EXHIBIT 10.11
Date December 28, 2005
SALINA SHIPHOLDING CORP.
as Borrower
-and-
CALYON
as Lender
------------------------------------------------
LOAN AGREEMENT
------------------------------------------------
relating to a US$15,500,000 facility
to finance part of the acquisition cost of
m.v. "ARTEMIS" (ex "SEA ARROW")
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
PIRAEUS
INDEX
CLAUSE PAGE
1 INTERPRETATION 1
2 FACILITY 12
3 DRAWDOWN 12
4 INTEREST 12
5 INTEREST PERIODS 13
6 DEFAULT INTEREST 14
7 REPAYMENT AND PREPAYMENT 14
8 CONDITIONS PRECEDENT 15
9 REPRESENTATIONS AND WARRANTIES 16
10 GENERAL UNDERTAKINGS 18
11 CORPORATE UNDERTAKINGS 20
12 INSURANCE 21
13 SHIP COVENANTS 26
14 SECURITY COVER 28
15 PAYMENTS AND CALCULATIONS 30
16 APPLICATION OF RECEIPTS 31
17 APPLICATION OF EARNINGS 32
18 EVENTS OF DEFAULT 33
19 FEES AND EXPENSES 37
20 INDEMNITIES 37
21 NO SET-OFF OR TAX DEDUCTION 39
22 ILLEGALITY, ETC 39
23 INCREASED COSTS 40
24 SET-OFF 41
25 TRANSFERS AND CHANGES IN LENDING OFFICE 42
26 VARIATIONS AND WAIVERS 42
27 NOTICES 43
28 SUPPLEMENTAL 44
29 LAW AND JURISDICTION 44
SCHEDULE 1 DRAWDOWN NOTICE 46
SCHEDULE 2 CONDITION PRECEDENT DOCUMENTS 47
EXECUTION PAGE 49
LOAN AGREEMENT made on December 28, 2005
BETWEEN
(1) SALINA SHIPHOLDING CORP., a corporation incorporated in the Republic of
▇▇▇▇▇▇▇▇ Islands and having its registered office at Trust Company
Complex, Ajeltake Road, Ajeltake Island, Majuro, ▇▇▇▇▇▇▇▇ Islands (the
"BORROWER"); and
(2) CALYON, acting through its office at 9 Quai du President ▇▇▇▇ ▇▇▇▇▇▇,
92400 Courbevoie, La Defense, Paris, France (the "LENDER").
WHEREAS the Lender has agreed to make available to the Borrower a loan facility
of the lesser of (a) US$15,500,000, (b) 75 per cent. of the purchase price of
m.v. "ARTEMIS" (ex "SEA ARROW") (the "SHIP") and (c) 75 per cent. of the market
value of the Ship on the Drawdown Date (determined by the valuation of the Ship
referred to at paragraph 7 of Schedule 2, Part A) for the purpose of financing
part of the acquisition cost of the Ship.
IT IS AGREED as follows:
1 INTERPRETATION
1.1 DEFINITIONS. Subject to Clause 1.5, in this Agreement:
"ACCOUNTING INFORMATION" means the annual audited accounts of the
Borrower referred to in Clause 10.6(a), the annual audited consolidated
accounts of the Group referred to in Clause 10.6(b) or the quarterly
unaudited accounts of each of the Borrower and the Group referred to in
Clause 10.6(c) (as the context may require);
"ACCOUNTS PLEDGE" means a deed creating security in respect of the
Operating Account and the Retention Account in such form as the Lender
may approve or require;
"APPROVED MANAGER" means, Eurobulk S.A. a corporation incorporated in
[the Republic of Liberia] and having a place of business at Aethrion
Center, 40 Ag. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ or
any other company which the Lender may approve from time to time as the
manager of the Ship;
"ASSET COVER RATIO" means, on each Margin Calculation Date, the ratio
(expressed as an percentage) of (i) the Market Value of the Ship to
(ii) the Loan (after deducting any repayment instalment paid on that
Margin Calculation Date);
"AVAILABILITY PERIOD" means the period commencing on the date of this
Agreement and ending on:
(a) 31 January 2006 (or such later date as the Lender may agree
with the Borrower); or
(b) if earlier, the date on which the Loan is fully borrowed or
the Lender's obligation to advance the Loan is cancelled or
terminated;
"BORROWER" means Salina Shipholding Corp., a corporation incorporated
in the Republic ▇▇▇▇▇▇▇▇ Islands and having its registered office at
Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, ▇▇▇▇▇▇▇▇
Islands;
"BUSINESS DAY" means a day on which banks are open in London and Paris
and, in respect of a day on which a payment is required to be made
under a Finance Document, also in New York City;
"CHARTER ASSIGNMENT" means, in relation to the Initial Charter and any
Future Charter, a specific assignment of the rights of the Borrower
under that charter in such form as the Lender may approve or require;
"CHARTERER" means" means ▇▇▇▇▇ Triestino di Navigazione SPA, a company
organised and existing under the laws of Italy with its principal place
of business at ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇;
"CONTRACTUAL CURRENCY" has the meaning given in Clause 20.5;
"CORPORATE GUARANTEE" means the guarantee by the Corporate Guarantor of
the obligations of the Borrower under this Agreement and the Finance
Documents in such form as the Lender may approve or require;
"CORPORATE GUARANTOR" means Euroseas Ltd. a corporation incorporated in
the Republic of the ▇▇▇▇▇▇▇▇ Islands and having its registered office
at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro,
▇▇▇▇▇▇▇▇ Islands in its capacity as Corporate Guarantor;
"DOLLARS" and "$" means the lawful currency for the time being of the
United States of America;
"DRAWDOWN DATE" means the date requested by the Borrower for the Loan
to be advanced, or (as the context requires) the date on which the Loan
is actually advanced;
"DRAWDOWN NOTICE" means a notice in the form set out in Schedule 1 (or
in any other form which the Lender approves or reasonably requires);
"EARNINGS" means all moneys whatsoever which are now, or later become,
payable (actually or contingently) to the Borrower and which arise out
of the use or operation of the Ship, including (but not limited to):
(a) all freight, hire and passage moneys, compensation payable to
the Borrower in the event of requisition of the Ship 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 Ship;
(c) all moneys which are at any time payable under Insurances in
respect of loss of earnings; and
(d) if and whenever the Ship is employed on terms whereby any
moneys falling within paragraphs (a) or (c) above are pooled
or shared with any other person, that proportion of the net
receipts of the relevant pooling or sharing arrangement which
is attributable to the Ship;
"ENVIRONMENTAL CLAIM" means:
(a) any claim by any governmental, judicial or regulatory
authority which arises out of an Environmental Law;
(b) any claim by any other person which relates to an
Environmental Incident or to an alleged Environmental
Incident,
and "CLAIM" means a claim for damages, compensation, fines,
penalties or any other payment of any kind, whether or not
similar to the foregoing; an order or direction to take, or
not to take, certain action or to desist from or suspend
certain action; and
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any form of enforcement or regulatory action, including the
arrest or attachment of any asset;
"ENVIRONMENTAL INCIDENT" means:
(a) any release of Environmentally Sensitive Material from the
Ship; or
(b) any incident in which Environmentally Sensitive Material is
released from a vessel other than the Ship and which involves
a collision between the Ship and such other vessel or some
other incident of navigation or operation, in either case, in
connection with which the Ship is actually or potentially
liable to be arrested, attached, detained or injuncted and/or
the Ship or the Borrower and/or any operator or manager is at
fault or allegedly at fault or otherwise liable to any legal
or administrative action; or
(c) any other incident in which Environmentally Sensitive Material
is released otherwise than from the Ship and in connection
with which the Ship is actually or potentially liable to be
arrested and/or where the Borrower and/or any operator or
manager of the Ship is at fault or allegedly at fault or
otherwise liable to any legal or administrative action;
"ENVIRONMENTAL LAW" means any law relating to pollution or protection
of the environment, to the carriage of Environmentally Sensitive
Material or to actual or threatened releases of Environmentally
Sensitive Material;
"ENVIRONMENTALLY SENSITIVE MATERIAL" means oil, oil products and any
other substance (including any chemical, gas or other hazardous or
noxious substance) which is (or is capable of being or becoming)
polluting, toxic or hazardous;
"EVENT OF DEFAULT" means any of the events or circumstances described
in Clause 18.1;
