168 24,168 Combined Balance November 17, 2014 — — — — — — — — — $107,493 $107,493 Net liability of business retained by NaviosAcquisition — — — — — — — — — $248,147 $248,147 Net assets contributed to the Partnership inexchange for General Partner units,common units and subordinated units ofthe Partnership 381,334 $12,367 1,242,692 $40,299 9,342,692 $302,974 — — $355,640 $(355,640) — Cash remittance to Navios Acquisition inexchange for contribution of net assets ofthe Partnership — (7,471) — (24,346) — (183,037) — — (214,854) — (214,854) Capital contribution from NaviosAcquisition — 4,896 — 15,953 — 119,937 — — 140,786 — — Proceeds from initial public offering ofcommon units, net of offering costs — — 8,100,000 110,147 — — — — 110,147 — 110,147 Net income — 51 — 1,250 — 1,250 — — 2,551 2,551 Consolidated Balance December 31, 2014 381,334 $4,947 9,342,692 $127,350 9,342,692 $121,187 — — $253,484 $— $253,484 Net income — 544 — 12,465 — 12,465 — 1,598 27,072 — 27,072 Issuance of subordinated Series A Units andgeneral partner units 32,509 551 — — — — 1,592,920 27,111 27,662 — 27,662 Cash distribution — (578) — (13,498) — (13,498) — (1,330) (28,904) — (28,904) Consolidated Balance December 31, 2015 413,843 $5,464 9,342,692 $126,317 9,342,692 $120,154 1,592,920 27,379 $279,314 $— $279,314 Net income — 492 — 11,306 — 11,186 — 1,906 24,890 — 24,890 Equity offering 6,798 89 333,103 4,010 — — — — 4,099 — 4,099 Cash distribution — (702) — (15,998) — (15,788) — (2,692) (35,180) — (35,180) Consolidated Balance December 31, 2016 420,641 $5,343 9,675,795 $125,635 9,342,692 $115,552 1,592,920 $26,593 $273,123 $— $273,123 See notes to consolidated and combined financial statements. F-7NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data)NOTE 1: DESCRIPTION OF BUSINESSNavios Maritime Midstream Partners L.P. (“Navios Midstream”, the “Company” or the “Partnership”) (NYSE: NAP), was formed in The Republic of theMarshall Islands on October 13, 2014. Navios Maritime Midstream Partners GP LLC (the “General Partner”), a Marshall Islands limited liability company andwholly-owned subsidiary of Navios Maritime Acquisition Corporation (“Navios Acquisition”), was also formed on that date to act as the General Partner ofNavios Midstream and receive a 2.0% general partner interest.In connection with the initial public offering (“IPO”) of Navios Midstream in November 2014, Navios Midstream acquired all of the outstanding shares ofcapital stock of four of Navios Acquisition’s vessel-owning subsidiaries (Shinyo Ocean Limited, Shinyo Kannika Limited, Shinyo Kieran Limited andShinyo Saowalak Limited) in exchange for: (i) all of the estimated net proceeds from the IPO amounting to $110,403; (ii) $104,451 of the $126,000borrowings under Navios Midstream’s new credit facility; (iii) 9,342,692 subordinated units and 1,242,692 common units; and (iv) 381,334 general partnerunits, representing a 2.0% general partner interest in Navios Midstream, and all of the incentive distribution rights in Navios Midstream, to our GeneralPartner.On or prior to the closing of the IPO, Navios Midstream entered into the following agreements: a) a share purchase agreement with Navios Acquisitionpursuant to which Navios Midstream will have options, exercisable at any time during a two-year period until November 18, 2016, to acquire the capitalstock of up to seven of its subsidiaries that own seven VLCCs and the related time charters; b) a management agreement (the “Management Agreement”) withNavios Tankers Management Inc. (the “Manager”), a subsidiary of Navios Maritime Holdings Inc. (“Navios Holdings”), pursuant to which the Managerprovides Navios Midstream commercial and technical management services; c) an administrative services agreement (the “Administrative ServicesAgreement”) with the Manager pursuant to which the Manager provides Navios Midstream administrative services; and c) an omnibus agreement with NaviosHoldings, Navios Acquisition, Navios Maritime Partners L.P. (“Navios Partners”) and the General Partner governing, among other things, when NaviosMidstream, Navios Holdings, Navios Acquisition and Navios Partners may compete against each other as well as rights of first offer on VLCCs, crude oiltankers, refined petroleum product tankers, chemical tankers and LPG tankers.In June 2015, Navios Midstream exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste and the C. Dream fromNavios Acquisition for an aggregate purchase price of $100,000. The aggregate purchase price consisted of 1,592,920 subordinated Series A Units, issued toNavios Acquisition, and $73,000 cash consideration. The rights and terms of the subordinated Series A Units are substantially similar to those of thesubordinated units in terms of rights such as voting and distributions; provided, however, the subordinated Series A Units are senior in preference inliquidation to the subordinated units and unlike the subordinated units that convert at the end of the subordination period (as such period is determinedpursuant to the partnership agreement), all of the outstanding subordinated Series A Units will automatically convert into common units on a one-for-onebasis on the earlier of (i) June 18, 2018, or (ii) the Liquidation Date, as defined in the partnership agreement.Navios Midstream’s principal activity is to own, operate and acquire crude oil tankers under long-term employment contracts as well as refined petroleumproduct tankers, chemical tankers, and liquefied petroleum gas, or LPG, tankers under long-term employment contracts. The Company intends to charter thevessels under long-term employment contracts to international oil companies, refiners, and large vessel operators.As of December 31, 2016, there were outstanding: 9,675,795 common units, 9,342,692 subordinated units, 1,592,920 Series A subordinated units and420,641 general partnership units. As of December 31, 2016, Navios Acquisition owned a 59.90% limited partner interest in Navios Midstream, whichincluded a 2.0% general partner interest. F-8NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) Navios Midstream’s principal activity is to own, operate and acquire crude oil tankers under long-term employment contracts as well as refined petroleumproduct tankers, chemical tankers, and liquefied petroleum gas, or LPG, tankers under long-term employment contracts. The Company charters the vesselsunder long-term employment contracts to international oil companies, refiners, and large vessel operators.As at December 31, 2016 the Company owned six VLCCs.NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of these consolidated and combined financial statements are set out below. These policieshave been consistently applied to all the years presented, unless otherwise stated.(a) Basis of Presentation and Consolidation: The accompanying consolidated and combined financial statements have been prepared inconformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The combined financial statements for theperiods prior to the November 18, 2014-IPO reflect the combined financial position, results of operations and cash flows of the four vessel-owningsubsidiaries of Navios Acquisition (collectively, the “Combined Entity”) that owned the vessels prior to the IPO as each vessel-owing subsidiary wasunder the common control of Navios Acquisition. These combined financial statements have been presented using the historical carrying costs of suchvessel-owning subsidiaries for all periods presented prior to the IPO, as each vessel-owning subsidiary was under the common control of NaviosAcquisition.The combined financial statements prior to the IPO included the assets, liabilities, revenues, expenses and cash flows directly attributable to the vessel-owning legal entities, except for the loans, interest expense, deferred financing fees and the related amortization, which were allocated to the CombinedEntity on the following basis: • Loans and related interest expense: The vessels included in the combined financial statements were financed through Ship Mortgaged Notesissued by Navios Acquisition. See Note 9: Leases. The Combined Entity’s vessels were used as collateral for such Ship Mortgaged Notes. For thepurposes of the combined financial statements, the Ship Mortgaged Notes and related interest expense and loss on extinguishment of 2017 Noteswere allocated to the mortgaged vessels with reference to their relative fair value at the issuance of the relevant notes. • Deferred financing fees and related amortization: As noted above, the