EXHIBIT 10.8
MORTGAGE
by
ADVENTURE THREE S.A.
as mortgagor
in favour of
HOLLANDSCHE BANK-UNIE N.V.
as mortgagee
DATED the 29th day of September, 2004
- relating to -
m.v. "FREE ENVOY"
NAUTADUTILH N.V.
ROTTERDAM
TABLE OF CONTENTS
Clause Heading Page
------ ------- ----
1. Interpretation ..................................................... 2
2. Representations and warranties ..................................... 7
3. Payment covenants .................................................. 8
4. Charging Clause .................................................... 9
5. Continuing security and other provisions ........................... 9
6. Covenants .......................................................... 10
7. Powers of Mortgagee to protect security and remedy defaults ........ 21
8. Events of Default .................................................. 22
9. Enforceability and Mortgagee's powers .............................. 24
10. Application of Moneys .............................................. 26
11. Omissions or Delay ................................................. 26
12. Delegation of Powers ............................................... 27
13. Indemnity .......................................................... 27
14. Power of Attorney .................................................. 27
15. Further Assurance .................................................. 28
16. Discharge amount; maturity date; discharge mortgage ................ 28
17. Partial Invalidity ................................................. 28
18. Notices ............................................................ 29
19. Law and jurisdiction ............................................... 30
1
THIS FIRST PREFERRED MORTGAGE is made the 29th day of September, 2004
BY:
ADVENTURE THREE S.A., a company incorporated and existing under the laws of the
▇▇▇▇▇▇▇▇ Islands, having its registered office at Ajeltake Road, Ajeltake
Island, Majuro, ▇▇▇▇▇▇▇▇ Islands MH96960 (the "Mortgagor")
IN FAVOUR OF:
HOLLANDSCHE BANK-UNIE N.V., a company incorporated and existing under the laws
of the Netherlands, having its corporate seat at Amsterdam, the Netherlands,
acting herein through its branch office at ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (the "Mortgagee");
WHEREAS:
(1) the Mortgagor is the absolute owner of the vessel described and defined in
clause 1.1;
(2) by, and subject to and upon the terms and conditions of (i) a credit
agreement signed by the Mortgagee on the 24th day of June 2004 and signed
by the Mortgagor on the 8th day of July 2004 and in which One Adventure
S.A. assumed joint and several liability towards the Mortgagee for all
sums which Mortgagor will owe to the Mortgagee under the credit agreement
from time to time and (ii) a short-term loan agreement dated the 8th day
of July 2004 and made between the Mortgagor and the Mortgagee (as the same
may be amended, supplemented or varied from time to time together with the
therein referred to HBU General Credit Provisions dated January 1999 the
"Financial Agreement", copies of which are annexed hereto as Exhibit A, B
and C respectively), the Mortgagee agreed to make available to the
Mortgagor by way of an overdraft facility the amount of USD 6,000,000.00
(six million United States Dollars) (the "Loan");
(3) it is a condition of the Financial Agreement that the Mortgagor shall
execute to the Mortgagee a first preferred mortgage over the Vessel (as
hereinafter defined) for securing the Outstanding Indebtedness (as
hereinafter defined) in the form herein set out;
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(4) the Mortgagor in order to secure the repayment of the Loan and the payment
of interest thereon and all other sums of moneys from time to time owing
to the Mortgagee under the Financial Agreement and the performance and
observe of and compliance with all the covenants, terms and conditions
contained in the Financial Agreement and this Mortgage, has duly
authorized the execution and delivery of this Preferred Mortgage under and
pursuant to Chapter 3 of the Maritime Act, 1990 of the ▇▇▇▇▇▇▇▇ Islands
(as amended) which is executed by the Mortgagor in consideration of the
Mortgagee making available the Loan.
NOW THIS MORTGAGE PROVIDES as follows:
1. Interpretation
1.1 In this Mortgage unless the context otherwise requires:
"Business Day" means a day on which the banks are open for business in
Amsterdam, London and New York (whichever is applicable) for all kinds of
business as contemplated herein and/or the Financial Agreement;
"DOC" means a document of compliance issued to an Operator in accordance
with the ISM Code;
"Dollars" and "USD" means the lawful currency of the United States of
America;
"Earnings" means all moneys whatsoever from time to time due or payable
actually or contingently to the Mortgagor arising out of the use or
operation of the Vessel including (but without prejudice to the generality
of the foregoing) all freight, hire and passage moneys, income arising
under pooling arrangements, compensation payable to the Mortgagor in the
event of requisition of the Vessel for hire, remuneration for salvage and
towage services, demurrage and detention moneys and damages for breach (or
payments for variation or termination) of any charterparty or other
contract for the employment of the Vessel;
"Environmental Approvals" means all approvals, licences, permits,
exemptions or authorisations required under applicable Environmental Laws;
"Environmental Claim" means:
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(a) any claim by, or directive from, any applicable governmental, judicial or
other regulatory authority alleging breach of, or non-compliance with, any
Environmental Laws or Environmental Approvals or otherwise howsoever
relating to or arising out of an Environmental Incident; or
(b) any claim by any other third party howsoever relating to or arising out of
any Environmental Incident
and, in each such case, "claim" shall mean a claim for damages, clean-up costs,
compliance, remedial action or otherwise;
"Environmental Incident" means:
(a) any release of Environmentally Sensitive Material from the Vessel;
(b) any incident in which Environmentally Sensitive Material is released from
a vessel other than the Vessel and which involves collision between the
Vessel and such other vessel or some other incident of navigation or
operation, in either case, where the Vessel, the Mortgagor or the Manager
are actually or allegedly at fault or otherwise liable (in whole or in
part); or
(c) any incident in which Environmentally Sensitive Material is released from
a vessel other than the Vessel and where the Vessel is actually
potentially liable to be arrested as a result and/or where the Mortgagor
or the Manager are actually or allegedly at fault or otherwise liable;
"Environmental Laws" means all laws, regulations, conventions and agreements
whatsoever relating to pollution or protection of the environment (including,
without limitation, the United States Oil Pollution Act of 1990 and any
comparable laws of the individual States of the United States of America);
"Environmentally Sensitive Material" means oil, oil products, any other
substance which is polluting, toxic or hazardous or any substance the release of
which into the environment is regulated, prohibited or penalised by or pursuant
to any Environmental Law;
"Event of Default" means any one of the events of default specified and referred
to
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in the Financial Agreement and/or clause 8;
"Financial Agreement" has the meaning given in recital (2) hereto;
"Insurances" means all policies and contracts of insurance (which expression
includes without limitation all entries of the Vessel in a protection and
indemnity or war risks association) which are from time to time in place or
taken out or entered into by or for the benefit of the Mortgagor in respect of
the Vessel and her Earnings or otherwise howsoever in connection with the Vessel
and all the benefits thereof including all claims of whatsoever nature and
return of premiums;
"ISM Code" means the International Safety Management Code for the Safe Operation
of Ships and for Pollution Prevention constituted pursuant to Resolution A.741
(18) of the International Maritime Organisation and incorporated into the Safety
of Life at Sea Convention and includes any amendments or extensions of it and
any regulation issued pursuant to it;
"Loan" has the meaning given in recital (2) hereto;
"Major Casualty Amount" means USD 100,000.00 (one hundred thousand United States
Dollars) or the equivalent thereof in any other currency;
"Manager" means such manager of the Vessel as approved by the Mortgagee in
writing;
"Operator" means any entity who is at any time during the Security Period
concerned in the operation of the Vessel and falls within the definition of
"Company" set out in the ISM Code;
"Outstanding Indebtedness" means (a) the aggregate of all sums of money actual
or contingent, present or future due by the Security Parties as joint and
several obligors to the Mortgagee under or in connection with the Security
Documents or any of them and (b) all costs and expenses incurred in connection
with the Security Documents, including any taxes payable by the Mortgagee (other
than on net profit), as well as any reasonable costs and expenses incurred by
the Mortgagee in connection with the Mortgagor's failure to comply with or
fulfil any obligation under the Security Documents at the time and in the manner
required,
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including collection charges, disbursements, fees of legal consultants and other
experts and costs of proceedings, irrespective against whom brought;
"Requisition Compensation" means all moneys or other compensation payable by
reason of requisition for title or other compulsory acquisition of the Vessel
otherwise than by requisition for hire;
"Security Documents" means the Financial Agreement, this Mortgage and any other
such document as may be executed from time to time to secure and/or regulate the
Outstanding Indebtedness;
"Security Interest" means a mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment or other security interest or
arrangement of any kind whatsoever;
"Security Parties" means the Mortgagor and One Adventure S.A., having its
registered office at Ajeltake Road, Ajeltake Island, Majuro, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇;
"Security Period" means the period commencing on the date of this Mortgage and
terminating on the date upon which all moneys payable or to become payable from
time to time pursuant to the terms of the Financial Agreement, this Mortgage
and/or any of the other Security Documents shall have been paid and discharged
in full;
"SMC" means a safety management certificate issued in respect of the Vessel in
accordance with the ISM Code;
"Total Loss" means:
(a) actual or constructive or compromised or arranged total loss of the
Vessel;
(b) requisition for title or other compulsory acquisition of the Vessel
otherwise than by requisition for hire;
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(c) capture seizure arrest detention or confiscation of the Vessel by
any government or entity or individual acting or purporting to act
on behalf of any government unless the Vessel be released and
restored to the Mortgagor from such capture seizure arrest detention
or confiscation within thirty (30) days after the occurrence
thereof;
"Vessel" means the ▇▇▇▇▇▇▇▇ Islands flag vessel "Free Envoy" with Official
Number 2161, gross tonnage approximately 15,715, net tonnage approximately
9,106, built in 1984 by Kurushima yard, Ehime, Japan and includes her
engines, machinery, boats, tackle, outfit, equipment, spare gear, fuel,
consumable or other stores, belongings and appurtenances whether on board
or ashore and whether now owned or hereafter required.