"FINANCE DOCUMENTS" means:
(a) this Agreement;
(b) the Corporate Guarantee;
(c) the General Assignment;
(d) any Charter Assignment;
(e) the Mortgage;
(f) the Master Agreement;
(g) the Master Agreement Assignment;
(h) the Accounts Pledge;
(i) the Negative Pledge;
(j) the Manager's Undertaking; and
(k) any other document (whether creating a Security Interest or
not) which is executed at any time by the Borrower or any
other person as security for, or to
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establish any form of subordination or priorities arrangement
in relation to, any amount payable to the Lender under this
Agreement or any of the documents referred to in this
definition;
"FINANCIAL INDEBTEDNESS" means, in relation to a person (the "DEBTOR"),
a liability of the debtor:
(a) for principal, interest or any other sum payable in respect of
any moneys borrowed or raised by the debtor;
(b) under any loan stock, bond, note or other security issued by
the debtor;
(c) under any acceptance credit, guarantee or letter of credit
facility made available to the debtor;
(d) under a financial lease, a deferred purchase consideration
arrangement or any other agreement having the commercial
effect of a borrowing or raising of money by the debtor;
(e) under any interest or currency swap or any other kind of
derivative transaction entered into by the debtor or, if the
agreement under which any such transaction is entered into
requires netting of mutual liabilities, the liability of the
debtor for the net amount; or
(f) under a guarantee, indemnity or similar obligation entered
into by the debtor in respect of a liability of another person
which would fall within (a) to (e) if the references to the
debtor referred to the other person;
"FINANCIAL YEAR" means, in relation to each of the Borrower and the
Group, each period of 1 year commencing on 1 January in respect of
which its audited Accounting Information is or ought to be prepared;
"FUTURE CHARTER" means any charter in respect of the Ship (other than
the Initial Charter) which exceeds, or is capable of exceeding, 12
months in duration;
"GENERAL ASSIGNMENT" means a general assignment of the Earnings, the
Insurances and any Requisition Compensation in such form as the Lender
may approve or require;
"GROUP" means the Borrower, the Corporate Guarantor and all subsidiaries of the
Corporate Guarantor from time to time during the Security Period and "MEMBER OF
THE GROUP" shall be construed accordingly;
"INITIAL CHARTER" means a time charter in respect of the Ship for a
period of 3 years at a daily charterhire rate of $19,000 (less brokers'
commission of 3.75 per cent.) dated 24 October 2005 and made between
Sea Arrow Navigation Company Limited as original owner and the
Charterer as novated to ▇▇▇▇▇▇▇▇ Shipping Co. as former owner (the
"FORMER OWNER") pursuant to a novation agreement dated 31 October 2005
and as further novated to the Borrower as new owner pursuant to the
terms of a novation agreement dated 7 November 2005 and entered into
between the Former Owner, the Borrower and the Charterer;
"INSURANCES" means:
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(a) all policies and contracts of insurance, including entries of
the Ship in any protection and indemnity or war risks
association, which are effected in respect of the Ship, its
Earnings or otherwise in relation to the Ship; and
(b) all rights and other assets relating to, or derived from, any
of the foregoing, including any rights to a return of a
premium;
"INTEREST PERIOD" means a period determined in accordance with Clause
5;
"ISM CODE" means in relation to its application to the Borrower, the
Approved Manager, the Ship and its 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 November 1993 and incorporated on 19 May 1994 into chapter
IX of the International Convention for the 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 on behalf 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 by Administrations'
produced by the International Maritime Organisation pursuant
to Resolution A.788(19) adopted on 25 November 1995,
as the same may be amended, supplemented or replaced from time to time;
"ISM CODE DOCUMENTATION" includes, in relation to the Ship:
(a) the document of compliance (DOC) and safety management
certificate (SMC) issued pursuant to the ISM Code in relation
to the Ship within the periods specified by the ISM Code; and
(b) all other documents and data which are relevant to the ISM SMS
and its implementation and verification which the Lender may
require; and
(c) any other documents which are prepared or which are otherwise
relevant to establish and maintain the Ship's compliance or
the compliance of the Borrower with the ISM Code which the
Lender may require;
"ISM SMS" means, in relation to the Ship, the safety management system
which is required to be developed, implemented and maintained by the
Borrower under the ISM Code;
"ISPS CODE" means the International Ship and Port Facility Security
Code constituted pursuant to resolution A.924 (22) of the International
Maritime Organisation ("IMO") adopted by a Diplomatic conference of the
IMO on Maritime Security on 13 December 2002 and now set out in Chapter
XI-2 of the Safety of Life at Sea Convention (SOLAS) 1974 (as amended)
to take effect on 1 July 2004;
"ISPS CODE DOCUMENTATION" includes:
5
(a) the International Ship Security Certificate issued pursuant to
the ISPS Code in relation to the Ship within the period
specified in the ISPS Code; and
(e) all other documents and data which are relevant to the ISPS
Code and its implementation and verification which the Lender
may require;
"LENDER" means:
(a) Calyon, acting through its branch at 9 Quai du President ▇▇▇▇
▇▇▇▇▇▇, 92400 Courbevoie, La Defense, Paris, France (or
through another branch notified to the Lender under Clause
25.6) or its direct or indirect successor;
(b) a direct or indirect assignee of such bank or financial
institution or of a successor of it; or
(c) a direct or indirect successor of an assignee such as is
mentioned in (b), unless any of the foregoing has assigned all
its rights, and novated all its obligations and liabilities,
under the Finance Documents;
"LIBOR" means, for an Interest Period, the rate per annum determined by
the Lender to be the rate at which deposits in Dollars are offered to
the Lender by leading banks in the London Interbank Market at the
Lender's request at or about 11.00 a.m. (London time) on the second
Business Day prior to the commencement of that Interest Period for a
period equal to that Interest Period and for delivery on the first
Business Day of it;
"LOAN" means the principal amount of the borrowing by the Borrower
under this Agreement being in an amount of up to $15,500,000 or, as the
context may require, the principal amount for the time being
outstanding under this Agreement;
"MAJOR CASUALTY" means, any casualty to the Ship in respect of which
the claim or the aggregate of the claims against all insurers, before
adjustment for any relevant franchise or deductible, exceeds $350,000
or the equivalent in any other currency;
"MANAGEMENT AGREEMENT" means the agreement (a certified true copy of
which has been delivered to the Lender) made between the Approved
Manager and the Borrower in respect of the management of the Ship;
"MANAGER'S UNDERTAKING" means the undertaking referred to in paragraph
3(a) of Part B of Schedule 2 in such form as the Lender may approve or
require;
"MARGIN" means:
(a) (i) at all times until the first Margin Calculation Date and
(ii) at all other times when the Asset Cove Ratio is less than
150 per cent., 1.10 per cent. per annum; and
(b) at all times after the first Margin Calculation Date when the
Asset Cover Ratio is equal to or higher than 150 per cent.,
0.90 per cent. per annum;
"MARGIN CALCULATION DATE" has the meaning given to that term in Clause
4.7;
"MARKET VALUE" means the market value of the Ship at any date
determined in accordance with Clause 14.5;
"MASTER AGREEMENT" means the master agreement (on the 1992 ISDA
(Multicurrency - Crossborder) form) made or to be made between the
Borrower and the Lender and
6