Ship Mortgaged Notes were allocated to the mortgaged vessels withreference to their relative fair value at the issuance of the relevant notes. For the purposes of the combined financial statements, the deferredfinancing fees and the related amortization expense were allocated to the mortgaged vessels with reference to their relative fair value at theissuance of the relevant notes.Parent Net Investment of the Combined Entity represented the sum of the underlying invested equity in the vessel-owning entities and did not representshares in a single standalone business. Transactions and intercompany balances with Navios Holdings and its affiliates for periods prior to the IPO werepresented as due to/from related parties in the combined financial statements and as owner’s net investment, respectively.The consolidated financial statements for periods after the IPO are referred to as those of the Navios Midstream and include the accounts of all of the entitiescomprising the Company. F-9NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) The Company consists of the consolidation of the following entities: Country ofincorporation Statement of Operations Company name Vessel name 2016 2015 2014 Navios Maritime Midstream Operating LLC N/A Marshall Islands 1/1—12/31 1/1—12/31 11/18—12/31 Navios Maritime Midstream Partners L.P. N/A Marshall Islands 1/1—12/31 1/1—12/31 11/18—12/31 Navios Maritime Midstream Finance (US) Inc. N/A Delaware 1/1—12/31 6/4—12/31 — Shinyo Kannika Limited Shinyo Kannika Hong Kong 1/1—12/31 1/1—12/31 1/1—12/31 Shinyo Ocean Limited Shinyo Ocean Hong Kong 1/1—12/31 1/1—12/31 1/1—12/31 Shinyo Saowalak Limited Shinyo Saowalak British Virgin Is. 1/1—12/31 1/1—12/31 1/1—12/31 Shinyo Kieran Limited Shinyo Kieran British Virgin Is. 1/1—12/31 1/1—12/31 1/1—12/31 Shinyo Dream Limited C. Dream Hong Kong 1/1—12/31 6/18—12/31 — Sikinos Shipping Corporation Nave Celeste Marshall Islands 1/1—12/31 6/18—12/31 — All significant inter-company balances and transactions have been eliminated in the consolidated and combined financial statements.The Company also consolidates entities that are determined to be variable interest entities as defined in the accounting guidance, if it determines that it is theprimary beneficiary. A variable interest entity is defined as a legal entity where either (a) equity interest holders as a group lack the characteristics of acontrolling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards, or (b) the equity holders have notprovided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rightsof some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns ofthe entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately fewvoting rights.Based on internal forecasts and projections that take into account reasonably possible changes in our trading performance, management believes that theCompany has adequate financial resources to continue in operation and meet its financial commitments, including but not limited to capital expendituresand debt service obligations, for a period of at least twelve months from the date of issuance of these consolidated financial statements. Accordingly, theCompany continues to adopt the going concern basis in preparing its financial statements.The Company / Combined Entity had no items of other comprehensive income in any period.(b) Use of estimates: The preparation of consolidated and combined financial statements in conformity with U.S. GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of thefinancial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates theestimates and judgments, including those related to future drydock dates, the selection of useful lives and residual values for tangible assets and vessels’ fairvalue upon initial recognition, expected future cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivable,and provisions for legal disputes and contingencies. Management bases its estimates and judgments on historical F-10NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgmentsabout the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates underdifferent assumptions and/or conditions.(c) Cash and Cash equivalents: Cash and cash equivalents consist of deposits held on call with banks, with original maturities of three months or less.(d) Accounts Receivable, net: The amount shown as accounts receivable, net at each balance sheet date includes receivables from charterers for hire, freightand demurrage billings, net of a provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individuallyfor purposes of determining the appropriate provision for doubtful accounts. No provision for doubtful accounts was required for any of the periodspresented.(e) Vessels, net: Vessels are stated at historical cost, which consists of the contract price, delivery and acquisition expenses and capitalized interest costswhile under construction. Vessels acquired in a business combination are recorded at fair value. The vessels that were acquired from Navios Acquisition inconnection with the Company’s IPO were recorded at the historical carrying values as a transaction under common control. Vessels acquired in an assetacquisition are measured at cost (including transaction costs). Subsequent expenditures for major improvements and upgrading are capitalized, provided theyappreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Expenditures for routine maintenance and repairsare expensed as incurred.Depreciation is computed using the straight line method over the useful life of the vessels, after considering the estimated residual value. Managementestimates the residual values of our tanker vessels based on a scrap value cost of steel times the weight of the ship noted in lightweight ton (LWT). Residualvalues are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons. Revisions of residual values affect thedepreciable amount of the vessels and affects depreciation expense in the period of the revision and future periods. The management after considering currentmarket trends for scrap rates and 10-year average historical scrap rates of the residual values of the Company’s vessels, estimates scrap value at a rate of $360per LWT. Management estimates the useful life of our vessels to be 25 years from the vessel’s original construction. However, when regulations placelimitations over the ability of a vessel to trade on a worldwide basis, its useful life is re-estimated to end at the date such regulations become effective.(f) Impairment of long-lived Asset Group: Vessels, other fixed assets and other long lived assets held and used by the Company are reviewed periodically forpotential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fully recoverable. TheCompany’s management evaluates the carrying amounts and periods over which long-lived assets are depreciated to determine if events or changes incircumstances have occurred that would require modification to their carrying values or useful lives. In evaluating useful lives and carrying values of long-lived assets, certain indicators of potential impairment are reviewed such as undiscounted projected operating cash flows, vessel sales and purchases, businessplans and overall market conditions.Undiscounted projected net operating cash flows are determined for each asset group and compared to the vessel carrying value, the unamortized portion ofdeferred drydock and special survey costs related to the vessel and the related carrying value of the intangible with respect to the time charter agreementattached to that vessel. Within the shipping industry, vessels are often bought and sold with a charter attached. The value of the charter may be favorable orunfavorable when comparing the charter rate to then current market rates. The loss recognized either on impairment (or on disposition) will reflect the excessof carrying value over the fair value (selling price) for the vessel individual asset group. F-11NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) During the fourth quarter of fiscal 2016, management concluded that, although market rates were at healthy levels during the year, however, events occurredand circumstances had changed, over previous years, which indicated the potential impairment of Navios Midstream’s long-lived assets may exist. Theseindicators included continued volatility in the charter market and the related impact of the tanker sector has on management’s expectation for futurerevenues. As a result, an impairment assessment of long-lived assets or identified asset