1.2 In clause 6.1:
"excess risks" means the proportion (if any) of claims for general average
and salvage charges and under the Institute Collision Clause not
recoverable in consequence of the value at which a vessel is assessed for
the purpose of such claims exceeding her insured value;
"protection and indemnity risks" means the usual risks (including
pollution and a Freight Demurrage and Defence cover) covered by a
protection and indemnity association including the proportion (if any) not
recoverable in case of collision under the Institute Collision Clause;
"war risks" includes the risks of mines and all risks excluded from the
standard form of English marine policy by the Institute War Exclusion
Clause.
1.3 This Mortgage shall be read together with the Financial Agreement, but in
the case of conflict between the two instruments the provisions of the
Financial Agreement shall prevail in as far as it does not contravene the
laws of the ▇▇▇▇▇▇▇▇ Islands.
1.4 In this Mortgage:
(a) clause headings are inserted for convenience of reference only and
shall be ignored in the interpretation of this Mortgage;
(b) unless the context otherwise requires, words denoting the singular
number
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shall include the plural and vice versa;
(c) references to clauses and schedules shall be construed as references
to clauses of and schedules to this Deed;
(d) an "entity" shall be construed to include any firm, company,
association, partnership (whether or not having separate legal
personality), institution, government (local, national or
supranational), state, agency or sub division thereof or
international organisation;
(e) reference to any document including this Mortgage shall be construed
as reference to such document as amended supplemented or varied from
time to time;
(f) words and expressions defined in the Financial Agreement shall,
unless it is stated otherwise herein, have the same meaning when
used in this Mortgage; and
(g) the Mortgagee, the Mortgagor, the Security Parties and any other
entity or individual shall include their respective successors in
title, estates and, in the event of an assignment permitted under
this Mortgage, assignees.
2. Representations and warranties
2.1 The Mortgagor hereby represents and warrants to the Mortgagee that:
(a) it is fully entitled to grant this Mortgage and further to agree the
terms and conditions hereof;
(b) it is the sole, absolute, legal and beneficial owner of the Vessel;
(c) save for an existing time charter agreement between the Mortgagor
and Express Sea Transport Corporation of Panama City, Republic of
Panama dated the 14th day of April 2004, the Vessel is not subject
to any charter which, if entered into after the date of this
Mortgage, would have required the consent of the Mortgagee under
clause 6.1 (k) and there is no existing agreement or arrangement
whereby the Earnings may be shared with any other entity or
individual;
8
(d) the Vessel is not subject to any charge and/or encumbrance (save as
constituted by the Security Documents or otherwise permitted by the
terms thereof); and
(e) the Operator has obtained and maintains a DOC (a true copy of which
has been delivered to the Mortgagee) and has obtained and maintains
a SMC (a true copy of which has been delivered to the Mortgagee) in
respect of the Vessel, both are in full force and effect and nothing
has happened which might cause either to be withdrawn.
2.2 The Mortgagor hereby further represents and warrants to the Mortgagee
that:
(a) all applicable Environmental Laws and Environmental Approvals
relating to the Vessel, its operation and management and the
business of the Mortgagor (as now conducted and as reasonably
anticipated to be conducted in the future) have been complied with;
(b) no Environmental Claim has been made or threatened against the
Mortgagor, the Manager or otherwise in connection with the Vessel;
and
(c) no Environmental Incident has occurred.
3. Payment covenants
The Mortgagor hereby covenants duly to observe and perform all its
obligations under the Financial Agreement in accordance with the terms and
conditions thereof and in particular:
(a) to repay the Loan by the instalments and on the dates referred to
and otherwise in the manner and upon the terms set out in the
Financial Agreement;
(b) to pay interest on the Loan and on other moneys payable under the
Financial Agreement at the rate or rates from time to time
applicable thereto in the manner and upon the terms set out in the
Financial Agreement;
9
(c) to pay all other moneys payable by the Mortgagor under or in
connection with the Security Documents or any of them at the times
and in the manner therein specified.
4. Charging Clause
4.1 In pursuance of the Financial Agreement and in consideration of the
premises and by way of security for payment of the Outstanding
Indebtedness and the performance of the obligations under the Financial
Agreement, this Mortgage and the other Security Documents by the
Mortgagor, the Mortgagor with full title guarantee hereby mortgages and
charges and agrees to mortgage and charge to and in favour of the
Mortgagee all its right, title and interest (present and future) to and in
the Vessel TO HAVE AND HOLD the same unto and in favour of the Mortgagee
forever upon the terms set forth in this Mortgage to secure the
Outstanding Indebtedness and further to secure the performance and
observance of and the compliance with the covenants, terms and conditions
in the Financial Agreement, this Mortgage and the other Security Documents
contained.
4.2 Notwithstanding anything to the contrary in this Mortgage it is not
intended that any provision of this Mortgage shall waive the preferred
status of this Mortgage and that if any provision or part thereof in this
Mortgage shall be construed as waiving the preferred status of this
Mortgage, then such provisions shall to such extent be void and of no
effect.
4.3 The Mortgagor shall remain liable to perform all the obligations assumed
by it in relation to the Vessel and the Mortgagee shall not be under any
obligation of any kind whatsoever in respect thereof or be under any
liability whatsoever in event of any failure by the Mortgagor to perform
its obligations in respect thereof.
5. Continuing security and other provisions
It is declared and agreed that:
(a) the security created by this Mortgage and the other Security
Documents shall be held by the Mortgagee as a continuing security
for the payment of the Outstanding Indebtedness and the performance
and observance of and compliance with all obligations of the
Mortgagor under the Security Documents or any of them, express or
implied;
10
(b) the security so created shall not be satisfied by any intermediate
payment or satisfaction of any part of the Outstanding Indebtedness
and shall be in addition to and shall not in any way prejudice or
affect and may be enforced by the Mortgagee without prior recourse
to the security created by any other of the Security Documents or by
any other security now or hereafter held by the Mortgagee and shall
not in any way be prejudiced or affected thereby or by the
invalidity or unenforceability thereof or by the Mortgagee
releasing, modifying or refraining from perfecting or enforcing any
of the same or granting time or indulgence or compounding with any
liable entity or individual;
(c) all the rights, remedies and powers vested in the Mortgagee under
this Mortgage shall be in addition to and not a limitation of any
and every other right, power or remedy vested in the Mortgagee under
any other of the Security Documents or at law (whether ▇▇▇▇▇▇▇▇
Islands or otherwise) and that all the powers so vested in the
Mortgagee may be exercised from time to time and as often as the
Mortgagee may deem expedient; and
(d) the Mortgagee shall not be obliged to make any enquiry as to the
nature or sufficiency of any payment received by it under this
Mortgage or to make any claim or to take any action or to enforce
any rights and benefits hereby assigned to the Mortgagee or to which
the Mortgagee may at any time be entitled under this Mortgage.