includes all Transactions from time to time entered into and
Confirmations from time to time exchanged thereunder;
"MASTER AGREEMENT ASSIGNMENT" means the assignment of the Master
Agreement by the Borrower in such form as the Lender may approve or
require;
"MASTER AGREEMENT LIABILITIES" means, at any relevant time, all
liabilities actual or contingent, present or future, of the Borrower to
the Lender under the Master Agreement;
"MORTGAGE" means the first preferred ▇▇▇▇▇▇▇▇ Islands ship mortgage in
respect of the Ship in such form as the Lender may approve or require;
"NEGATIVE PLEDGE" means the negative pledge in respect of the whole of
the issued share capital of the Borrower in such form as the Lender may
approve or require;
"NET INCOME" means, in relation to each Financial Year of the Borrower,
the aggregate income of the Borrower appearing in the Accounting
Information of the Borrower for that Financial Year as determined in
accordance with US GAAP consistently applied;
"OPERATING ACCOUNT" means an account in the name of the Borrower with
the Lender designated "Salina Shipholding Corp. - Operating Account" or
any other account (with that or another office of the Lender) which is
designated by the Lender as the Operating Account for the purposes of
this Agreement;
"PAYMENT CURRENCY" has the meaning given in Clause 20.5;
"PERTINENT JURISDICTION", in relation to a company, means:
(a) England and Wales;
(b) the country under the laws of which the company is
incorporated or formed;
(c) a country in which the company's central management and
control is or has recently been exercised;
(d) a country in which the overall net income of the company is
subject to corporation tax, income tax or any similar tax;
(e) a country in which assets of the company (other than
securities issued by, or loans to, related companies) having a
substantial value are situated, in which the company maintains
a permanent place of business, or in which a Security Interest
created by the company must or should be registered in order
to ensure its validity or priority; and
(f) a country the courts of which have jurisdiction to make a
winding up, administration or similar order in relation to the
company or which would have such jurisdiction if their
assistance were requested by the courts of a country referred
to in paragraphs (b) or (c) above;
"POTENTIAL EVENT OF DEFAULT" means an event or circumstance which, with
the giving of any notice, the lapse of time, a determination of the
Lender and/or the satisfaction of any other condition, would constitute
an Event of Default;
"RELEVANT PERSON" has the meaning given in Clause 18.8;
7
"REPAYMENT DATE" means a date on which a repayment is required to be
made under Clause 7;
"REQUISITION COMPENSATION" includes all compensation or other moneys
payable by reason of any act or event such as is referred to in
paragraph (b) of the definition of "TOTAL LOSS";
"RETENTION ACCOUNT" means an account in the name of the Borrower with
the Lender in Paris designated "Salina Shipholding Corp. - Retention
Account" or any other account (with that or another office of the
Lender) which is designated by the Lender as the Retention Account for
the purposes of this Agreement;
"SECURED LIABILITIES" means all liabilities which the Borrower, the
Security Parties or any of them have, at the date of this Agreement or
at any later time or times, under or by virtue of the Finance Documents
or any judgment relating to the Finance Documents; and for this
purpose, there shall be disregarded any total or partial discharge of
these liabilities, or variation of their terms, which is effected by,
or in connection with, any bankruptcy, liquidation, arrangement or
other procedure under the insolvency laws of any country;
"SECURITY INTEREST" means:
(a) a mortgage, charge (whether fixed or floating) or pledge, any
maritime or other lien or any other security interest of any
kind;
(b) the rights of the plaintiff under an action in rem in which
the vessel concerned has been arrested or a writ has been
issued or similar step taken; and
(c) any arrangement entered into by a person (A) the effect of
which is to place another person (B) in a position which is
similar, in economic terms, to the position in which B would
have been had he held a security interest over an asset of A;
but (c) does not apply to a right of set off or combination of
accounts conferred by the standard terms of business of a bank
or financial institution;
"SECURITY PARTY" means the Approved Manager, the Corporate Guarantor
and any other person (except the Lender) who, as a surety or mortgagor,
as a party to any subordination or priorities arrangement, or in any
similar capacity, executes a document falling within the final
paragraph of the definition of "Finance Documents";
"SECURITY PERIOD" means the period commencing on the date of this
Agreement and ending on the date on which the Lender notifies the
Borrower and the Security Parties that:
(a) all amounts which have become due for payment by the Borrower
or any Security Party under the Finance Documents have been
paid;
(b) no amount is owing or has accrued (without yet having become
due for payment) under any Finance Document;
(c) neither the Borrower nor any Security Party has any future or
contingent liability under Clause 19, 20 or 21 below or any
other provision of this Agreement or another Finance Document;
and
(d) the Lender, in its reasonable judgement, does not consider
that there is a significant risk that any payment or
transaction under a Finance Document would be set aside, or
would have to be reversed or adjusted, in any present or
possible future bankruptcy of the Borrower or a Security Party
or in any present or possible future
8
proceeding relating to a Finance Document or any asset covered
(or previously covered) by a Security Interest created by a
Finance Document;
"SHIP" means the 1987-built fully cellular container vessel of 2,098
teu presently registered in the ownership of the Borrower under
▇▇▇▇▇▇▇▇ Islands flag with the name "ARTEMIS";
"SWAP EXPOSURE" means, as at any relevant date the aggregate net amount
in Dollars which would be payable by the Borrower to the Lender under
(and calculated in accordance with) section 6(e) (Payments on Early
Termination) of the Master Agreement if an Early Termination Date had
occurred on the relevant date in relation to all continuing
Transactions entered into between the Borrowers and the Lender;
"TOTAL LOSS" means:
(a) actual, constructive, compromised, agreed or arranged total
loss of the Ship;
(b) any expropriation, confiscation, requisition or acquisition of
the Ship, whether for full consideration, a consideration less
than the Ship's proper value, a nominal consideration or
without any consideration, which is effected by any government
or official authority or by any person or persons claiming to
be or to represent a government or official authority,
excluding a requisition for hire for a fixed period not
exceeding one year without any right to an extension;
(c) any condemnation of the Ship by any tribunal or by any person
or person claiming to be a tribunal; and
(d) any arrest, capture, seizure or detention of the Ship
(including any hijacking or theft) unless she is within 45
days redelivered to the full control of the Borrower;
"TOTAL LOSS DATE" means:
(a) in the case of an actual loss of the Ship, the date on which
it occurred or, if that is unknown, the date when the Ship was
last heard of;
(b) in the case of a constructive, compromised, agreed or arranged
total loss of the Ship, the earliest of:
(i) the date on which a notice of abandonment is given to
the insurers; and
(ii) the date of any compromise, arrangement or agreement
made by or on behalf of the Borrower with the Ship's
insurers in which the insurers agree to treat the
Ship as a total loss; and
(c) in the case of any other type of total loss, on the date (or
the most likely date) on which it appears to the Lender that
the event constituting the total loss occurred; and
"US GAAP" means generally accepted accounting principles as from time
to time in effect in the United States of America.