groups was performed.The Company determined undiscounted projected net operating cash flows for each vessel and compared it to the vessel’s carrying value together with thecarrying value of deferred drydock and special survey costs related to the vessel and the carrying value of the related intangible. The significant factors andassumptions used in the undiscounted projected net operating cash flow analysis included: determining the projected net operating cash flows byconsidering the charter revenues from existing time charters for the fixed fleet days (Company’s remaining charter agreement rates) and an estimated dailytime charter equivalent for the unfixed days (based on the 10-year average historical one year time charter rates) over the remaining economic life of eachvessel, net of brokerage and address commissions, excluding days of scheduled off-hires, management fees fixed until December 2018 and thereafterassuming an annual increase of 3.0% and utilization rate of 99.7% based on the fleets historical performance.The assessment concluded that step two of the impairment analysis was not required and no impairment of vessels and related intangible assets existed as ofDecember 31, 2016, as the undiscounted projected net operating cash flows exceeded the carrying value.In the event that impairment would occur, the fair value of the related asset would be determined and a charge would be recorded to operations calculated bycomparing the asset’s carrying value to its fair value. Fair value is estimated by management with the assistance of independent third-party valuationsperformed on an individual vessel basis. Although management believes the underlying assumptions supporting this assessment are reasonable, if charter ratetrends and the length of the current market downturn vary significantly from our forecasts, management may be required to perform step two of theimpairment analysis in the future that could expose the Company to material impairment charges in the future.No impairment loss was recognized for any of the periods presented.(g) Deferred Finance Costs: Deferred finance costs include fees, commissions and legal expenses associated with obtaining or modifying loan facilities. TheCompany historically presented deferred debt issuance costs, or fees related to directly issuing debt, as long-term assets on the consolidated balance sheets. InApril 2015, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03— Interest—Imputation of Interestto simplify the presentation of debt issuance costs. The new guidance simplifies financial reporting by eliminating the different presentation requirements fordebt issuance costs and debt discounts or premiums. Presenting debt issuance costs as assets is inconsistent with FASB Concepts Statement No. 6, Elementsof Financial Statements, which states that debt issuance costs cannot be assets because they provide no future economic benefit. Current guidance alsoconflicts with IFRS, which requires transaction costs, including third-party costs and creditor fees, to be deducted from the carrying value of the financialliability and not recorded as a separate asset. The Company adopted the new guidance effective for the financial statements for the fiscal year endedDecember 31, 2015 and interim period within that fiscal year and thus presents deferred finance costs, net of accumulated amortization, as a reduction of longterm debt. F-12NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) The Company amortizes these costs over the life of the related debt using the effective interest rate method, and are included in interest expense. For thepurpose of these consolidated financial statements, for the period prior to the IPO such amortization has been allocated to the Company based on the relativefair value of the vessels. For the period subsequent to the IPO, these costs are amortized over the life of the related facility using the effective interest ratemethod. Amortization and write off of deferred finance cost for each of the years ended December 31, 2016, 2015 and 2014 were $1,407, $2,676 and $712,respectively.(h) Intangibles assets: The Company’s intangible assets consist of favorable lease terms. When intangible assets (or liabilities) associated with theacquisition of a vessel are identified, they are recorded at fair value. Fair value is determined by reference to market data and the discounted amount ofexpected future cash flows. Where charter rates are higher than market charter rates, an asset is recorded, being the difference between the acquired charter rateand the market charter rate for an equivalent vessel. Where charter rates are less than market charter rates, a liability is recorded, being the difference betweenthe assumed charter rate and the market charter rate for an equivalent vessel. The determination of the fair value of acquired assets and assumed liabilitiesrequires management to make significant assumptions and estimates of many variables including market charter rates, expected future charter rates, the levelof utilization of its vessels and its weighted average cost of capital. The use of different assumptions could result in a material change in the fair value ofthese items, which could have a material impact on the Company’s financial position and results of operations.The amortizable value of favorable leases is amortized over the remaining life of the lease term and the amortization expense is included in the statement ofoperations in the depreciation and amortization line item.The amortizable value of favorable leases would be considered impaired if their fair market values could not be recovered from the future undiscounted cashflows associated with the asset.Management, after considering various indicators performed impairment tests on asset groups which included intangible assets as described in paragraph(f) above. No impairment loss was recognized for any of the periods presented.(i) Deferred Drydock and Special Survey Costs: The Company’s vessels are subject to regularly scheduled drydocking and special surveys which are carriedout every 30 or 60 months to coincide with the renewal of the related certificates issued by the classification societies, unless a further extension is obtainedin rare cases and under certain conditions. The costs of drydocking and special surveys is deferred and amortized over the above periods or to the nextdrydocking or special survey date if such has been determined. Unamortized drydocking or special survey costs of vessels sold are written-off to theconsolidated statement of operations in the year the vessel is sold.Costs capitalized as part of the drydocking or special survey consist principally of the actual costs incurred at the yard, spare parts, paints, lubricants andservices incurred solely during the drydocking or special survey period. For each of the years ended December 31, 2016, 2015 and 2014, the amortizationexpense was $3,093, $1,602 and $1,283, respectively. Accumulated amortization as of December 31, 2016 and 2015 amounted to $2,740 and $5,427,respectively.(j) Foreign currency translation: The Company’s functional and reporting currency is the U.S. dollar. The Company engages in worldwide commerce with avariety of entities. Although its operations may expose it to certain levels of foreign currency risk, its transactions are predominantly U.S. dollardenominated. Additionally, the Company transacted a nominal amount of its operations in Euros; however, all of the Company’s primary cash flows are U.S.dollar-denominated. Transactions in currencies other than the functional currency are F-13NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transactiondenominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized in the statement of operations.(k) Provisions: The Company, in the ordinary course of its business, is subject to various claims, suits and complaints. Management, in consultation withinternal and external advisors, will provide for a contingent loss in the financial statements if the contingency had been incurred at the date of the financialstatements and the amount of the loss was probable and can be reasonably estimated. If the Company has determined that the reasonable estimate of the lossis a range and there is no best estimate within the range, the Company will provide the lower amount of the range. The Company, through the ManagementAgreement with the Manager, participates in Protection and Indemnity (P&I) insurance coverage plans provided by mutual insurance societies known as P&Iclubs. Services such as the ones described above are provided by the Manager under the Management Agreement and included as part of the daily fee of $9.5per owned VLCC vessel (see Note 10).