6. Covenants
6.1 The Mortgagor further covenants with the Mortgagee throughout the Security
Period:
(a) Insurance
(i) to insure and keep the Vessel insured at the expense of the
Mortgagor against:
(A) fire and usual marine risks (including excess risks);
(B) war risks;
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(C) protection and indemnity risks (including pollution
risks and a freight demurrage and defence cover); and
(D) where the Vessel shall, at any time enter waters under
the jurisdiction of the United States of America and/or
the Exclusive Economic Zone (as defined in the United
States Oil Pollution Act of 1990), oil pollution
liability risks in excess of the cover for oil pollution
liability risks included within the cover for protection
and indemnity risks;
and, at the option of the Mortgagee, either (i) to effect and
keep effected, in the name and for the benefit of the
Mortgagee, but at the expense of the Mortgagor or (ii) to
reimburse the Mortgagee on demand for any and all costs
incurred by it in effecting and maintaining such insurance in
relation to the Vessel:
(E) a mortgagee's interest insurance; and
(F) where the Vessel shall, at any time enter waters under
the jurisdiction of the United States of America and/or
the Exclusive Economic Zone (as defined in the United
States Oil Pollution Act of 1990) insurance against the
possible consequences of pollution due to, without
limitation, oil or any other substance involving the
Vessel including, without limitation, the risk of
expropriation or sequestration of the Vessel or the
imposition of any Security Interest having priority over
the Mortgage ("Mortgagee's Interest Insurance -
Additional Perils (Pollution)");
(ii) to effect and keep effected the Insurances (if not effected by
the Mortgagee) in such amounts and in such currency and upon
such terms and through such brokers (hereinafter called the
"approved brokers") and with such insurance companies,
underwriters, war risks and protection and indemnity
associations (hereinafter called the "approved associations")
as shall from time to time be approved in writing by the
Mortgagee PROVIDED HOWEVER
12
that the insurances against war risks and protection and
indemnity risks may be effected by the entry of the Vessel
with such war risks and protection and indemnity risks
associations as shall from time to time be approved in writing
by the Mortgagee and if so required by the Mortgagee (but
without, as between the Mortgagor and the Mortgagee, liability
on the part of the Mortgagee for premiums or calls) with the
Mortgagee named as co-assured;
(iii) if any of the Insurances forms part of a fleet cover, to
procure that the approved brokers and (as the case may be) the
approved associations shall undertake to the Mortgagee that
they shall neither set off against any claims in respect of
the Vessel any premiums due in respect of other vessels under
such fleet cover or any premiums due for other insurances, nor
cancel such insurance in respect of the Vessel for reason of
non-payment of premiums for other vessels under such fleet
cover or of premiums for such other insurances and shall
undertake to issue a separate policy in respect of the Vessel
if and when so requested by the Mortgagee;
(iv) at least fourteen (14) days before the relevant policies,
contracts or entries expire, to notify the Mortgagee in
writing of the names of the brokers and/or the war risks and
protection and indemnity risks associations proposed to be
employed by the Mortgagor for the purposes of the renewal of
such insurances (subject to the Mortgagee's approval of such
brokers and/or associations) and of the amounts in which such
insurances are proposed to be renewed and the risks to be
covered and, (subject to compliance with any requirements of
the Mortgagee pursuant to this clause 6.1(a)), to renew (or
procure the renewal of) such Insurances at least ten (10) days
before the relevant policies, contracts or entries expire and
to procure that such brokers and (as the case may be) such
associations will at least seven (7) days before such expiry
confirm such renewals in writing to the Mortgagee;
(v) punctually to pay all premiums, calls, contributions or other
sums payable in respect of the Insurances and to produce all
relevant receipts or other evidence if and when so required by
the Mortgagee;
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(vi) to arrange for the execution of such guarantees or indemnities
as may from time to time be required by or in connection with
any protection and indemnity or war risks association or
required by or in connection with a usual marine risks policy
(including excess risks and war risks);
(vii) to procure that the interest of the Mortgagee shall be duly
endorsed upon all slips, cover notes, policies, certificates
of entry or other instruments of insurance issued or to be
issued in connection with the Insurances by means of a loss
payable and notice of cancellation clause and a notice of
assignment (signed by the Mortgagor) in such forms as from
time to time required by the Mortgagee;
(viii) to procure that all instruments of the Insurances shall be
deposited with the approved brokers and that such brokers
shall (if so required by the Mortgagee) furnish the Mortgagee
with pro forma copies thereof and a letter or letters of
undertaking in such form as may from time to time be required
by the Mortgagee;
(ix) to procure that the protection and indemnity and/or war risks
associations wherein the Vessel is entered shall (if so
required by the Mortgagee) furnish the Mortgagee with a letter
or letters of undertaking in such form as may from time to
time be required by the Mortgagee;
(x) not to employ the Vessel or suffer the Vessel to be employed
otherwise than in conformity with the terms of the instruments
of the Insurances (including any warranties express or implied
therein) without first obtaining the consent to such
employment of the insurers and complying with such
requirements as to extra premium or otherwise as the insurers
may prescribe;
(xi) to reimburse to the Mortgagee on demand any costs or expenses
incurred by the Mortgagee in obtaining (if and when so
required by the Mortgagee) reports from an independent marine
insurance broker appointed by the Mortgagee as to the adequacy
of the
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insurances effected or proposed to be effected pursuant to
this clause 6 and procure that there is delivered to such
broker any and all such information in relation to such
insurances as such broker may require;
(xii) not to make, do, consent or agree to any act or omission which
would or might render any instrument of insurance invalid,
void, voidable or unenforceable or render any sum paid
thereunder repayable in whole or in part;
(xiii) to do all things necessary and provide all documents,
evidence and information to enable the Mortgagee to collect or
recover any moneys which shall at any time become due in
respect of the Insurances;
(xiv) to apply such sums receivable in respect of the Insurances
other than in respect of a Total Loss and any major casualty
(that is to say any casualty the claim in respect of which
exceeds the Major Casualty Amount inclusive of any deductible)
which shall be payable to the Mortgagee as are paid to the
Mortgagor for the purpose of making good the loss and fully
repairing all damage in respect whereof the insurance moneys
shall have been received;
(xv) to make all such quarterly or other voyage declaration as may
from time to time be required by the protection and indemnity
risks association to maintain cover for trading (including,
without limitation, trading to the United States of America
and Exclusive Economic Zone (as defined in the United States
Oil Pollution Act 1990))
PROVIDED ALWAYS THAT the Mortgagee shall be entitled to review the
requirements of this clause 6.1 (a) from time to time in order to
take account of significant changes in circumstances after the date
of this Mortgage (such changes in circumstances include, without
limitation, changes in the availability or the cost of insurance
coverage). The Mortgagee may notify the Mortgagor in writing from
time to time of any proposed modification to the requirements of this
clause 6.1(a) which it deems appropriate in the circumstances, and
such modification shall take
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effect on and from the date it is notified in writing to the
Mortgagor as an amendment to this clause 6.1(a) and shall bind the
Mortgagor accordingly;
(b) Name and Registration
not to change the name of the Vessel and to keep the Vessel
registered with full registration as a ▇▇▇▇▇▇▇▇ Island ship in the
Republic of the ▇▇▇▇▇▇▇▇ Islands at the Port of Majuro in the name
of the Mortgagor and not do or suffer to be done anything, or omit
to do anything, the doing or omission of which could or might result
in the Vessel being required to be registered otherwise than as a
▇▇▇▇▇▇▇▇ Islands ship in the Republic of ▇▇▇▇▇▇▇▇ Islands at the
Port of Majuro and not to do or suffer to be done anything, or omit
to do anything, the doing or omission of which could or might result
in such registration being forfeited, terminated or imperilled and
not to register the Vessel or permit its registration under any
other name, flag or at any other port or with any other numbers
without the prior written consent of the Mortgagee and to procure
the renewal of such registration of the Vessel as a ▇▇▇▇▇▇▇▇ Islands
ship with full registration at least one month before the same shall
expire;
(c) Operator
(i) to comply and to procure that the Operator will comply with,
and ensure that the Vessel and the Operator at all times
comply with, the requirements of the ISM Code;
(ii) immediately to inform and to procure that the Operator will
inform the Mortgagee if there is any threatened or actual
withdrawal of its or the Operator's DOC or the Vessel's SMC;
and
(iii) promptly to inform and to procure that the Operator will
promptly inform the Mortgagee upon the issue to the Mortgagor
or the Operator of a DOC and to the Vessel of a SMC;
(d) Employment
not knowingly to employ the Vessel or suffer its employment in any
trade or business which is forbidden by international law or is
otherwise illegal
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or in carrying illegal or prohibited goods or in any manner
whatsoever which may render the Vessel or its cargo liable to
condemnation in a Prize Court or to penalty, destruction, seizure or
confiscation and in the event of any major political confrontation
or hostilities (whether or not war shall have been formally
declared) or during any civil war or insurrection, not to carry or
permit to be carried on or in the Vessel any cargo that is or may be
declared contraband of war or that may render the Vessel or its
cargo liable to penalty, destruction, seizure, or confiscation
unless special war risks policies previously approved by the
Mortgagee shall have been effected prior to undertaking any such
risk and to deliver the signed cover notes in respect thereof
forthwith to the Mortgagee;
(e) Encumbrances, sale or other disposal
(i) not without the previous consent in writing of the Mortgagee
to create or suffer the creation of any Security Interest on
or in respect of the Vessel to or in favour of any entity or
individual other than the Mortgagee;
(ii) not without the previous consent in writing of the Mortgagee
(and then only subject to such terms as the Mortgagee may