1.2 CONSTRUCTION OF CERTAIN TERMS. In this Agreement:
9
"APPROVED" means, for the purposes of Clause 12, approved in writing by
the Lender;
"ASSET" includes every kind of property, asset, interest or right,
including any present, future or contingent right to any revenues or
other payment;
"COMPANY" includes any partnership, joint venture and unincorporated
association;
"CONSENT" includes an authorisation, consent, approval, resolution,
licence, exemption, filing, registration, notarisation and
legalisation;
"CONTINGENT LIABILITY" means a liability which is not certain to arise
and/or the amount of which remains unascertained;
"DOCUMENT" includes a deed; also a letter or fax;
"EXCESS RISKS" means, in relation to the Ship, the proportion of claims
for general average, salvage and salvage charges not recoverable under
the hull and machinery policies in respect of the Ship in consequence
of its insured value being less than the value at which the Ship is
assessed for the purpose of such claims;
"EXPENSE" means any kind of cost, charge or expense (including all
legal costs, charges and expenses) and any applicable value added or
other tax;
"LAW" includes any form of delegated legislation, any order or decree,
any treaty or international convention and any regulation or resolution
of the Council of the European Union, the European Commission, the
United Nations or its Security Council;
"LEGAL OR ADMINISTRATIVE ACTION" means any legal proceeding or
arbitration and any administrative or regulatory action or
investigation;
"LIABILITY" includes every kind of debt or liability (present or
future, certain or contingent), whether incurred as principal or surety
or otherwise;
"MONTHS" shall be construed in accordance with Clause 1.3;
"OBLIGATORY INSURANCES" means, in relation to the Ship, all insurances
effected, or which the Borrower is obliged to effect, under Clause 12
below or any other provision of this Agreement or another Finance
Document;
"PARENT COMPANY" has the meaning given in Clause 1.4;
"PERSON" includes any company; any state, political sub-division of a
state and local or municipal authority; and any international
organisation;
"POLICY", in relation to any insurance, includes a slip, cover note,
certificate of entry or other document evidencing the contract of
insurance or its terms;
"PROTECTION AND INDEMNITY RISKS" means the usual risks covered by a
protection and indemnity association managed in London, including
pollution risks and the proportion (if any) of any sums payable to any
other person or persons in case of collision which are not recoverable
under the hull and machinery policies by reason of the incorporation
therein of clause 1 of the Institute Time Clauses (Hulls)(1/10/83) or
clause 8 of the Institute Time Clauses (Hulls)(1/11/1995) or the
Institute Amended Running Down Clause (1/10/71) or any equivalent
provision;
"REGULATION" includes any regulation, rule, official directive, request
or guideline whether or not having the force of law of any
governmental, intergovernmental or supranational body, agency,
department or regulatory, self-regulatory or other authority or
organisation;
10
"SUBSIDIARY" has the meaning given in Clause 1.4;
"SUCCESSOR" includes any person who is entitled (by assignment,
novation, merger or otherwise) to any other person's rights under this
Agreement or any other Finance Document (or any interest in those
rights) or who, as administrator, liquidator or otherwise, is entitled
to exercise those rights; and in particular references to a successor
include a person to whom those rights (or any interest in those rights)
are transferred or pass as a result of a merger, division,
reconstruction or other reorganisation of it or any other person;
"TAX" includes any present or future tax, duty, impost, levy or charge
of any kind which is imposed by any state, any political sub-division
of a state or any local or municipal authority (including any such
imposed in connection with exchange controls), and any connected
penalty, interest or fine; and
"WAR RISKS" includes the risk of mines and all risks excluded by clause
23 of the Institute Time Clauses (Hulls)(1/10/83) or clause 24 of the
Institute Time Clauses (Hulls)(1/11/1995).
1.3 MEANING OF "MONTH". A period of one or more "MONTHS" ends on the day in
the relevant calendar month numerically corresponding to the day of the
calendar month on which the period started ("THE NUMERICALLY
CORRESPONDING DAY"), but:
(a) on the Business Day following the numerically corresponding day if the
numerically corresponding day is not a Business Day or, if there is no
later Business Day in the same calendar month, on the Business Day
preceding the numerically corresponding day; or
(b) on the last Business Day in the relevant calendar month, if the period
started on the last Business Day in a calendar month or if the last
calendar month of the period has no numerically corresponding day,
and "MONTH" and "MONTHLY" shall be construed accordingly.
1.4 MEANING OF "SUBSIDIARY". A company (S) is a subsidiary of another
company (P) if:
(a) a majority of the issued shares in S (or a majority of the issued
shares in S which carry unlimited rights to capital and income
distributions) are directly owned by P or are indirectly attributable
to P; or
(b) P has direct or indirect control over a majority of the voting rights
attaching to the issued shares of S; or
(c) P has the direct or indirect power to appoint or remove a majority of
the directors of S; or
(d) P otherwise has the direct or indirect power to ensure that the affairs
of S are conducted in accordance with the wishes of P,
and any company of which S is a subsidiary is a parent company of S.
1.5 GENERAL INTERPRETATION.
(a) In this Agreement:
(i) references to, or to a provision of, a Finance Document or any
other document are references to it as amended or
supplemented, whether before the date of this Agreement or
otherwise;
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(ii) references to, or to a provision of, any law include any
amendment, extension, re-enactment or replacement, whether
made before the date of this Agreement or otherwise; and
(iii) words denoting the singular number shall include the plural
and vice versa;
(b) Clauses 1.1 to 1.4 and paragraph (a) of this Clause 1.5 apply unless
the contrary intention appears; and
(c) The clause headings shall not affect the interpretation of this
Agreement.
2 FACILITY
2.1 AMOUNT OF FACILITY. Subject to the other provisions of this Agreement,
the Lender shall make available to the Borrower a loan facility of up
to the lesser of (a) $15,500,000, (b) 75 per cent. of the purchase
price of the Ship (as certified by the Borrower to the satisfaction of
the Lender) and (c) 75 per cent. of the Market Value of the Ship
(determined by the valuation of the Ship referred to at paragraph 7 of
Schedule 2, Part A) to be drawn in a single advance.