(l) Segment Reporting: The Company reports financial information and evaluates its operations by charter revenues and not by the length of shipemployment for its customers. The Company does not use discrete financial information to evaluate operating results for each type of charter. Managementdoes not identify expenses, profitability or other financial information by charter type. As a result, management reviews operating results solely by revenueper day and operating results of the fleet and thus the Company has determined that it operates under one reportable segment.(m) Insurance claims: Insurance claims at each balance sheet date consist of claims submitted and/or claims in the process of compilation or submission(claims pending against vessels’ insurance underwriters). They are recorded on the accrual basis and represent the claimable expenses, net of applicabledeductibles, incurred through December 31 of each reported period, which are expected to be recovered from insurance companies. Any remaining costs tocomplete the claims are included in accrued liabilities. The classification of insurance claims into current and non-current assets is based on management’sexpectations as to their collection dates.(n) Revenue and Expense Recognition:Revenue Recognition: Revenue is recorded when (i) services are rendered, (ii) the Company has signed charter agreement or other evidence of anarrangement, (iii) the price is fixed or determinable and (iv) collection is reasonably assured. Revenue is generated from the time charter of vessels.Revenues from time chartering of vessels are accounted for as operating leases and are thus recognized on a straight-line basis as the average revenue over therental periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers’ disposal for a period of timeduring which the charterer uses the vessel in return for the payment of a specified daily hire rate. Under time charters, operating costs such as for crews,maintenance and insurance are typically paid by the owner of the vessel.Profit-sharing revenues are calculated at an agreed percentage of the excess of the charterer’s average daily income (calculated on a quarterly, half-yearly orannually basis) over an agreed amount and accounted for on an accrual basis based on provisional amounts and for those contracts that provisional accrualscannot be made due to the nature of the profit share elements, these are accounted for or when such revenue becomes determinable.Revenues are recorded net of address commissions. Address commissions represent a discount provided directly to the charterers based on a fixed percentageof the agreed upon charter. Since address commissions represent a discount (sales incentive) on services rendered by the Company and no identifiable benefitis received in exchange for the consideration provided to the charterer, these commissions are presented as a reduction of revenue. F-14NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) Time Charter Expenses: Time charter expenses mostly comprise of brokerage commissions and are expensed over the period of the time charter.Direct Vessel Expense: Direct vessel expenses comprise of the amortization of drydock and special survey costs of certain vessels of our fleet.Management fees:Prior to IPO: Pursuant to a management agreement dated May 28, 2010, as amended on May 4, 2012, the Manager, provided for five years from theinception of the agreement, commercial and technical management services to the Company’s vessels for a daily fee through May 28, 2014. This daily feecovered all of the vessels’ operating expenses, other than certain fees and costs. Drydocking expenses were reimbursed at cost for VLCC vessels.In May 2014, the duration of that management agreement was extended, until May 2020 and the daily rate was reduced by 5% to $9.5 per VLCC vessel fortwo additional years through May 2016.Navios Midstream: On November 18, 2014, the Company entered into a Management Agreement with the Manager pursuant to which the Manager providescommercial and technical management services to Navios Midstream’s vessels for a daily fee of $9.5 per VLCC tanker vessel that has been fixed for the firsttwo years.In October 2016, Navios Midstream amended its existing Management Agreement with the Manager, a wholly-owned subsidiary of Navios Holdings, toextend the fixed fee period for commercial and technical management services of its fleet, until December 31, 2018 at the current rate of $9.5 per day perVLCC. Dry docking expenses are reimbursed at cost for all vessels.General and administrative expenses:Prior to IPO: Pursuant to an administrative services agreement dated May 28, 2010, the Manager provided for five years from the inception of the agreementcertain administrative management services which include: bookkeeping, audit and accounting services, legal and insurance services, administrative andclerical services, banking and financial services, advisory services, client and investor relations and other services. The Manager was reimbursed forreasonable costs and expenses incurred in connection with the provision of these services. In May 2014, the duration of that administrative servicesagreement was extended until May 2020 pursuant to its terms.Navios Midstream: On November 18, 2014, Navios Midstream entered into a new Administrative Services Agreement with the Manager, expiring onNovember 18, 2019, pursuant to which the Manager provides certain administrative management services to Navios Midstream which include: bookkeeping,audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client andinvestor relations and other services. The Manager is reimbursed for reasonable costs and expenses.Deferred Revenue: Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as revenue overthe charter period.(o) Financial Instruments: Financial instruments carried on the balance sheet include trade receivables and payables, other receivables and other liabilitiesand long-term debt. The particular recognition methods applicable to each class of financial instrument are disclosed in the applicable significant policydescription of each item, or included below as applicable. F-15NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) Financial risk management: The Company’s activities expose it to a variety of financial risks including fluctuations in future freight rates, time charter hirerates, and fuel prices, credit and interest rate risk. Risk management is carried out under policies approved by executive management. Guidelines areestablished for overall risk management, as well as specific areas of operations.Credit risk: The Company closely monitors its exposure to customers and counterparties for credit risk. The Company has entered into the ManagementAgreement with the Manager, pursuant to which the Manager agreed to provide commercial and technical management services to the Company. Whennegotiating on behalf of the Company various employment contracts, the Manager has policies in place to ensure that it trades with customers andcounterparties with an appropriate credit history.For the year ended December 31, 2016, the Company’s customers representing 10% or more of total revenue were Dalian Ocean Shipping Co. and FormosaPetrochemical Corporation, and SK Shipping Company Limited which accounted for 70.6%, 15.7% and 13.7%, respectively. For the year endedDecember 31, 2015, the Company’s customers representing 10% or more of total revenue were Dalian Ocean Shipping Co. and Formosa PetrochemicalCorporation, which accounted for 75.6% and 18.3%, respectively. For the year ended December 31, 2014, the Company’s customers representing 10% ormore of total revenue were Dalian Ocean Shipping Co. and Formosa Petrochemical Corporation, which accounted for 77.9% and 22.1%, respectively.Foreign exchange risk: Foreign currency transactions are translated into the measurement currency rates prevailing at the dates of transactions. Foreignexchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated inforeign currencies are recognized in the consolidated statement of operations.Recent Accounting PronouncementsIn August 2016, the FASB issued Accounting Standards Update No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and CashPayments” (“ASU 