impose) to sell agree to sell transfer or abandon or otherwise
dispose of the Vessel or any share or interest therein;
(f) Prevention of and release from arrest
to pay and discharge all debts and liabilities which may give rise
to maritime statutory or possessory liens on the Vessel or to claims
enforceable by actions in rem against the Vessel or similar process
so as to keep her free from arrest or detention and in the event of
arrest or detention of the Vessel being threatened or effected
forthwith to notify the Mortgagee thereof and to take all steps and
to make all payments necessary to obtain the release of the Vessel
from such arrest or detention within thirty days from receiving
notice thereof;
(g) Repair and Class
to maintain the Vessel in her present class, and (subject to clause
6.1(q)) to
17
keep her and her machinery, auxiliaries and all equipment at such
times in thoroughly good and seaworthy condition and in such
condition as to make her comply with all regulations and
requirements of the laws and Government of the Republic of Liberia
of any country where the Vessel may come and to renew and replace
all parts and equipment as and when they may become worn out,
damaged or lost by others of a similar nature and of at least equal
value;
(h) Surveys
to submit the Vessel to such periodical or other surveys as may be
required for classification purposes and if so required to supply to
the Mortgagee copies of all survey reports issued in respect
thereof;
(i) Inspections
to permit the Mortgagee to inspect the condition of the Vessel at
all reasonable times and to give the Mortgagee sufficient notice
whenever practicable of dry-dockings, surveys and major repairs so
as to enable the Mortgagee's surveyors or other entity or individual
appointed by it to attend thereat and if so required to supply to
the Mortgagee copies of survey reports on the Vessel;
(j) Modification, Removal of Parts, Equipment owned by third parties
not without the prior written consent of the Mortgagee to:
(i) make any modification to the Vessel in consequence of which
her structure, type or performance characteristics could or
might materially be altered or her value materially reduced;
or
(ii) remove any material part of the Vessel or any equipment the
value of which is such that its removal from the Vessel would
materially reduce the value of the Vessel without replacing
the same with equivalent parts or equipment owned by the
Mortgagor free from encumbrances; or
(iii) install on the Vessel any equipment owned by a third party
which
18
cannot be removed without causing damage to the structure or
fabric of the Vessel and not to permit any of the foregoing by
any third party;
(k) Chartering
not without the prior written consent of the Mortgagee, which shall
not unreasonably be withheld, to:
(i) let the Vessel on demise charter for any period; or
(ii) let the Vessel on time or consecutive voyage charter or
otherwise dispose of the Vessel, except for an existing time
charter agreement between the Mortgagor and Express Sea
Transport Corporation of Panama City, Republic of Panama dated
the 14th day of April 2004 and a time or consecutive voyage
charter agreement for a period which does not exceed or which
by virtue of any optional extensions therein contained is not
likely to exceed twelve (12) months'duration; or
(iii) charter the Vessel on terms whereby more than three (3)
months' hire is payable in advance;
(l) Information
to supply to the Mortgagee on request full information regarding the
Vessel, her employment, position and engagements, particulars of all
towages and salvages and copies of all charters and other contracts
concerning the Vessel;
(m) Notification of certain events
to notify the Mortgagee forthwith by letter or in case of urgency by
telefax of any accident to the Vessel involving repairs the cost
whereof is likely to exceed the Major Casualty Amount, of any
occurrence whereby the Vessel has or is likely to become a Total
Loss, of any actual or threatened arrest, detention, seizure,
confiscation or requisition of the Vessel, of any requirement of
insurers, classification society or any competent authority
19
which is not immediately carried out and of any petition or notice
or meeting to consider any resolution to dissolve wind-up or
liquidate the Mortgagor;
(n) Reimbursement
to pay to the Mortgagee on demand all moneys whatsoever which the
Mortgagee shall or may expend be put to or become liable for in or
about the protection maintenance or enforcement of the security
created by this Mortgage and the other Security Documents or in or
about the exercise by the Mortgagee of any of the powers vested in
it hereunder or thereunder and to pay interest thereon at the
default rate as per the Financial Agreement;
(o) Costs
to pay on demand to the Mortgagee (or as it may direct) the amount
of all investigation and legal expenses of any kind whatsoever stamp
duties (if any) registration fees and any other charges incurred by
the Mortgagee in connection with the preparation completion
registration and discharge of the Security Documents or otherwise in
connection with the Outstanding Indebtedness and the security
therefor and to pay interest thereon at the default rate as per the
Financial Agreement;
(p) Manager
not without the previous consent in writing of the Mortgagee (and
then only on and subject to such terms as the Mortgagee may impose)
to appoint a manager of the Vessel other than the Manager;
(q) Repairers' liens
not without the previous consent in writing of the Mortgagee to put
the Vessel into the possession of any entity or individual for the
purpose of work being done upon her in an amount exceeding or likely
to exceed the Major Casualty Amount, unless such entity or
individual shall first have given to the Mortgagee and in terms
satisfactory to it a written undertaking not to exercise any lien on
the Vessel or her Earnings for the
20
cost of such work or otherwise;
(r) Payment of outgoings and evidence of payment
promptly to pay all tolls dues and other outgoings whatsoever in
respect of the Vessel and her Earnings and Insurances and to keep
proper books of account in respect of the Vessel and her Earnings
and as and when the Mortgagee may so require to make such books
available for inspection on behalf of the Mortgagee and furnish
satisfactory evidence that the wages allotments the premiums for
social insurances and pension contributions of the master and crew
are being regularly paid and that all deductions from crew's wages
in respect of ▇▇▇▇▇▇▇▇ Islands tax liability are being properly
accounted for and that the master has no claim for disbursements
other than those incurred by him in the ordinary course of trading
on the voyage then in progress;
(s) Notice on board Vessel
to carry a certified copy of this Mortgage with the Vessel's papers
on board and exhibit it on demand to any person having business with
the Vessel or to any representative of the Mortgagee and to place
and keep prominently displayed in the chartroom and in the master's
cabin of the Vessel a notice, printed in plain type of such size
that the paragraph of reading matter shall cover a space not less
than six inches wide by nine inches high, framed, reading as
follows:
"NOTICE OF MORTGAGE
This Vessel is covered by a FIRST PREFERRED SHIP MORTGAGE to
HOLLANDSCHE BANK-UNIE N.V. under the authority of the Maritime ▇▇▇
▇▇▇▇ of the Republic of the ▇▇▇▇▇▇▇▇ Islands (as amended). Under the
terms of said Mortgage, neither the Owner, any charterer nor the
Master of the Vessel nor any other person has any right, power or
authority to create, incur or permit to be imposed upon this vessel
any lien whatsoever other than for crew's wages or salvage."; and
21
(t) Libel
if a libel be filed against the Vessel or the Vessel be otherwise
attached, levied upon or taken into custody by virtue of any legal
proceedings in any Court, to promptly notify the Mortgagee thereof
by telex or fax confirmed by a letter at its office as herein
referred to and within thirty (30) days cause the Vessel to be
released and all liens thereon to be discharged except for this
Mortgage and promptly notify the Mortgagee within 48 (forty-eight)
hours after is has become known to the Mortgagor of any average or
salvage incurred by the Vessel.
6.2 The Mortgagor hereby further covenants with the Mortgagee that throughout
the Security Period it will:
(a) comply, or procure compliance with, all Environmental Laws and
Environmental Approvals relating to the Vessel, its operation or
management and the business of the Mortgagor from time to time;
(b) notify the Mortgagee forthwith upon:
(i) any Environmental Claim being made against the Mortgagor, the
Manager or otherwise in connection with the Vessel; and
(ii) any Environmental Incident occurring; and
(c) keep the Mortgagee advised, in writing on such regular basis and in
such detail as the Mortgagee shall require, of the Mortgagor's
response to such Environmental Claim or Environmental Incident.
7. Powers of Mortgagee to protect security and remedy defaults
7.1 The Mortgagee shall without prejudice to its other rights and powers under
this Mortgage and the other Security Documents be entitled (but not bound)
at any time and as often as may be necessary to take any such action as it
may in its discretion think fit for the purpose of protecting or
maintaining the security created by this Mortgage (including, without
limitation, such action as is referred to in clause 7.2) and each and
every expense, liability, or loss (including, without limitation, legal
fees) so incurred by the Mortgagee in or about the protection or
22
maintenance of the said security together with default interest as per the
Financial Agreement payable thereon shall be repayable to it by the
Mortgagor on demand.
7.2 Without prejudice to the generality of clause 7.1:
(a) if the Mortgagor does not comply with the provisions of clause
6.1(a) the Mortgagee shall be entitled (but not bound) to effect or
to replace and renew and thereafter to maintain the Insurances in
such manner as in its discretion it may think fit and to require
that all policies, contracts and other records relating to the
Insurances (including details of any correspondence concerning
outstanding claims) be forthwith delivered to such brokers as the
Mortgagee may nominate and to collect, recover, compromise and give
a good discharge for all claims then outstanding or thereafter
arising under the Insurances or any of them and to take over or
institute (if necessary using the name of the Mortgagor) all such
proceedings in connection therewith as the Mortgagee in its absolute
discretion may think fit and to permit the brokers through whom the
collection or recovery is effected to charge the usual brokerage
therefor; and
(b) if the Mortgagor does not comply with the provisions of clauses
6.1(g), 6.1(h) and 6.1(i) or any of them the Mortgagee shall be
entitled (but not bound) to arrange for the carrying out of such
repairs to and/or surveys of the Vessel as it deems expedient or
necessary; and
(c) if the Mortgagor does not comply with the provisions of clauses
6.1(f) and 6.1(r) or any of them the Mortgagee shall be entitled
(but not bound) to pay and discharge all such debts, damages and
liabilities and all such tolls, dues, taxes, assessments, charges,
fines, penalties and other outgoings as are therein mentioned and/or
to take any such measures as it deems expedient or necessary for the
purpose of securing the release of the Vessel.