2.2 PURPOSE OF THE LOAN. The Borrower undertakes with the Lender to use the
Loan only for the purpose stated in the preamble to this Agreement.
3 DRAWDOWN
3.1 REQUEST FOR THE LOAN. The Borrower may request the Loan to be advanced
by ensuring that the Lender receives the completed Drawdown Notice not
later than 11.00 a.m. (London time) 2 Business Days prior to the
intended Drawdown Date subject to the Drawdown Date being a Business
Day during the Availability Period.
3.2 DRAWDOWN NOTICE IRREVOCABLE. A Drawdown Notice must be signed by a
director or a duly authorised attorney-in-fact of the Borrower; and
once served, a Drawdown Notice cannot be revoked without the prior
consent of the Lender.
3.3 DISBURSEMENT OF THE LOAN. Subject to the provisions of this Agreement,
the Lender shall on the Drawdown Date advance the Loan to the Borrower;
and payment to the Borrower shall be made to the account which the
Borrower specifies in the Drawdown Notice.
3.4 DISBURSEMENT OF THE LOAN TO THIRD PARTY. The payment by the Lender
under Clause 3.3 shall constitute the advancing of the Loan and the
Borrower shall thereupon become indebted, as principal and direct
obligor, to the Lender in an amount equal to the Loan.
4 INTEREST
4.1 PAYMENT OF NORMAL INTEREST. Subject to the provisions of this
Agreement, interest on the Loan in respect of each Interest Period
shall be paid by the Borrower on the last day of that Interest Period.
4.2 NORMAL RATE OF INTEREST. Subject to the provisions of this Agreement,
the rate of interest on the Loan in respect of an Interest Period shall
be the aggregate of the applicable Margin and LIBOR for that Interest
Period.
4.3 PAYMENT OF ACCRUED INTEREST. In the case of an Interest Period longer
than 3 months, accrued interest shall be paid every 3 months during
that Interest Period and on the last day of that Interest Period.
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4.4 NOTIFICATION OF MARKET DISRUPTION. The Lender shall promptly notify the
Borrower if for any reason the Lender is unable to obtain Dollars in
the London Interbank Market in order to fund the Loan (or any part of
it) during any Interest Period, stating the circumstances which have
caused such notice to be given.
4.5 SUSPENSION OF DRAWDOWN. If the Lender's notice under Clause 4.4 is
served before the Loan is advanced, the Lender's obligation to make the
Loan available shall be suspended while the circumstances referred to
in the Lender's notice continue.
4.6 ALTERNATIVE RATE OF INTEREST. If, after the Loan has been advanced, the
Lender is unable to obtain Dollars in the London Interbank Market to
fund the Loan (or any part of it) during any Interest Period or
adequate and fair means do not exist for ascertaining the rate of
interest, the Lender shall set an interest rate representing the cost
of funding of the Lender in Dollars or in any available currency of the
Loan plus the Margin.
4.7 CALCULATION OF ASSET COVER RATIO. The Lender shall calculate the Asset
Cover Ratio on each anniversary of the Drawdown Date (each a "MARGIN
CALCULATION DATE") for the purposes of calculating the Margin and shall
advise the Borrower in writing, within 10 Business Days of each Margin
Calculation Date, of the Margin which will apply for the 12-month
period commencing on the relevant Margin Calculation Date PROVIDED THAT
in respect of each Margin Calculation Date other than the first Margin
Calculation Date, the Lender shall only be obliged to advise the
Borrowers of the Margin which will apply for the 12-month period
commencing on the relevant Margin Calculation Date if that Margin will
be different to the Margin which applied immediately prior to that
Margin Calculation Date.
For the purposes of calculating the Asset Cover Ratio pursuant to this
Clause 4.7, the Market Value of the Ship shall be determined no more
than 30 days prior to the relevant Margin Calculation Date.
5 INTEREST PERIODS
5.1 COMMENCEMENT OF INTEREST PERIODS. The first Interest Period applicable
to the Loan shall commence on the Drawdown Date and each subsequent
Interest Period shall commence on the expiry of the preceding Interest
Period.
5.2 DURATION OF NORMAL INTEREST PERIODS. Subject to Clauses 5.3 and 5.4,
each Interest Period shall be:
(a) 3, 6 or 12 months as notified by the Borrower to the Lender not later
than 11.00 a.m. (London time) 3 Business Days before the commencement
of the Interest Period; or
(b) 3 months, if the Borrower fails to notify the Lender by the time
specified in paragraph (a) above; or
(c) such other period as the Lender may agree with the Borrower.
5.3 DURATION OF INTEREST PERIODS FOR REPAYMENT INSTALMENTS. In respect of
an amount due to be repaid under Clause 7 on a particular Repayment
Date, an Interest Period shall end on that Repayment Date.
5.4 NON-AVAILABILITY OF MATCHING DEPOSITS FOR INTEREST PERIOD SELECTED. If,
after the Borrower has selected an Interest Period longer than 6
months, the Lender notifies the Borrower by 11.00 a.m. (London time) on
the third Business Day before the commencement of the Interest Period
that it is not satisfied that deposits in Dollars for a
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period equal to the Interest Period will be available to it in the
London Interbank Market when the Interest Period commences, the
Interest Period shall be of 6 months.
6 DEFAULT INTEREST
6.1 PAYMENT OF DEFAULT INTEREST ON OVERDUE AMOUNTS. The Borrower shall pay
interest in accordance with the following provisions of this Clause 6
on any amount payable by the Borrower under any Finance Document which
the Lender does not receive on or before the relevant date, that is:
(a) the date on which the Finance Documents provide that such amount is due
for payment; or
(b) if a Finance Document provides that such amount is payable on demand,
the date on which the demand is served; or
(c) if such amount has become immediately due and payable under Clause
18.5, the date on which it became immediately due and payable.
6.2 DEFAULT RATE OF INTEREST. Interest shall accrue on an overdue amount
from (and including) the relevant date until the date of actual payment
(as well after as before judgment) at the rate per annum determined by
the Lender to be 1 per cent. above the Margin plus LIBOR at which
deposits in an amount equal to such overdue amount are offered on call
or for successive periods of any duration of up to 3 months, as the
Lender may determine from time to time.
6.3 NOTIFICATION OF INTEREST PERIODS AND DEFAULT RATES. The Lender shall
promptly notify the Borrower of each interest rate determined by it
under Clause 6.2 and of each period selected by it for the purposes of
that Clause; but this shall not be taken to imply that the Borrower is
liable to pay such interest only with effect from the date of the
Lender's notification.
6.4 PAYMENT OF ACCRUED DEFAULT INTEREST. Subject to the other provisions of
this Agreement, any interest due under this Clause shall be paid on the
last day of the period by reference to which it was determined.
6.5 COMPOUNDING OF DEFAULT INTEREST. Any such interest which is not paid at
the end of the period by reference to which it was determined shall be
compounded every 3 months.
7 REPAYMENT AND PREPAYMENT
7.1 AMOUNT OF REPAYMENT INSTALMENTS. The Borrower shall repay the Loan by
10 consecutive six-monthly instalments of (a) in the case of the first
to sixth instalments (inclusive) in the amount of $1,750,000 each and
(b) in the case of the seventh to tenth instalments (inclusive), in the
amount of $650,000 each together with a balloon payment of $2,400,000
(the "BALLOON").