2016-15”). This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. Theamendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Earlyadoption is permitted for all entities. The Company is currently assessing the impact that adopting this new accounting guidance will have on itsconsolidated financial statements.In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 will apply to bothtypes of leases — capital (or finance) leases and operating leases. According to the new Accounting Standard, lessees will be required to recognize assets andliabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016-02 is effective for fiscal yearsbeginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently assessingthe impact that adopting this new accounting guidance will have on its consolidated financial statements and footnotes disclosures.In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” clarifying the method used to determine the timing and requirementsfor revenue recognition on the statements of income. Under the new standard, an entity must identify the performance obligations in a contract, thetransaction price and allocate the price to specific performance obligations to recognize the revenue when the obligation is completed. The amendments inthis update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flowarising from contracts. The new accounting guidance was originally effective for interim and annual periods beginning after December 15, 2016. On July 9, F-16NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) 2015, the FASB finalized a one-year deferral of the effective date for the new revenue standard. The standard will be effective for public entities for annualreporting periods beginning after December 15, 2017 and interim periods therein. The adoption of the new standard is not expected to have a material impacton the Company’s results of operations, financial position or cash flows.NOTE 3: CASH AND CASH EQUIVALENTSCash and cash equivalents consisted of the following: December 31, 2016 December 31, 2015 Cash at banks $49,787 $37,719 Short-term deposits 3,004 115 Total cash and cash equivalents $52,791 $37,834 The bank accounts are legally owned by the entities referenced in Note 1.Cash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event of non-performance byfinancial institutions. The Company does maintain cash deposits and equivalents in excess of government-provided insurance limits. The Company alsominimizes exposure to credit risk by dealing with a diversified group of major financial institutions.NOTE 4: ACCOUNTS RECEIVABLE, NETAccounts receivable consist of the following: December 31,2016 December 31,2015 Accounts receivable $2,264 $5,110 Less: Provision for doubtful accounts — — Accounts receivable, net $2,264 $5,110 Financial instruments that potentially subject the Company to concentrations of credit risk are accounts receivable. The Company does not believe itsexposure to credit risk is likely to have a material adverse effect on its financial position, results of operations or cash flows.NOTE 5: VESSELS, NET Cost AccumulatedDepreciation Net BookValue Balance at December 31, 2014 $387,777 $(67,548) $320,229 Additions 99,363 (19,400) 79,963 Balance at December 31, 2015 $487,140 $(86,948) $400,192 Additions 500 (22,248) (21,748) Balance at December 31, 2016 $487,640 $(109,196) $378,444 In June 2015, Navios Midstream exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste and the C. Dream fromNavios Acquisition for an aggregate purchase price of $100,000. The aggregate purchase price consisted of the issuance of 1,592,920 subordinated Series AUnits, to Navios Acquisition and $73,000 cash consideration. F-17NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) The purchase price of the Nave Celeste consisted of 884,956 subordinated Series A Units issued to Navios Acquisition, valued at $15,062 and cash of$42,000. The purchase price of the C. Dream consisted of 707,964 subordinated Series A units issued to Navios Acquisition and cash of $31,000. The numberof subordinated Series A Units issued was calculated based on a price of $16.95 per unit, which was the volume weighted average trading price of thecommon units for the twenty business days immediately prior to the date of the acquisition. For accounting purposes, the subordinated Series A Units werevalued based on the closing price of the common units on the day of the transaction, which was $17.02 per common unit. The additional capitalized costs foreach of the Nave Celeste and the C. Dream amounted to $125. The working capital acquired for the Nave Celeste and the C. Dream was $587 and $(1,586),respectively.For each of the Nave Celeste and the C. Dream purchased from Navios Acquisition, the acquisition of both vessels was effected through the acquisition of allof the capital stock of the respective vessel-owning companies, which held the ownership and other contractual rights and obligations related to each of theacquired vessels, including the respective charter-out contracts. Management accounted for each acquisition as an asset acquisition under ASC 805. At thetransaction date, the purchase price approximated the fair value of the assets acquired, which was determined based on a combination of methodologiesincluding discounted cash flow analyses and independent valuation analyses.NOTE 6: INTANGIBLE ASSETSIntangible assets as of December 31, 2016 and December 31, 2015 consisted of the following: Favorable lease terms Cost AccumulatedAmortization Net BookValue Balance at December 31, 2014 $44,877 $(13,141) $31,736 Additions — (3,286) (3,286) Balance at December 31, 2015 $44,877 $(16,427) $28,450 Additions — (3,286) (3,286) Balance at December 31, 2016 $44,877 $(19,713) $25,164 Amortization expense of favorable lease terms for the years ended December 31, 2016, 2015 and 2014 is presented in the following table: December 31,2016 December 31,2015 December 31,2014 Favorable lease terms charter-out (3,286) (3,286) (3,286) Total $(3,286) $(3,286) $(3,286) The aggregate amortizations of intangible assets will be as follows: Description WithinOneYear YearTwo YearThree YearFour YearFive Thereafter Total Favorable lease terms $(2,846) $(2,811) $(2,811) $(2,811) $(2,811) $(11,074) $(25,164) Total $(2,846) $(2,811) $(2,811) $(2,811) $(2,811) $(11,074) $(25,164) Intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives to their estimated residual value ofzero. Intangible assets are amortized over the contract periods, which range from 6.34 to 15.00 years at inception. In relation to the acquisition of the NaveCeleste and the C. Dream in June 2015, please read disclosure in Note 5. F-18NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) NOTE 7: LONG-TERM DEBTLong-term debt consisted of the following: December 31,2016 December 31,2015 Term Loan B 201,925 203,975 Less deferred finance costs, net (3,342) (4,332) Total long term debt 198,583 199,643 Less unamortized discount (1,407) (1,824) Less current portion, net of deferred finance cost (661) (643) Total Long Term Debt, net of current portion and net of deferred financecosts $196,515 $197,176 Ship Mortgage Notes:Term Loan B: On June 18, 2015, Navios Midstream and Navios Maritime Midstream Partners Finance (US) Inc. (“Navios Finance”), as co-borrowers,completed the issuance of the $205,000 Term Loan B (the “Term Loan B”). The Term Loan B is set to mature on June 18, 2020 and is repayable in equalquarterly installments of 0.25% of the initial principal amount of the Term Loan B, beginning on September 18, 2015, with a final payment of the aggregateprincipal amount of the Term Loan B, plus accrued and unpaid interest, due on the maturity. The Term Loan B bears interest at LIBOR plus 4.50% perannum.The Term Loan B requires maintenance of a loan to value ratio of no greater than 0.85 to 1.0 and a minimum interest coverage ratio of at least 3.75 to 1.0, andother restrictive covenants including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Term LoanB also provides for excess cash flow prepayments and customary events of default.Amounts drawn under the facilities are secured by first preferred mortgages on Navios Midstream’s vessels and other collateral and are guaranteed by eachvessel-owning subsidiary.Navios Midstream was in compliance with the covenants set forth in the Term Loan B as of December 31, 2016.As of December 31, 2016 and 2015, a balance of $201,925 and $203,975, respectively, was outstanding under the Term Loan B. The weighted averageinterest rate for the years ended December 31, 2016 and 