8. Events of Default
Upon the happening of any of the following events the Outstanding
Indebtedness shall immediately become due and payable to the Mortgagee
without notice and
23
without the necessity of any Court declaration to the effect that an Event
of Default has taken place:
(a) any of the Security Parties fails to pay any sum of money payable
under any of the Security Documents on the date stipulated for
payment of such sum; or
(b) any of the Security Parties does not observe or perform or fails in
the punctual performance or observance of any undertaking covenant
obligation or other provision contained in any of the Security
Documents; or
(c) a petition is filed or an order is made or an effective resolution
is passed for the dissolution or winding up of any of the Security
Parties or a receiver, administrative receiver, administrator or a
similar officer is appointed of the undertaking or property of any
of the Security Parties or any of the Security Parties suspends
payment or ceases to carry on its business or make special
arrangements for composition with its creditors or anything
analogous to any of the foregoing events occurs under the law of any
applicable jurisdiction; or
(d) anything is done or suffered, or omitted to be done or occurs, which
in the reasonable opinion of the Mortgagee imperils the security
created by the Security Documents; or
(e) the Vessel becomes a Total Loss; or
(f) it becomes impossible or unlawful of the any of the Security Parties
to fulfil any of the covenants and obligations on its part to be
fulfilled as contained in the Security Documents or for the
Mortgagee to exercise the rights or any of them vested in it under
the Security Documents; or
(g) anything is done or suffered or omitted to be done by of the any of
the Security Parties which in the reasonable opinion of the Mortgage
may imperil or materially decrease the value of the security created
by the Security Documents or any of them; or
24
(h) there is in the opinion of the Mortgagee any material adverse change
in the financial situation of any of the Security Parties or
otherwise affecting its affairs; or
(i) if the Outstanding Indebtedness becomes immediately due and payable
to the Mortgagee in accordance with the provisions of the Financial
Agreement or any of the other Security Documents.
9. Enforceability and Mortgagee's powers
Upon the happening of any Event of Default the Mortgagee shall become
forthwith entitled to enforce the security created by this Mortgage
without prior notice and in any manner available to it and in such
sequence as the Mortgagee may in its absolute discretion prefer and when
it may see fit to put into force and to exercise all or any of the rights
powers and remedies conferred upon mortgagees by law and/or possessed by
it as mortgagee and chargee of the Vessel by virtue of this Mortgage and
in particular (without limiting the generality of the foregoing):
(a) to take possession of the Vessel;
(b) to require that all policies contracts, certificates of entry and
other records relating to the Insurances (including details of and
correspondence concerning outstanding claims) be forthwith delivered
to such brokers as the Mortgagee may nominate;
(c) to collect, recover, compromise and give a good discharge for all
claims then outstanding or thereafter arising under the Insurances
or any of them or in respect of the Earnings or any Requisition
Compensation and to take over or institute (if necessary using the
name of the Mortgagor) all such proceedings in connection therewith
as the Mortgagee in its absolute discretion thinks fit and to permit
the brokers through whom collection or recovery is effected to
charge the usual brokerage therefor;
(d) to discharge compound release or compromise claims against the
Mortgagor in respect of the Vessel which have given or may give rise
to any charge or lien on the Vessel or which are or may be
enforceable by proceedings against the Vessel;
25
(e) to terminate any charterparty in respect of the Vessel without being
responsible for any loss thereby occurred;
(f) to sell the Vessel or any share therein with or without prior notice
to the Mortgagor and with or without the benefit of any charterparty
or other contract for her employment by public auction or private
contract at such place and upon such terms as the Mortgagee in its
absolute discretion may determine with power to postpone any such
sale and without being answerable for any loss occasioned by such
sale or resulting from postponement thereof;
(g) to manage, insure, maintain and repair the Vessel and to employ or
lay up the Vessel in such manner and for such period as the
Mortgagee in its absolute discretion deems expedient and for the
purposes aforesaid the Mortgagee shall be entitled to do all acts
and things incidental or conducive thereto and in particular to
enter into such arrangement respecting the Vessel her insurance
management maintenance repair classification and employment in all
respects as if the Mortgagee was the owner of the Vessel and without
being responsible for any loss thereby incurred;
(h) to recover from the Mortgagor on demand any such losses as may be
incurred by the Mortgagee in or about the exercise of the power
vested in the Mortgagee under sub-clause (g) of this clause with
interest thereon at the default rate as per the Financial Agreement
from the date when such losses were incurred by the Mortgagee until
the date of payment whether before or after any relevant judgment;
(i) to recover from the Mortgagor on demand all expenses payments and
disbursements incurred by the Mortgagee in or about or incidental to
the exercise by it of any of the powers aforesaid together with
interest thereon at the default rate as per the Financial Agreement
from the date when such expenses payments or disbursements were
incurred by the Mortgagee until the date of payment whether before
or after any relevant judgment
PROVIDED ALWAYS that (i) the Mortgagee shall not be liable as mortgagee in
possession in respect of the Vessel to account or be liable for any loss
upon
26
realisation or for any neglect or default of any nature whatsoever in
connection therewith for which a mortgagee in possession may be liable as
such and (ii) upon any sale of the Vessel or any share therein by the
Mortgagee pursuant to sub-clause (f) of this clause the purchaser shall
not be bound to see or enquire whether the Mortgagee's power of sale has
arisen in the manner herein provided and the sale shall be deemed to be
within the power of the Mortgagee and the receipt of the Mortgagee for the
purchase money shall effectively discharge the purchaser who shall not be
concerned with the manner of application of the proceeds of sale or be in
any way answerable therefor.
10. Application of Moneys
Upon the happening of any Event of Default the Mortgagee shall become
forthwith entitled as and when it may see fit to apply any amounts
received by it from the Mortgagor and the Mortgagee shall similarly be
entitled to apply any amounts received by it in respect of:
(a) sale of the Vessel or any share therein;
(b) recovery under the Insurances;
(c) any Earnings or moneys received pursuant to the provisions of clause
9.(g);
(d) any Requisition Compensation,
in the manner as specified in the Financial Agreement.
11. Omissions or Delay
No delay, indulgence or omission of the Mortgagee to exercise any right
power or remedy vested in it under the Security Documents or any of them
shall in any way prejudice or impair such right power or remedy or be
construed as a waiver of or as acquiescence in any default by the
Mortgagor and in event of the Mortgagee at any time agreeing to waive any
such right power or remedy such waiver shall be revocable by the Mortgagee
at any time and the right power or remedy shall thereafter be again
exercisable as though there had been no such waiver.
27
12. Delegation of Powers
The Mortgagee shall be entitled at any time and as often as may be
expedient to delegate all or any of the powers and discretions vested in
it by the Security Documents or any of them (including the powers vested
in it by virtue of clause 7.2(a) and clause 14) in such manner upon such
terms and to such entities or individuals as the Mortgagee in its absolute
discretion may think fit.
13. Indemnity
13.1 The Mortgagor hereby agrees and covenants to indemnify the Mortgagee
against all losses actions claims expenses demands obligations and
liabilities whatsoever and whensoever arising which the Mortgagee may
incur in respect of, in relation to or in connection with the Vessel or
otherwise, howsoever, in relation to or in connection with any of the
matters dealt with in the Security Documents or any of them.
13.2 The Mortgagor hereby agrees and undertakes to indemnify the Mortgagee on
demand against all losses, actions, claims, expenses, demands, obligations
and liabilities sustained or incurred as result of or in connection with
any Environmental Claim being made against the Mortgagee or otherwise
howsoever arising out of any Environmental Incident.
14. Power of Attorney
14.1 The Mortgagor, by way of security and in order more fully to secure the
performance of the Mortgagor's obligations under this Mortgage, hereby
irrevocably appoints the Mortgagee as its attorney during the Security
Period for the purposes of:
(a) doing in its name all acts and executing, signing and (if required)
registering in its name all documents which the Mortgagor itself
could do, execute, sign or register in relation to the Vessel
(including without limitation, transferring title to the Vessel to a
third party and deleting the Vessel from the ▇▇▇▇▇▇▇▇ Islands Ships
Registry); provided, however, that such power shall not be
exercisable by or on behalf of the Mortgagee until this Mortgage
shall have become immediately enforceable pursuant to clause 9; and
28
(b) executing, signing, perfecting, doing and (if required) registering
every such further assurance document, act or thing as is referred
to in clause 15.
14.2 The exercise of such power as is referred to in clause 14.1(a) by or on
behalf of the Mortgagee shall not put any entity or individual dealing
with the Mortgagee upon any enquiry as to whether this Mortgage has become
enforceable nor shall such entity or individual be in any way affected by
notice that this Mortgage has not become enforceable and, in relation to
both clauses 14.1(a) and 14.1(b), the exercise by the Mortgagee of such
power shall be conclusive evidence of its right to exercise the same.
15. Further Assurance
The Mortgagor hereby further covenants at its own expense from time to
time to execute, sign, perfect, do and (if required) register any such
further assurance, document, act or thing as in the opinion of the
Mortgagee may be necessary or desirable for the purpose of more
effectually mortgaging and charging the Vessel or perfecting the security
constituted or intended to be constituted by the Security Documents.
16. Discharge amount; maturity date; discharge mortgage
16.1 For the purpose of recording this Mortgage as required by Chapter 3 of the
Maritime Act, 1990 of the ▇▇▇▇▇▇▇▇ Islands (as amended), the total amount
of this Mortgage is USD 6,000,000.00 (six million United States Dollars)
together with interest thereon, fees, commissions and performance of
mortgage covenants, and the date of maturity is the 31st day of December
2010, and the discharge amount is the same as the total amount.