7.2 REPAYMENT DATES. The first repayment instalment shall be repaid on the
date falling 6 months after the Drawdown Date, each subsequent
repayment instalment shall be paid at six-monthly intervals thereafter
and the last instalment, together with the Balloon, shall be repaid on
the date falling on the earlier of (a) the date falling on the fifth
anniversary of the Drawdown Date and (b) 31 January 2011.
7.3 FINAL REPAYMENT DATE. On the final Repayment Date, the Borrower shall
additionally pay to the Lender all other sums then accrued or owing
under any Finance Document.
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7.4 VOLUNTARY PREPAYMENT. Subject to the following conditions, the Borrower
may prepay the whole or any part of the Loan on the last day of an
Interest Period.
7.5 CONDITIONS FOR VOLUNTARY PREPAYMENT. The conditions referred to in
Clause 7.4 are:
(a) that a partial prepayment shall be $250,000 or an integral multiple
thereof;
(b) that the Lender has received from the Borrower at least 10 days' prior
written notice specifying the amount to be prepaid and the date on
which the prepayment is to be made;
(c) that the Borrower has provided evidence satisfactory to the Lender that
any consent required by the Borrower or any Security Party in
connection with the prepayment has been obtained and remains in force,
and that any regulation relevant to this Agreement which affects the
Borrower or any Security Party has been complied with.
7.6 EFFECT OF NOTICE OF PREPAYMENT. A prepayment notice may not be
withdrawn or amended without the consent of the Lender and the amount
specified in the prepayment notice shall become due and payable by the
Borrower on the date for prepayment specified in the prepayment notice.
7.7 MANDATORY PREPAYMENT. Without prejudice to the provisions of Clause 14,
the Borrower shall be obliged to prepay the whole of the Loan if the
Ship is sold or becomes a Total Loss:
(a) in the case of a sale, on or before the date on which the sale is
completed; or
(b) in the case of Total Loss, on the earlier of the date falling 150 days
after the Total Loss Date and the date of receipt by the Lender of the
proceeds of insurance relating to such Total Loss.
7.8 SHAREHOLDING AND SENIOR EXECUTIVE MANAGEMENT OF BORROWER. If at any
time ▇▇. ▇▇▇▇ ▇▇▇▇▇▇ and members of the ▇▇▇▇▇▇ family (either directly
and/or through companies beneficially owned by the ▇▇▇▇▇▇ family and/or
trusts or foundations of which the ▇▇▇▇▇▇ family are beneficiaries) (i)
do not own the necessary shareholding to exercise executive power of
the Corporate Guarantor or (ii) are not represented in the senior
executive management of the Corporate Guarantor, the Borrower shall
promptly advise the Lender of the occurrence of the circumstances
referred to in this Clause 7.8. If the Lender does not approve (in its
sole and absolute discretion) the change in circumstances which has
occurred, the Loan shall be prepaid in full subject to the Lender
giving the Borrower and the Corporate Guarantor 60 days prior written
notice.
7.9 AMOUNTS PAYABLE ON PREPAYMENT. A prepayment shall be made together with
accrued interest (and any other amount payable under Clause 20 below or
otherwise) in respect of the amount prepaid and, if the prepayment is
not made on the last day of an Interest Period together with any sums
payable under Clause 20.1(b) but without premium or penalty.
7.10 APPLICATION OF PARTIAL PREPAYMENT. Each partial prepayment shall be
applied in reducing pro rata each of the repayment instalments
specified in Clause 7.1 and the Balloon.
7.11 NO REBORROWING. No amount prepaid may be reborrowed.
8 CONDITIONS PRECEDENT
8.1 DOCUMENTS, FEES AND NO DEFAULT. The Lender's obligation to advance the
Loan is subject to the following conditions precedent:
15
(a) that, on or before the service of the Drawdown Notice, the Lender
receives the documents described in Part A of Schedule 2 in form and
substance satisfactory to it and its lawyers;
(b) that, on the Drawdown Date but prior to the advancing of the Loan, the
Lender receives the documents described in Part B of Schedule 2 in form
and substance satisfactory to it and its lawyers;
(c) that the Lender has received the management fee referred to in Clause
19.1 and has received payment of the expenses referred to in Clause
19.2;
(d) that both at the date of the Drawdown Notice and at the Drawdown Date:
(i) no Event of Default or Potential Event of Default has occurred
and is continuing or would result from the borrowing of the
Loan;
(ii) the representations and warranties in Clause 9.1 and those of
the Borrower or any Security Party which are set out in the
other Finance Documents would be true and not misleading if
repeated on each of those dates with reference to the
circumstances then existing; and
(iii) none of the circumstances contemplated by Clause 4.4 has
occurred and is continuing;
(e) that, if the ratio set out in Clause 14.1 were applied immediately
following the advancing of the Loan, the Lender would not be entitled
to oblige the Borrower to provide additional security or prepay part of
the Loan under that Clause; and
(f) that the Lender has received, and found to be acceptable to it, any
further opinions, consents, agreements and documents in connection with
the Finance Documents which the Lender may reasonably request by notice
to the Borrower prior to the Drawdown Date.
8.2 WAIVERS OF CONDITIONS PRECEDENT. If the Lender, at its discretion,
permits the Loan to be borrowed before certain of the conditions
referred to in Clause 8.1 are satisfied, the Borrower shall ensure that
those conditions are satisfied within 5 Business Days after the
Drawdown Date (or such longer period as the Lender may specify).
9 REPRESENTATIONS AND WARRANTIES
9.1 GENERAL. The Borrower represents and warrants to the Lender as follows.
9.2 STATUS. The Borrower is duly incorporated and validly existing and in
good standing under the laws of the Republic of the ▇▇▇▇▇▇▇▇ Islands.
9.3 SHARE CAPITAL AND OWNERSHIP. The Borrower has an authorised share
capital of 500 bearer and/or registered ] shares of no par value each,
all of which shares have been issued in bearer form, and the legal
title and beneficial ownership of all the shares of the Borrower is
held, free of any Security Interest or other claim, by the Corporate
Guarantor.
9.4 CORPORATE POWER. The Borrower has the corporate capacity, and has taken
all corporate action and obtained all consents necessary for it:
(a) to execute the Finance Documents to which it is a party; and
(b) to borrow under this Agreement and to make all the payments
contemplated by, and to comply with, this Agreement and the other
Finance Documents to which it is a party.
16
9.5 CONSENTS IN FORCE. All the consents referred to in Clause 9.4 remain in
force and nothing has occurred which makes any of them liable to
revocation.
9.6 LEGAL VALIDITY; EFFECTIVE SECURITY INTERESTS. The Finance Documents to
which the Borrower is a party do now or, as the case may be, will, upon
execution and delivery (and, where applicable, registration as provided
for in the Finance Documents):
(a) constitute the Borrower's legal, valid and binding obligations
enforceable against the Borrower in accordance with their respective
terms; and
(b) create legal, valid and binding Security Interests enforceable in
accordance with their respective terms over all the assets to which
they, by their terms, relate,
subject to any relevant insolvency laws affecting creditors' rights
generally.