2015 was 5.50% and 4.74%, respectively.The maturity table below reflects the principal payments of credit facilities outstanding as of December 31, 2016 for the next five years and thereafter arebased on the repayment schedule of the respective loan facilities (as described above). December 31,2016 Long-Term Debt Obligations: Year December 31, 2017 2,050 December 31, 2018 2,050 December 31, 2019 2,050 December 31, 2020 195,775 Total $201,925 F-19NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) NOTE 8: FAIR VALUE OF FINANCIAL INSTRUMENTSFair Value of Financial InstrumentsThe following methods and assumptions were used to estimate the fair value of each class of financial instrument:Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their fair valuebecause of the short maturity of these investments.Accounts receivable, net: Carrying amounts are considered to approximate fair value due to the short-term nature of these accounts receivables and nosignificant changes in interest rates. All amounts that are assumed to be uncollectible are written-off and/or reserved.Accounts payable: The carrying amount of accounts payable reported in the balance sheet approximates its fair value due to the short-term nature of theseaccounts payable and no significant changes in interest rates.Due from related parties: The carrying amount of due from related parties reported in the balance sheet approximates its fair value due to the short-termnature of these accounts receivable and no significant changes in interest rates.Due to related parties: The carrying amount of due to related parties reported in the balance sheet approximates its fair value due to the short-term nature ofthese accounts payable and no significant changes in interest rates.Long-term debt: The fair value of the Company’s debt is estimated based on currently available debt with similar contract terms, interest rate and remainingmaturities, as well as taking into account our creditworthiness.The fair value hierarchy is explained as follows:Level I: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets that we have the ability to access. Valuation of theseitems does not entail a significant amount of judgment.Level II: Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at themeasurement date.Level III: Inputs that are unobservable. The Company did not use any Level 3 inputs as of December 31, 2016 or 2015. December 31, 2016 December 31, 2015 Book Value Fair Value Book Value Fair Value Cash and cash equivalents $52,791 $52,791 $37,834 $37,834 Accounts receivable $2,264 $2,264 $5,110 $5,110 Due from related parties $4,864 $4,864 $2,804 $2,804 Accounts payable $2,386 $2,386 $412 $412 Due to related parties $— $— $438 $438 Long-term debt $198,583 $198,139 $199,643 $200,405 F-20NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) Fair Value MeasurementsThe estimated fair value of our financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair valuehierarchy, are as follows:Level I: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets that we have the ability to access. Valuation of theseitems does not entail a significant amount of judgment.Level II: Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at themeasurement date.Level III: Inputs that are unobservable. The Company did not use any Level 3 inputs as of December 31, 2016 or 2015. Fair Value Measurements at December 31, 2016 Using Total Level I Level II Level III Cash and cash equivalents $52,791 $52,791 $— $— Long-term debt $198,139 $— $198,139 $— Fair Value Measurements at December 31, 2015 Using Total Level I Level II Level III Cash and cash equivalents $37,834 $37,834 $— $— Long-term debt $200,405 $— $200,405 $— NOTE 9: LEASESThe future minimum contractual lease income (charter-out rates is presented net of commissions and includes backstop commitment), for which a charterparty has been concluded, is as follows: Amount 2017 86,681 2018 86,635 2019 40,777 2020 35,248 Thereafter 173,881 Total minimum lease revenue, net of commissions $423,222 NOTE 10: TRANSACTIONS WITH RELATED PARTIESManagement fees:Prior to the IPOPursuant to a management agreement dated May 28, 2010, as amended on May 4, 2012, the Manager, a subsidiary of Navios Holdings provided for five yearsfrom the inception of the agreement, commercial and technical management services to the Company’s vessels for a daily fee through May 28, 2014. Thisdaily fee covered all of the vessels’ operating expenses, other than certain fees and costs. Drydocking expenses were reimbursed at cost for VLCC vessels. F-21NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) In May 2014, the duration of the existing management agreement was extended until May 2020 and the daily rate was reduced by 5% to $9,500 per VLCCvessel for two additional years through May 2016. Drydocking expenses under this management agreement were reimbursed at cost for all vessels.Navios MidstreamOn November 18, 2014, the Company entered into a Management Agreement with the Manager, a wholly-owned subsidiary of Navios Holdings, pursuant towhich the Manager provides commercial and technical management services to Navios Midstream’s vessels for a daily fee of $9.5 per VLCC tanker vesselthat was originally fixed for the first two years.In October 2016, Navios Midstream amended its existing Management Agreement with the Manager to extend the fixed fee period for commercial andtechnical management services of its fleet, until December 31, 2018 at the current rate of $9.5 per day per VLCC. Dry docking expenses are reimbursed at costfor all vessels.Total management fees for each of the years ended December 31, 2016, 2015 and 2014 amounted to $20,862, $17,613 and $14,166, respectively.General and administrative expenses:Prior to the IPOPursuant to an Administrative Services Agreement dated May 28, 2010, the Manager provided for five years from the inception of the agreement certainadministrative management services which include: bookkeeping, audit and accounting services, legal and insurance services, administrative and clericalservices, banking and financial services, advisory services, client and investor relations and other services. The Manager is reimbursed for reasonable costsand expenses incurred in connection with the provision of these services. In May 2014, the duration of the existing administrative services agreement wasextended until May 2020 pursuant to its existing terms.Navios MidstreamOn November 18, 2014, Navios Midstream entered into the Administrative Services Agreement with the Manager, expiring on November 18, 2019, pursuantto which the Manager provides certain administrative management services to Navios Midstream which include: bookkeeping, audit and accountingservices, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations andother services. The Manager is reimbursed for reasonable costs and expenses.For the years ended December 31, 2016, 2015 and 2014, the expense arising from the administrative services rendered by the Manager to the Company’svessels amounted to $1,500, $1,014 and $800, respectively.Balances due from/ to related parties: Balances due from/ to related parties relate to amounts from/ to Navios Acquisition and its subsidiaries, as well as,Navios Holdings.Amounts due from related parties as of December 31, 2016 and as of December 31, 2015, were $4,864 and $2,804, respectively, which mainly related topayments of management fees and other expenses.There were no amounts due to Navios Acquisition as of December 31, 2016. There were amounts due to Navios Acquisition of $346 as of December 31, 2015which represented the current accounts payable to Navios Acquisition in relation to voyage expenses of the vessels. Amounts due to Navios Holdings as ofDecember 31, 2016 were $0 ($92 as of December 31, 2015). F-22NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) Omnibus Agreement: On November 18, 2014, Navios Midstream entered into an omnibus agreement, with Navios Acquisition, Navios Holdings and NaviosPartners in connection with the Navios Midstream IPO, pursuant to which Navios Acquisition, Navios Holdings, Navios Partners and their controlledaffiliates generally have agreed not to acquire or own any VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankersunder time charters of five or more years. The omnibus agreement contains significant exceptions that will allow Navios Acquisition, Navios Holdings,Navios Partners or any of their controlled affiliates to compete with Navios Midstream under specified circumstances.Under