16.2 Upon payment and discharge in full to the satisfaction of the Mortgagee of
the Outstanding Indebtedness, the Mortgagee shall, at the request and cost
of the Mortgagor, discharge this Mortgage.
17. Partial Invalidity
If at any time any one or more of the provisions in this Mortgage is or
becomes invalid, illegal or unenforceable in any respect under any law or
regulation, the
29
validity, legality and enforceability of the remaining provisions of this
Mortgage shall not be in any way affected or impaired thereby.
18. Notices
18.1 Any notice or other communication under this Mortgage shall be in writing
but may be given or made by telex or facsimile to:
the Mortgagor
- ADVENTURE THREE S.A.
- c/o Free Bulkers S.A.
- Akti ▇▇▇▇▇▇▇ ▇▇
- ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
- ▇▇▇▇▇▇
- telephone: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
- fax: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
the Mortgagee:
- HOLLANDSCHE BANK-UNIE N.V.
- ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
- ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
- ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
or
- ▇.▇. ▇▇▇ ▇▇▇
- ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
- ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
- telephone: ▇▇▇ ▇▇ ▇▇▇▇▇▇▇
- fax: ▇▇▇ ▇▇ ▇▇▇▇▇▇▇.
18.2 Any such notice or other communication shall be deemed to have been duly
given or made as follows:
(a) if sent by personal delivery, upon delivery at the address of the
relevant party;
(b) if sent by registered post three (3) Business Days after the date of
posting;
(c) if sent by telex, when dispatched but only if the recipient's
answerback
30
appears correctly at the start and end of the sender's telex; and
(d) if sent by facsimile, when dispatched.
Any communication by telex or facsimile sent by the Mortgagor to the
Mortgagee shall be confirmed by letter if so required by the Mortgagee.
19. Law and jurisdiction
19.1 This Mortgage shall be governed by and construed in accordance with the
laws of the ▇▇▇▇▇▇▇▇ Islands.
19.2 Subject to clause 19.3, the courts of Rotterdam, the Netherlands shall
have exclusive jurisdiction in relation to all matters which may arise out
of or connection with this Mortgage with the exclusion of any other court
of law.
19.3 For the exclusive benefit of the Mortgagee the Mortgagor agrees that the
Mortgagee reserves the right to commence proceedings in relation to any
matter which arises out of or in connection with this Mortgage in the
courts of any place in the Netherlands other than Rotterdam or any country
other than the Netherlands and which have jurisdiction to that matter.
19.4 In this clause 19 "proceedings" means proceedings of any kind, including
an application for a provisional or protective measure.
31
19.5 The Mortgagor hereby agrees that any writ, judgment or other notice of
process shall be sufficiently and effectively served on it, if served on
it at the address specified in clause 18.1.
IN WITNESS whereof the Mortgagor has caused this Mortgage to be duly executed
the day and year first written.
SIGNED ) ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
by /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ) Attorney-IN-Fact
as attorney-in-fact for )
ADVENTURE THREE S.A. )
in the presence of: )
________________________ )
1
ACKNOWLEDGEMENT
CITY OF NEW YORK )
:SS
COUNTY OF NEW YORK )
On this 21st day of September 2004, before me personally appeared, ▇▇▇▇▇▇▇▇▇ ▇.
Slangar to me known, who being by me duly sworn deposes and says that he resides
at One [????] Park Plaza, New York, New York; 10004 that he is the
Attorney-in-Fact of Adventure Three S.A., the corporation described in and which
executed the foregoing instrument and that he signed his name thereto pursuant
to authority from the Board of Directors of said corporation.
/s/ [ILLEGIBLE]
-------------------
SPECIAL AGENT
[SEAL]
[HBU LOGO] HBU GENERAL CREDIT PROVISION
consisting of:
I. General Provisions
II. General Provisions governing Overdraft
and Contingent Liability Facilities
III. General Provisions governing Loans
(January 1999)
Hollandschs Bank-Unis N.V.
Established in Amsterdam. Register
of Commerce no. 33259495.
1 DEFINITIONS
In these HBU General Credit Provisions the following expressions shall have the
following meanings:
a "Borrower" shall mean the legal or natural person or persons, both together
and individually, to whom the Credit has been or will be made available;
b "HBU" shall mean Hollandsche Bank-Unie N.V.;
c "Credit Agreement" shall mean the agreement concluded between the Borrower and
HBU in which these HBU General Credit Provisions have been stated to apply;
d "Credit" shall mean overdraft facilities and/or contingent liability
facilities and/or loans granted to the Borrower under the Credit Agreement.
2 AVAILABILITY
The"Credit will not be made available to the Borrower until all security
interests, covenants, documents and information stated in the Credit Agreement
have been provided and the other terms and conditions stipulated in the Credit
Agreement regarding availability of the Credit have also been complied with.
3 SECURITY AND COVENANTS
3.1 AGREEMENTS AND PRIORITY
Any security and covenants provided shall serve to secure all present and future
indebtedness of the Borrower to HBU on any account whatsoever, and shall be
documented using agreements to be determined by HBU or in the Credit Agreement.
Any costs involved shall be for the Borrower's account. Unless otherwise stated,
security interests in favour of HBU shall rank prior to any other charges.
3.2 MORTGAGE
If a mortgage is given, in addition to the provisions contained in the mortgage
deed, the General Terms and Conditions for Mortgages (Algemene Bepalingen voor
Hypotheekstelling) shall also apply. A mortgage interest in respect of various
registered properties shall be created by means of separate mortgages in
respect of each property individually, in each case for the full principal plus
interest and costs.
3.3 DISCLOSURE
The Borrower agrees that if third parties have provided security or covenants,
HBU may provide such third parties with information about his financial position
and any facts relating to the Credit which may be of importance to such third
parties.
4 PLURALITY OF BORROWERS/JOINT AND SEVERAL LIABILITY
If the Borrower consists of various legal or natural persons, each of them shall
irrevocably be jointly and severally liable to HBU for all present or future
indebtedness of any or all of them to HBU on account of the Credit or on any
other account whatsoever, whether as part of ordinary banking business or
Otherwise. Unless otherwise stated, notices and communications to the Borrower
first named in the Credit Agreement shall be deemed to have been given or made
to all jointly and severally liable persons. This provision shall not apply if
the Borrower is jointly and severally liable to HBU under a separate agreement
concluded to that effect.
5 NEGATIVE PLEDGE
As long as the Borrower owes HBU any sum on any account whatsoever, or may in
any manner become indebted to HBU as a result of present or future obligations,
the Borrower shall not except where such transfer forms part of his ordinary
business -, or charge, or promise to charge, all or any of his assets in favour
of a third party unless he has obtained the prior express consent of HBU.
6 INSURANCE
The Borrower shall at all times provide for sufficient and adequate insurance
against general business risks as well as the specific risks pertaining to his
line of business.
7 RESTRUCTURING CLAUSE (COMPANIES ONLY)
The Borrower shall notify HBU without delay of any changes in the structure of
his company and any subsidiaries and group companies, including changes in the
person or persons of any shareholders of the Borrower and any subsidiaries and
group companies.
8 COSTS AND EXPENSES
All costs and expenses incurred in connection with the Credit Agreement,
including any taxes payable by HBU (other than on net profit), as well as any
reasonable costs and expenses incurred by HBU in connection with the Borrower's
failure to comply with or fulfil any obligation under the Credit Agreement at
the time and in the manner required, including collection charges, fees of legal
consultants and other experts and costs of proceedings, irrespective against
whom brought, shall be for the account of the Borrower and be paid by the
Borrower on HBU's first demand.
9 INFORMATION
9.1 ANNUAL ACCOUNTS
The Borrower shall send HBU two copies of his balance sheet, profit and loss
account and notes thereto for the past financial year immediately after
completion but in any event not later than six months after the end of his
financial year.
9.2 DETAILS
The Borrower shall provide HBU, both on its first demand and unsolicited, with
any details of his financial position and business developments which may have a
material effect on his financial position.
10 GENERAL CONDITIONS
All relations between the Borrower and HBU shall be governed by the General
Conditions (Algemene Voorwaarden) of HBU. By signing the Credit Agreement the
Borrower declares that he has received a copy of said General Conditions.
II GENERAL PROVISIONS GOVERNING OVERDRAFT AND CONTINGENT LIABILITY FACILITIES
1 USE
1.1 OVERDRAFT FACILITY
An overdraft facility may be used to borrow money on current account, and if
agreed explicitly, to enter into contingent liabilities with a maximum term of
one year, such as those arising from the issuance of guarantees, the issuance of
letters of credit, the discounting of bills and any other purposes stated in the
Credit Agreement.
1.2 CONTINGENT LIABILITY FACILITY
A contingent liability facility may be used for the purpose stated in the Credit
Agreement.
2 EXPOSURE/UNUSED PART OF FACILITY
2.1 OVERDRAFT FACILITY
The limit of an overdraft facility shall always be reduced by the obligations of
the Borrower to HBU on account of:
- the current account debit balance (including accrued interest and fees);
- contingent liabilities such as those arising out of obligations HBU has
undertaken against third parties for the account and at the risk of the
Borrower, unless such obligations can be charged to a contingent liability
facility granted to the Borrower.