9.7 NO THIRD PARTY SECURITY INTERESTS. Without limiting the generality of
Clause 9.6, at the time of the execution and delivery of each Finance
Document:
(a) the Borrower will have the right to create all the Security Interests
which that Finance Document purports to create; and
(b) no third party will have any Security Interest or any other interest,
right or claim over, in or in relation to any asset to which any such
Security Interest, by its terms, relates.
9.8 NO CONFLICTS. The execution by the Borrower of the Finance Documents
and the borrowing of the Loan, and its compliance with each Finance
Document will not involve or lead to a contravention of:
(a) any law or regulation; or
(b) the constitutional documents of the Borrower; or
(c) any contractual or other obligation or restriction which is binding on
the Borrower or any of its assets.
9.9 NO WITHHOLDING TAXES. All payments which the Borrower is liable to make
under the Finance Documents may be made without deduction or
withholding for or on account of any tax payable under any law of any
Pertinent Jurisdiction.
9.10 NO DEFAULT. No Event of Default or Potential Event of Default has
occurred and is continuing.
9.11 INFORMATION. All information which has been provided in writing by or
on behalf of the Borrower or any Security Party to the Lender in
connection with any Finance Document satisfied the requirements of
Clause 10.5; all audited and unaudited accounts which have been so
provided satisfied the requirements of Clause 10.7; and there has been
no material adverse change in the financial position or state of
affairs of the Borrower from that disclosed in the latest of those
accounts.
9.12 NO LITIGATION. No legal or administrative action involving the Borrower
(including action relating to any alleged or actual breach of the ISM
Code and the ISPS Code) has been commenced or taken or, to the
Borrower's knowledge, is likely to be commenced or taken which, in
either case, would be likely to have a material adverse effect on the
Borrower's financial position or profitability.
9.13 COMPLIANCE WITH CERTAIN UNDERTAKINGS. At the date of this Agreement,
the Borrower is in compliance with Clauses 10.2, 10.4, 10.9 and 10.12.
17
9.14 TAXES PAID. The Borrower has paid all taxes applicable to, or imposed
on or in relation to itself, its business or the Ship.
9.15 ISM CODE AND ISPS CODE COMPLIANCE. All requirements of the ISM Code and
the ISPS Code as they relate to the Borrower, the Approved Manager and
the Ship have been complied with.
10 GENERAL UNDERTAKINGS
10.1 GENERAL. The Borrower undertakes with the Lender to comply with the
following provisions of this Clause 10 at all times during the Security
Period, except as the Lender may otherwise permit.
10.2 TITLE; NEGATIVE PLEDGE. The Borrower will:
(a) hold the legal title to, and own the entire beneficial interest in the
Ship, its Insurances and Earnings, free from all Security Interests and
other interests and rights of every kind, except for those created by
the Finance Documents and the effect of assignments contained in the
Finance Documents; and
(b) not create or permit to arise any Security Interest over any other
asset, present or future.
10.3 NO DISPOSAL OF ASSETS. The Borrower will not transfer, lease or
otherwise dispose of:
(a) all or a substantial part of its assets, whether by one transaction or
a number of transactions, whether related or not; or
(b) any debt payable to it or any other right (present, future or
contingent right) to receive a payment, including any right to damages
or compensation.
10.4 NO OTHER LIABILITIES OR OBLIGATIONS TO BE INCURRED. The Borrower will
not incur any liability or obligation except liabilities and
obligations under the Finance Documents and liabilities or obligations
reasonably incurred in the ordinary course of operating and chartering
the Ship.
10.5 INFORMATION PROVIDED TO BE ACCURATE. All financial and other
information which is provided in writing by or on behalf of the
Borrower under or in connection with any Finance Document will be true
and not, misleading and will not omit any material fact or
consideration.
10.6 PROVISION OF FINANCIAL STATEMENTS. The Borrower will send to the
Lender:
(a) as soon as possible, but in no event later than 90 days after the end
of each Financial Year of the Borrower, the audited Accounting
Information of the Borrower;
(b) as soon as possible, but in no event later than 90 days after the end
of each Financial Year of the Corporate Guarantor, the audited
Accounting Information of the Group;
(c) as soon as possible, but in no event later than 50 days after the end
of each financial quarter in each Financial Year of each of the
Borrower and the Corporate Gaurantor:
(i) the unaudited Accounting Information of the Borrower; and
(ii) the unaudited Account Information of the Group ,
in each case, certified as to its correctness by the chief financial
officer of the Corporate Guarantor; and
18
(d) promptly, when requested, such other financial information and accounts
relating to the business, undertaking, assets, liabilities, revenues,
financial condition or affairs of any Security Party and such other
further general information relating to any Security Party as the
Lender from time to time may reasonably require including (without
limitation) in relation to the Ship, its Earnings, the Approved Manager
and the Corporate Guarantor. .
10.7 FORM OF FINANCIAL STATEMENTS. All Accounting Information delivered
under Clause 10.6 will:
(a) be prepared in accordance with all applicable laws and US GAAP
consistently applied and, in the case of audited financial statements,
certified as to its correctness by auditors acceptable to the Lender;
(b) give a true and fair view of the state of affairs of the Borrower or
the Group (as the case may be) at the date of that Accounting
Information and of the profit of the Borrower or, as the case may be,
the Group for the period to which that Accounting Information relates;
and
(c) fully disclose or provide for all significant liabilities of the
Borrower or, as the case may be, of the Group.
10.8 CREDITOR NOTICES. The Borrower will send the Lender, at the same time
as they are despatched, copies of all communications which are
despatched to all the Borrower's creditors or any class of them.
10.9 CONSENTS. The Borrower will maintain in force and promptly obtain or
renew, and will promptly send certified copies to the Lender of, all
consents required:
(a) to perform its obligations under any Finance Document;
(b) for the validity or enforceability of any Finance Document to which it
is a party;
(c) for the Borrower to continue to own and operate the Ship,
and the Borrower will comply with the terms of all such consents.
10.10 MAINTENANCE OF SECURITY INTERESTS. The Borrower will:
(a) at its own cost, do all that it reasonably can to ensure that any
Finance Document validly creates the obligations and the Security
Interests which it purports to create; and
(b) without limiting the generality of paragraph (a) above, at its own
cost, promptly register, file, record or enrol any Finance Document
with any court or authority in all Pertinent Jurisdictions, pay any
stamp, registration or similar tax in all Pertinent Jurisdictions in
respect of any Finance Document, give any notice or take any other step
which may be or has become necessary or desirable for any Finance
Document to be valid, enforceable or admissible in evidence or to
ensure or protect the priority of any Security Interest which it
creates.
10.11 NOTIFICATION OF LITIGATION. The Borrower will provide the Lender with
details of any legal or administrative action involving the Borrower,
any Security Party, either Approved Manager, the Ship, the Earnings or
the Insurances as soon as such action is instituted or it becomes
apparent to the Borrower that it is likely to be instituted, unless it
is clear that the legal or administrative action cannot be considered
material in the context of any Finance Document.