the omnibus agreement, Navios Midstream and its subsidiaries granted to Navios Acquisition a right of first offer on any proposed sale, transfer orother disposition of any of its VLCCs or any crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers and related charters ownedor acquired by Navios Midstream. Likewise, Navios Acquisition granted a similar right of first offer to Navios Midstream for any of the VLCCs, crude oiltanker, refined petroleum product tanker, LPG tanker or chemical tanker under charter for five or more years it might own. These rights of first offer will notapply to a (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of any charter or other agreement with acharter party or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third-party.Backstop Agreements: On November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream. In accordance with the termsof the backstop agreements, Navios Acquisition has provided a backstop commitment at a net rate of $35.0 per day for the Nave Celeste, $38.4 per day for theShinyo Ocean and $38.0 per day for the Shinyo Kannika. The backstop rates apply for a two-year period as of the redelivery of each of the vessels from itsoriginal charterer, if the actual rates achieved are below the agreed backstop rates for each of the vessels. Please see Note 16: Subsequent Events.General Partner Option Agreement: Navios Holdings has a ten-year option to purchase a minimum of 25% of the general partner interest held by thegeneral partner, the incentive distribution rights held by the general partner and/or the membership interests in the general partner from Navios Acquisition,each at fair market value. The option expires on November 18, 2024.Option Vessels: On November 18, 2014, Navios Midstream entered into a share purchase agreement with Navios Acquisition, pursuant to which NaviosMidstream would have options that were exercisable through November 18, 2016, to acquire the capital stock of up to seven vessel-owning subsidiaries ofNavios Acquisition that owned seven VLCC vessels and the related time charters. In June 2015, Navios Midstream exercised its option and acquired two ofthe seven vessels, the Nave Celeste and the C. Dream. In October 2016, Navios Acquisition extended the options for the Buena Suerte, the Nave Neutrino andthe Nave Electron for an additional two-year period expiring on November 18, 2018.NOTE 11: COMMITMENTS AND CONTINGENCIESThe Company is involved in various disputes and arbitration proceedings arising in the ordinary course of business. Provisions have been recognized in thefinancial statements for all such proceedings where the Company believes that a liability may be probable, and for which the amounts are reasonablyestimable, based upon facts known at the date of the financial statements were prepared. In the opinion of the management, the ultimate disposition of thesematters individually and in aggregate will not materially affect the Company’s financial position, results of operations or liquidity. F-23NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) NOTE 12: SEGMENT INFORMATIONThe Company reports financial information and evaluates its operations by charter revenues. The Company does not use discrete financial information toevaluate operating results for each type of charter. As a result, management reviews operating results solely by revenue per day and operating results of thefleet and thus the Company has determined that it operates under one reportable segment.Revenue is allocated on the basis of the geographic region in which the customer is located. For each of the years ended December 31, 2016, 2015 and 2014,all the revenues were derived from customers located in Asia. Revenues from specific geographic regions which contribute over 10% of total revenue aredisclosed separately.Vessels operate on a worldwide basis and are not restricted to specific locations. Accordingly, it is not possible to allocate the assets of these operations tospecific countries.NOTE 13: ISSUANCE OF UNITSIn connection with the initial public offering (“IPO”) of Navios Midstream in November 2014, Navios Midstream acquired all of the outstanding shares ofcapital stock of four of Navios Acquisition’s vessel-owning subsidiaries (Shinyo Ocean Limited, Shinyo Kannika Limited, Shinyo Kieran Limited andShinyo Saowalak Limited) in exchange for: (i) all of the estimated net proceeds from the IPO amounting to $110,403; (ii) $104,451 of the $126,000borrowings under Navios Midstream’s new credit facility; (iii) 9,342,692 subordinated units and 1,242,692 common units; and (iv) 381,334 general partnerunits, representing a 2.0% general partner interest in Navios Midstream, and all of the incentive distribution rights in Navios Midstream, to our GeneralPartner.In June 2015, Navios Midstream exercised its option to acquire the shares of the vessel-owning subsidiaries of the Nave Celeste and the C. Dream fromNavios Acquisition for an aggregate purchase price of $100,000. The aggregate purchase price consisted of 1,592,920 subordinated Series A Units, issued toNavios Acquisition, and $73,000 cash consideration.Upon the expiration of such subordination period in June 2018, the subordinated Series A Units will automatically convert into common units.On June 18, 2015, Navios Midstream issued 32,509 additional general partner units to the General Partner, in order the General Partner to maintain its 2%general partnership interest. The net proceeds from the issuance of the general partnership units were $551.On July 29, 2016, Navios Midstream entered into a Continuous Offering Program Sales Agreement with the Agent, pursuant to which Navios Midstream mayissue and sell from time to time through the Agent common units representing limited partner interests having an aggregate offering price of up to$25,000. As of December 31, 2016, Navios Midstream issued 333,103 common units and received net proceeds of $4,010 after deducting fees and expensesof $350. Pursuant to the issuance of the common units, Navios Midstream issued 6,798 general partnership units to its general partner in order to maintain its2.0% general partner interest. The net proceeds from the issuance of the general partnership units were $89.As of December 31, 2016, there were outstanding: 9,675,795 common units, 9,342,692 subordinated units, 1,592,920 subordinated Series A Units and420,641 general partnership units. As of December 31, 2016, Navios Acquisition owned a 59.90% limited partner interest in Navios Midstream, whichincluded a 2.0% general partner interest. F-24NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) NOTE 14: CASH DISTRIBUTIONS AND EARNINGS/ (LOSSES) PER UNITThe partnership agreement of Navios Midstream requires that all available cash is distributed quarterly, after deducting expenses, including estimatedmaintenance and replacement capital expenditures and reserves. Distributions may be restricted by, among other things, the provisions of existing and futureindebtedness, applicable partnership and limited liability company laws and other laws and regulations. The amount of the minimum quarterly distribution is$0.4125 per unit or $1.65 per unit per year and is made in the following manner: • First, 98% to the holders of common units and 2% to the General Partner until each common unit has received a minimum quarterly distributionof $0.4125 plus any arrearages from previous quarters; • Second, 98% to the holders of subordinated units and 2% to the General Partner until each subordinated unit has received a minimum quarterlydistribution of $0.4125; and • Third, 98% to all unitholders, pro rata, and 2% to General Partner, until each unit has received an aggregate amount of $0.4744.Thereafter there are incentive distribution rights held by the General Partner, which are analyzed as follows: Marginal PercentageInterestin Distributions Total QuarterlyDistributionTotal Amount CommonandsubordinatedUnitholders GeneralPartner Holders ofIDRs Minimum Quarterly Distribution $ 0.4125 98.0% 2.0% 0% First Target Distribution up to $ 0.4744 98.0% 2.0% 0% Second Target Distribution above $ 0.4744up to $ 0.5156 85.0% 2.0% 13.0% Third Target Distribution above $ 0.5156up to $ 0.6188 75.0% 2.0% 23.0% Thereafter above $ 0.6188 50.0% 2.0% 48.0% On January 23, 2015, the Board of Directors of Navios Midstream authorized its quarterly cash distribution for the period November 18, 2014 toDecember 31, 2014 of $0.1973 per unit. The distribution was paid on February 12, 2015 to all holders of