If the Borrower maintains various current accounts, the current account debit
balance shall be the net amount of the combined debit and credit balances
(including accrued interest and fees) of such current accounts. The unused part
of the overdraft facility remaining after deduction of the above exposures shall
be available to the Borrower.
2.2 CONTINGENT LIABILITY FACILITY
The limit of a contingent liability facility shall always be reduced by the
obligations of the Borrower to HBU arising out of the use of such facility in
conformity with the purpose stated in the Credit Agreement insofar as such
obligations are not yet due and payable. The unused part of the contingent
liability facility remaining after deduction of such exposure shall be available
to the Borrower.
3 INTEREST AND FEES
3.1 CALCULATION BASIS OF DEBIT INTEREST
In calculating interest on debit balances in EMU currencies (which shall be
understood to include the euro) up to the agreed limit of the overdraft
facility, HBU shall apply the HBU Euro Base Rate. Until further notice the HBU
Euro Base Rate shall be the leading repo rate (the rate of the Main Refinancing
Operation) as determined from time to time by the European Central Bank (ECB),
plus a debit interest surcharge, subject to the minimum base rate stated in the
Credit Agreement. The HBU Euro Base Rate shall be increased by an individual
margin stated in the Credit Agreement. As soon as the ECB changes the rate of
the Main Refinancing Operation, or HBU changes the debit interest surcharge or
alters the composition or method of calculation of the HBU Euro Base Rate, the
debit interest rate shall be adjusted accordingly. In fixing the HBU Euro Base
Rate, the rate of the Main Refinancing Operation will be rounded to the nearest
0.10%. Rates ending with exactly 0.05% will be rounded up. HBU shall announce
changes in the debit interest surcharge as well as any alterations in the
composition or method of calculation of the HBU Euro Base Rate in at least three
national daily newspapers with a large circulation in the Netherlands. Interest
on debit balances in non-EMU currencies shall be payable at a rate to be
determined by HBU.
3.2 INTEREST ON OVERDRAFTS EXCEEDING THE AGREED LIMIT
Without prejudice to the provisions in 2.1 above, compensation to be determined
by HBU shall be payable in respect of the amount by which the debit balance of
the Borrower exceeds the limit of the overdraft facility.
3.3 PAYMENT OF DEBIT INTEREST AND FEES
Debit interest and fees payable by the Borrower shall be charged to his current
account as follows:
- debit interest once every quarter;
- fees at the times to be specified by HBU.
If the Borrower maintains various current accounts with HBU, HBU shall have the
right to charge debit interest and fees to one of these accounts.
4 CANCELLATION
Both the Borrower and HBU may cancel an overdraft facility and contingent
liability facility at any time.
III GENERAL PROVISIONS GOVERNING LOANS
1 AVAILABILITY
The following shall apply in addition to the provisions in 2 of the General
Provisions:
1. HBU shall not be obliged to make the loan amount available if any of the
events mentioned in 5 below occurs;
2. if the amount of the loan shall not or not fully have been drawn by the
agreed ultimate drawing date, HBU shall in its discretion be entitled without
any further instructions from the Borrower to make the undrawn part of the loan
available to the Borrower as of that date.
2 CALCULATION OF INTEREST
Interest shall be calculated on the basis of a 360-day year and the actual
number of days elapsed in any month.
3 REFIXING OF INTEREST
3.1 If a fixed interest rate has been agreed, HBU shall not later than two
weeks prior to an agreed interest refixing date notify the Borrower in writing
of the proposed - fixed or floating - interest rate for the subsequent fixed
rate period, without prejudice to the provisions contained in 3.3 below.
Agreement shall be reached not later than one week prior to the interest
refixing date. If the Borrower shall fail to respond to said notice from HBU not
later than one week prior to the interest refixing date, the Borrower shall be
deemed to have opted for the interest rate applicable to the shortest fixed
rate period stated in said notice. If HBU shall fail to give said notice within
the stated period, it shall nevertheless be at liberty to do so at a later date.
HBU shall then offer the Borrower either the interest rate which it would have
quoted on the basis of its prevailing interest rates had such notice been given
in time or, if this should be lower, the interest rate it is able to quote on
the basis of its interest rates prevailing at the time of such later notice.
Agreement on the interest rate shall be reached within two weeks after the
Borrower has received such notice from HBU.
3.2 If a floating interest rate has been agreed, the interest rate accepted by
the Borrower during the first two months of a calendar quarter shall apply until
the first day of the subsequent calendar quarter, and the interest rate accepted
by the Borrower during the third month of a calendar quarter shall apply until
the first day of the second following calendar quarter. Thereafter this interest
rate, or the interest rate subsequently refixed in accordance with the
provisions below, shall always apply for a period of three months. During the
remainder of the term of the loan, HBU shall refix the interest rate whenever,
in its opinion, having regard to money and capital market developments, the
interest rate as at the fifteenth calendar day in the third month of any
calendar quarter - or if HBU is not open for business on that day, the interest
rate on the preceding business day - differs 0.10% or more from the interest
rate then applicable pursuant to the Credit Agreement. The interest rate so
refixed shall become effective from the first day of the subsequent calendar
quarter. HBU shall notify such refixing to the Borrower in writing at least
eleven days prior to the first day of the calendar quarter. If the Borrower does
not agree to the refixed interest rate, the Borrower shall inform HBU not later
than one week prior to the interest refixing date. If the Borrower shall fail to
respond to the written notice from HBU not later than one week prior to the
interest refixing date, the Borrower shall be deemed to have agreed to the
interest rate quoted. If the Borrower shall so request not later than two weeks
prior to the first day of the subsequent calendar quarter or on an interest
refixing, HBU shall as from the first day of the subsequent calendar quarter
convert such floating rate loan into a fixed rate loan at HBU's interest rate
then prevailing.
3.3 If a loan is not denominated in an EMU currency (which shall be understood
to include the euro), the Borrower shall contact HBU by telephone before 10.00
a.m. (Amsterdam time) two business days prior to the agreed interest refixing
date. Business day shall mean a day on which banking institutions in the
Netherlands and the country where the currency in which the loan is denominated
is the national unit, are open for business. During, or immediately after such
telephone call, HBU shall quote the interest rate for the subsequent fixed rate
period. If HBU and the Borrower then reach agreement, HBU shall confirm the
interest rate to the Borrower in writing. If the Borrower shall fail to contact
HBU before the time indicated above, HBU shall have the right to refix the
interest rate on the basis of a one-year fixed rate period.
3.4 If HBU and the Borrower shall fail, or shall be deemed to have failed, to
reach agreement on the interest rate for and the length of the subsequent fixed
rate period, the Borrower shall be obliged on such interest refixing date to pay
all sums due and owing to HBU under the Credit Agreement. The Borrower shall not
be liable to pay compensation for losses sustained and income lost in respect of
such early repayment.
3.5 Upon the expiration of a period of not less than three months from the
date of the Credit Agreement, HBU shall notwithstanding the above provisions be
entitled at its discretion to refix the agreed interest rate if:
a. the cost to HBU of funding or continuing to fund the loan is above the
level at the time when the Credit Agreement was entered into, and
b. such increase is the consequence of credit restrictions, changes in
capital adequacy requirements or other rules and regulations (including
guidelines the observance of which is requested) of the Netherlands central bank
or of Dutch, foreign or international monetary authorities.
4 EARLY REPAYMENT
4.1 If a loan is denominated in an EMU currency (which shall be understood to
include the euro), the Borrower shall be entitled to make early repayments
without compensation for losses sustained and income lost provided all the
following conditions are complied with:
a. the Borrower has given HBU at least one month's prior notice by registered
letter, indicating the amount and date of the intended early repayment;
b. the early repayment shall coincide with a contractual repayment date or an
agreed interest payment date;
c. the prepaid amount shall be at least EUR 500 (or its equivalent in any
other EMU currency, where applicable), subject to a maximum in any one calendar
year of 5% of the original principal amount of the loan;
d. the Borrower shall prove to HBU's satisfaction that he is making such
early repayment out of his own resources. In all other cases the Borrower shall
be due compensation as determined in accordance with the provisions in 4.2
below.
4.2 If the Borrower wishes to make an early repayment in a manner other or an
amount higher than indicated in 4.1, he shall be liable to pay HBU compensation
for losses sustained and income lost together with such early repayment. In the
case of a floating interest rate being applicable, this compensation shall be 1%
of the amount prepaid in a manner other than agreed or in excess of the maximum
agreed. In the case of a fixed interest rate being applicable, this compensation
shall be the difference between:
a. the aggregate of the present values of the interest payments which
pursuant to the Credit Agreement HBU would have received in respect of the
amount prepaid in a manner other than agreed or in excess of the maximum agreed
in. respect of the period from the date of prepayment until the final repayment
date or the next interest refixing date (whichever shall be the earlier) had
such prepayment not been made, and
b. the aggregate of the present values of the interest payments which HBU
could receive on interbank loans where the principal amount is comparable to the
amount prepaid in a manner other than agreed or in excess of the maximum agreed
and of which the term is comparable to the period referred to in
4.2 a. hereof,but in any event not less than 1% of the amount prepaid in a
manner other than agreed or in excess of the maximum agreed. The present value
of the interest payments shall be calculated at the interbank rate applicable on
the date of the prepayment. HBU shall give sufficient notice of the amount of
compensation to the Borrower.
4.3 Upon giving notice of an intended early repayment, the Borrower shall be
obliged to make such early repayment.
4.4 Early repayments shall be applied in reduction of the contractual
repayments in reverse order of their maturity dates.
4.5 If the loan is repaid on an annuity basis, i.e. by instalments consisting
of a decreasing interest component and an increasing principal component, HBU
shall refix the remaining term of the loan, so that as far as possible the
original instalments shall remain unchanged.
5 EVENTS OF DEFAULT
5.1 The outstanding balance of the principal amount of the loan together with
accrued interest and any other sum due from the Borrower under the Credit
Agreement shall be payable to HBU forthwith and in full without any demand or
default notice being required:
a. if the Borrower fails to comply with or fulfil, at the time and in the
manner required, any obligation towards HBU whether arising under the Credit
Agreement or otherwise;
b. if the Borrower fails to comply with or fulfil, at the time and in the
manner required, any obligation under any other loan or financing arrangement
with or any guarantee towards third parties;
c. if the Borrower decides to cease practising his profession or carrying on
his business, to discontinue, sell, let or transfer title to the whole or part
of his business or practice, or is suspended, removed or dismissed from his
profession, office or function; if a licence, permit or registration which the
Borrower requires in order to practise his profession or to carry on his
business expires or is refused or withdrawn; if the nature of the Borrower's
profession or business in the opinion of HBU is changed in a material way; if
the Borrower decides to transfer abroad the practice of his profession or the
running of his business; if the Borrower acts contrary to any statutory
regulations with respect to his profession or business; if the Borrower ceases
to pursue the present corporate objects set out in his memorandum and articles
of association or loses his legal status;
d. if the partnership agreement (maatschaps- of vennootschapscontract) is
terminated, or if there is an accession or departure of one or more partners, or
if there is a dissolution or winding up (liquidatie) or a decision or an obvious
intention to dissolve or wind up;
e. if the Borrower dies, is placed under curatorship or otherwise loses his
legal capacity; if he takes up residence abroad, or changes the terms of his
marriage settlement; if any matrimonial regime of property governing the
Borrower is dissolved; if the assets of the Borrower are wholly or partly placed
under supervision (bewind);
f. if the Borrower or one of his partners applies for a moratorium or other
judicial postponement of payment of debts, files a bankruptcy or winding-up
petition, is adjudicated bankrupt or wound-up, proposes an extrajudicial
arrangement or composition with his creditors or, when insolvent, transfers any
of his assets to his creditors (boedelafstand), or requests a debt restructuring
arrangement;
g. if the whole or, in the opinion of HBU, a substantial part of the
Borrower's assets is taken in execution or attached by way of security and such
attachment is not lifted or discharged within 30 days after having been
effected; if the whole or, in the opinion of HBU, a substantial part of the
Borrower's properties is sold, encumbered, expropriated, confiscated, lost or
damaged;
h. if the Borrower's legal structure is changed and/or the Borrower merges or
associates with one or more third parties or if, in the opinion of HBU, a
significant change - whether or not as a consequence of the transfer of shares -
has taken place in the control of the Borrower's business or practice or if the
memorandum and articles of association or the rules or regulations of the
Borrower are, in the opinion of HBU, amended to a significant extent;
i. if the Borrower, without HBU's prior written consent, releases his
shareholders from liability to further calls on partly paid-up shares, if he
purchases his own shares, redeems his shares or makes a distribution from his
reserves, which shall include a decision or an obvious intention to do so;
j. if any circumstances mentioned in b. to i. (inclusive) occur in respect of
a surety, a guarantor, jointly and severally liable debtor or a person who has
provided HBU with any other type of security for the loan; if the surety or
guarantor cancels or withdraws a surety bond or guarantee issued by him to HBU
on the Borrower's behalf; if a third party which has provided or has promised to
provide HBU with security for the loan defaults in the performance of any
obligation in respect of the security provided or promised;
k. if any circumstances mentioned in b. to i. (inclusive) occur in respect of
one or more businesses or companies which are included in the Borrower's
consolidated balance sheet, or in respect of one or more businesses or companies
which have a controlling interest in the Borrower, or if any such business or
company defaults in the performance of any obligation towards HBU in connection
with credit and/or guarantee facilities granted by HBU;
l. (in the case of a mortgage on any registered property other than referred
to in m. below) if the whole or any part of the mortgaged property is attached,
expropriated, declared unfit for occupation, listed as a national monument,
re-divided (opneming in ruilverkaveling), demolished, lost or damaged, if a
leasehold (erfpachtsrecht), a building right (opstalrecht) or a right to use an
apartment (gebruiksrecht van het appartement) is completely or partially lost,
terminated or cancelled, if the conditions governing a leasehold or a building
right are altered; the sub-division (splitsing) of the mortgaged property is
terminated or the relevant deed or regulations are amended, if the leaseholder
or the holder of a building right fails to perform or acts contrary to any
statutory provisions with respect to the conditions governing the leasehold or
building right, if the owner or occupier of an apartment fails to perform or
acts contrary to any statutory provisions with respect to the right to use an
apartment or any provision contained in the agreement for sub-division or the
regulations;
m. (in the case of a mortgage on a ship) if the whole or any part of a mortgaged
ship is attached, is classified in a lower category, loses its national
registration or changes the same, is requisitioned, is the subject matter of
abandonment, is missing, laid up, broken up, wrecked or damaged;
n. if all or any of the goods, properties and other assets (goederen) provided
to HBU as security for the loan other than those referred to in l. and m. are
lost, destroyed or damaged or expire for any reason whatsoever;
o. if the Borrower has given HBU incorrect information or has withheld
information from HBU which it deems significant in connection with the
conclusion of the Credit Agreement;
p. if the loan is not used for the purpose for which it was granted, or if in
the opinion of HBU, it is clear that the purpose for which the loan was granted
has not been achieved or will not be achieved either wholly or to a significant
extent;
q. if any legislation or its interpretation is changed or a governmental action
is taken, which affects or may affect the Credit Agreement and/or the security
provided and/or the value thereof, and the Borrower and HBU have not within a
reasonable period to be determined by HBU reached a written agreement adjusting
the relevant provisions and/or security on such a basis that, in the opinion of
HBU, the position of HBU is not adversely affected.
5.2 The Borrower shall forthwith notify HBU of the occurrence of any events
mentioned in 5.1 b. to n. (inclusive).
5.3 If HBU demands repayment of the loan pursuant to the above provisions, the
Borrower shall forthwith pay HBU lump sum compensation for losses sustained and
income lost. Such compensation shall be due in respect of the full amount
repayable and be determined on the basis of the same method and principles as
specified in 4.2. Such compensation shall not be due if the demand for repayment
results from the death of the Borrower.
6 DUE DATES
6.1 If HBU has not received any sum due to it under the Credit Agreement on the
agreed due date, the Borrower shall be liable to pay HBU default interest on the
overdue amount as from the due date, without prejudice to HBU's other rights.
Such default interest shall be payable forthwith. Amounts in relation to which
no specific due dates have been stipulated in the Credit Agreement shall, for
the purpose of the above provisions, be payable on the day stipulated by HBU for
payment.
6.2 The rate of default interest shall be three percentage points above the
contractual interest rate per annum applicable to the loan. Default interest
shall be calculated on a monthly basis, part of a month being counted as a full
month. As regards late repayment of principal, the default interest rate shall,
as from the due date of such amount of principal, replace the contractual
interest rate then applicable to the loan.
7 PAYMENTS
7.1 The Borrower shall make all payments to HBU without any costs to HBU and
without any deduction or setoff. These payments shall be made on the due dates
at HBU's branch where the loan is administered, unless HBU has notified the
Borrower of another address for payment.
7.2 HBU shall be entitled, but not obliged, to debit all amounts payable by the
Borrower to HBU under the Credit Agreement to the Borrower's current account at
HBU on the agreed due dates. The Borrower shall be responsible for ensuring that
this debit will not exceed the amount available for payments and withdrawals
from such account.
7.3 Payments shall be applied as follows: firstly to costs and expenses
incurred, secondly to compensation for losses sustained and income lost and
default interest, thirdly to fees and commissions and interest, and fourthly to
principal.
REPUBLIC OF THE ▇▇▇▇▇▇▇▇ ISLANDS
MARITIME OFFICE
I HEREBY CERTIFY THAT THE WITHIN IS A TRUE COPY OF THE INSTRUMENT RECEIVED FOR
RECORD AND RECORDED IN THIS OFFICE IN BOOK PN 15 AT PAGE 418 ON SEPTEMBER 29TH
2004 AT 08:01 A.M. E.D.S.T.
VESSEL NAME "FREE ENVOY" OFFICIAL NUMBER 2161
GIVEN UNDER MY HAND AND SEAL THIS 29TH
DAY OF SEPTEMBER, 2004
[SEAL]
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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DEPUTY COMMISSIONER OF MARITIME AFFAIRS
OF THE REPUBLIC OF THE ▇▇▇▇▇▇▇▇ ISLANDS