record of common and general partner units onFebruary 9, 2015. The aggregate amount of the declared distribution was $3,761.On April 24, 2015, the Board of Directors of Navios Midstream authorized its quarterly cash distribution for the three month period ended March 31, 2015 of$0.4125 per unit. The distribution was paid on May 12, 2015 to all holders of record of common, subordinated and general partner units on May 6, 2015. Theaggregate amount of the distribution paid was $7,865.On July 22, 2015, the Board of Directors of Navios Midstream authorized its quarterly cash distribution for the three month period ended June 30, 2015 of$0.4125 per unit. The distribution was paid on August 12, 2015 to all holders of record of common, subordinated, Series A Units and general partner units onAugust 6, 2015. The aggregate amount of the distribution paid was $8,536.On October 19, 2015, the Board of Directors of Navios Midstream authorized its quarterly cash distribution for the three month period ended September 30,2015 of $0.4225 per unit. The distribution was paid on November 13, 2015 to all holders of record of common units, subordinated units, subordinated SeriesA units and general partner units on November 11, 2015. The aggregate amount of the distribution paid was $8,742. F-25NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) On January 22, 2016, the Board of Directors authorized its quarterly cash distribution for the three month period ended December 31, 2015 of $0.4225 perunit. The distribution was paid on February 12, 2016 to all holders of record of common, subordinated, subordinated Series A units and general partner unitson February 9, 2016. The aggregate amount of the distribution paid was $8,742.On April 21, 2016, the Board of Directors of Navios Midstream authorized its quarterly cash distribution for the three month period ended March 31, 2016 of$0.4225 per unit. The distribution was paid on May 12, 2016 to all holders of record of common, subordinated, subordinated Series A units and generalpartner units on May 6, 2016. The aggregate amount of the distribution paid was $8,742.On July 21, 2016, the Board of Directors of Navios Midstream authorized its quarterly cash distribution for the three month period ended June 30, 2016 of$0.4225 per unit. The distribution was paid on August 12, 2016 to all holders of record of common, subordinated, subordinated Series A units and generalpartner units on August 10, 2016. The aggregate amount of the distribution paid was $8,811.On October 17, 2016, the Board of Directors of Navios Midstream authorized its quarterly cash distribution for the three month period ended September 30,2016 of $0.4225 per unit. The distribution was paid on November 10, 2016 to all holders of record of common, subordinated, subordinated Series A units andgeneral partner units on November 8, 2016. The aggregate amount of the distribution paid was $8,885.For the period subsequent to the IPO, Navios Midstream calculates earnings per unit by allocating reported net income for each period to each class of unitsbased on the distribution waterfall for available cash specified in Navios Midstream’s partnership agreement, net of the unallocated earnings. Basic earningsper unit are determined by dividing net income by the weighted average number of units outstanding during the period. Basic and diluted net earnings perunit are the same because the Company does not have any potentially dilutive units outstanding for the period presented.In determining earnings per unit, the net loss for the period prior to the IPO, has been allocated to the general partner.Net loss per unit undistributed is determined by taking the distributions in excess of net income and allocating between common units, subordinated unitsand general partner units on a 98%-2% basis. F-26NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) The calculations of the basic and diluted earnings per unit are presented below. Year endedDecember 31,2016 Year endedDecember 31,2015 Year endedDecember 31,2014 Net income attributable to Navios Maritime Midstream Partners L.P.subsequent to initial public offering and limited partners’ interestin net income: $24,890 $27,072 $2,551 Earnings attributable to: Common unit holders $11,306 $12,465 $1,250 Subordinated unit holders Series A $1,906 $1,598 $— Subordinated unit holders $11,186 $12,465 $1,250 General Partner $492 $544 $51 Weighted average units outstanding (basic and diluted) Common units 9,457,455 9,342,692 9,342,692 Subordinated units Series A 1,592,920 859,740 — Subordinated units 9,342,692 9,342,692 9,342,692 General Partner 415,286 398,880 381,334 Earnings per unit (basic and diluted): Common unit holders $1.19 $1.33 $0.13 Subordinated unit holders Series A $1.20 $1.86 $— Subordinated unit holders $1.19 $1.33 $0.13 General Partner $1.19 $1.36 $0.13 Earnings per unit-distributed (basic and diluted): Common unit holders $1.69 $1.67 $0.20 Subordinated unit holders Series A $1.69 $2.33 $— Subordinated unit holders $1.69 $1.67 $0.20 General Partner $1.69 $1.70 $0.20 (Losses) per unit-undistributed (basic and diluted): Common unit holders $(0.50) $(0.34) $(0.07) Subordinated unit holders Series A $(0.49) $(0.47) $— Subordinated unit holders $(0.50) $(0.34) $(0.07) General Partner $(0.50) $(0.34) $(0.07) NOTE 15: INCOME TAXESMarshall Islands, British Virgin Islands, and Hong Kong, do not impose a tax on international shipping income. Under the laws of Marshall Islands, BritishVirgin Islands, and Hong Kong, of the companies’ incorporation and vessels’ registration, the companies are subject to registration and tonnage taxes whichhave been included in the daily management fee.In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies havingestablished an office in Greece are subject to duties towards the Greek state which are calculated on the basis of the relevant vessels’ tonnage. The payment ofsaid duties exhausts the tax liability of the foreign ship owning company and the relevant manager against any tax, duty, charge or contribution payable onincome from the exploitation of the foreign flagged vessel.Pursuant to Section 883 of the Internal Revenue Code of the United States (the “Code”), U.S. source income from the international operation of ships isgenerally exempt from U.S. income tax if the company operating the F-27NAVIOS MARITIME MIDSTREAM PARTNERS L.P.NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Expressed in thousands of U.S. Dollars except unit and per unit data) ships meets certain incorporation and ownership requirements. Among other things, in order to qualify for this exemption, the company operating the shipsmust be incorporated in a country, which grants an equivalent exemption from income taxes to U.S. corporations. All of the Company’s vessel-owningsubsidiaries satisfy these initial criteria. In addition, these companies must meet an ownership test. The management of the Company believes that thisownership test was satisfied prior to the IPO by virtue of a special rule applicable to situations where the ship operating companies are beneficially owned bya publicly traded company.For the period after the IPO, the Company believes that the second criterion can also be satisfied based on the trading volume and ownership of theCompany’s units but no assurance can be given that this will remain so in the future.NOTE 16: SUBSEQUENT EVENTSOn January 23, 2017, the Board of Directors authorized its quarterly cash distribution for the three month period ended December 31, 2016 of $0.4225 perunit. The distribution was paid on February 14, 2017 to all holders of record of common, subordinated, subordinated Series A units and general partner unitson February 9, 2017. The aggregate amount of the distribution paid was $9,019.Following the expiration of their charter contracts and the redelivery of the Nave Celeste, the Shinyo Ocean and the Shinyo Kannika in the first quarter of2017, Navios Midstream has entered into new charter contracts for the above vessels with third parties. Those contracts provide for index linked charter ratesor pool earnings as the case may be. Navios Acquisition has agreed to provide backstop commitments for a two-year period as of the redelivery of each of thevessels at a net rate of $35.0 per day for the Nave Celeste, $38.4 per day for the Shinyo Ocean and $38.0 per day for the Shinyo Kannika, if the actual ratesachieved are below the agreed backstop rates for each of the vessels. F-28

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