19
10.12 PRINCIPAL PLACE OF BUSINESS. The Borrower will maintain its place of
business, and keep its corporate documents and records, at the address
[referred to in Clause 27.2(a)]; and will not establish, or do anything
as a result of which it would be deemed to have, a place of business in
the United Kingdom or the United States of America.
10.13 CONFIRMATION OF NO DEFAULT. The Borrower will, within 2 Business Days
after service by the Lender of a written request, serve on the Lender a
notice which is signed by 2 directors of the Borrower and which:
(a) states that no Event of Default or Potential Event of Default has
occurred; or
(b) states that no Event of Default or Potential Event of Default has
occurred, except for a specified event or matter, of which all material
details are given.
10.14 NOTIFICATION OF DEFAULT. The Borrower will notify the Lender as soon as
the Borrower becomes aware of:
(a) the occurrence of an Event of Default or a Potential Event of Default;
or
(b) any matter which indicates that an Event of Default or a Potential
Event of Default may have occurred,
and will thereafter keep the Lender fully up-to-date with all
developments.
10.15 PROVISION OF FURTHER INFORMATION. The Borrower will, as soon as
practicable after receiving the request, provide the Lender with any
additional financial or other information relating:
(a) to the Borrower, the Ship, the Approved Manager, the Corporate
Guarantor, the Insurances, the Earnings; or
(b) to any other matter relevant to, or to any provision of, a Finance
Document,
which may be reasonably requested by the Lender at any time.
10.16 MINIMUM LIQUIDITY. At all times during the Security Period, the
Borrower will ensure that an amount of not less than $300,000 is
standing to the credit of the Operating Account.
11 CORPORATE UNDERTAKINGS
11.1 GENERAL. The Borrower also undertakes with the Lender to comply with
the following provisions of this Clause 11 at all times during the
Security Period except as the Lender may otherwise permit.
11.2 MAINTENANCE OF STATUS. The Borrower will maintain its separate
corporate existence and remain in good standing under the laws of the
Republic of ▇▇▇▇▇▇▇▇ Islands.
11.3 NEGATIVE UNDERTAKINGS. The Borrower will not:
(a) carry on any business other than the ownership, chartering and
operation of the Ship; or
(b) pay any dividend or make any other form of distribution or effect any
form of redemption, purchase or return of share capital PROVIDED THAT
(i) the Borrower may pay in any Financial Year (no more frequently than
on a quarterly basis during that Financial Year) dividends in an
aggregate amount not exceeding 60 per cent. of the Net Income in that
Financial Year if at the relevant time no Event of Default has occurred
or is
20
continuing or would result from the payment of such dividend and (ii)
with the prior written consent of the Lender (to be given or withheld
in its sole and absolute discretion), the Borrower may pay dividends in
any Financial Year in excess of the amount referred to in sub-paragraph
(i);
(c) repay any shareholder loans or any other loans advanced to it by any
person (or, in either case, any interest thereon), nor make nay loans
or advances to any person; or
(d) provide any form of credit or financial assistance to:
(i) a person who is directly or indirectly interested in the
Borrower's share or loan capital; or
(ii) any company in or with which such a person is directly or
indirectly interested or connected,
or enter into any transaction with or involving such a person or
company on terms which are, in any respect, less favourable to the
Borrower than those which it could obtain in a bargain made at arms'
length; or
(e) open or maintain any account with any bank or financial institution
except the Operating Account and the Retention Account and any other
account opened or to be opened with the Lender for the purposes of the
Finance Documents; or
(f) issue, allot or grant any person a right to any shares in its capital
or repurchase or reduce its issued share capital; or
(g) acquire any shares or other securities other than US or UK Treasury
bills and certificates of deposit issued by major North American or
European banks, or enter into any transaction in a derivative; or
(h) enter into any form of amalgamation, merger or de-merger or any form of
reconstruction or reorganisation.
12 INSURANCE
12.1 GENERAL. The Borrower also undertakes with the Lender to comply with
the following provisions of this Clause 12 at all times during the
Security Period except as the Lender may otherwise permit.
12.2 MAINTENANCE OF OBLIGATORY INSURANCES. The Borrower shall keep the Ship
insured at the expense of the Borrower against:
(a) fire and usual marine risks (including hull and machinery and excess
risks);
(b) war risks;
(c) protection and indemnity risks (all classes); and
(d) any other risks against which the Lender considers, having regard to
practices and other circumstances prevailing at the relevant time, it
would in the opinion of the Lender be reasonable for the Borrower to
insure and which are specified by the Lender by notice to the Borrower.
12.3 TERMS OF OBLIGATORY INSURANCES. The Borrower shall effect such
insurances:
(a) in Dollars;
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(b) in the case of fire and usual marine risks and war risks, in an amount
on an agreed value basis at least the greater of (i) the Market Value
of the Ship and (ii) 125 per cent. of the aggregate of the Loan and the
Swap Exposure and upon such terms as shall from time to time be
approved in writing by the Lender;
(c) in the case of oil pollution liability risks, for an aggregate amount
equal to the highest level of cover from time to time available under
basic protection and indemnity club entry and the international marine
insurance market for vessels of the same type and age as the Ship;
(d) in relation to protection and indemnity risks, in respect of the full
tonnage of the Ship;
(e) on approved terms; and
(f) through approved brokers and with approved insurance companies and/or
underwriters or, in the case of war risks and protection and indemnity
risks, in approved war risks and protection and indemnity risks
associations.
12.4 FURTHER PROTECTIONS FOR THE LENDER. In addition to the terms set out in
Clause 12.3, the Borrower shall procure that the obligatory insurances
shall:
(a) whenever the Lender requires name (or be amended to name) the Lender as
additional named assured for its rights and interests, warranted no
operational interest and with full waiver of rights of subrogation
against the Lender, but without the Lender thereby being liable to pay
(but having the right to pay) premiums, calls or other assessments in
respect of such insurance;
(b) name the Lender as sole loss payee with such directions for payment as
the Lender may specify;
(c) provide that all payments by or on behalf of the insurers under the
obligatory insurances to the Lender shall be made without set-off,
counterclaim or deductions or condition whatsoever;
(d) provide that the insurers shall waive, to the fullest extent permitted
by English law, their entitlement (if any) (whether by statute, common
law, equity, or otherwise) to be subrogated to the rights and remedies
of the Lender in respect of any rights or interests (secured or not)
held by or available to the Lender in respect of the Secured
Liabilities, until the Secured Liabilities shall have been fully repaid
and discharged, except that the insurers shall not be restricted by the
terms of this paragraph (d) from making personal claims against persons
(other than the Lender, the Borrower or any other Security Party) in
circumstances where the insurers have fully discharged their
liabilities and obligations under the relevant obligatory insurances;
(e) provide that such obligatory insurances shall be primary without right
of contribution from other insurances which may be carried by the
Lender;
(f) provide that the Lender may make proof of loss if the Borrower fail to
do so; and
(g) provide that if any obligatory insurance is cancelled, or if any
substantial change is made in the coverage which adversely affects the
interest of the Lender, or if any obligatory insurance is allowed to
lapse for non-payment of premium, such cancellation, charge or lapse
shall not be effective with respect to the Lender for 30 days (or 7
days in the case of war risks) after receipt by the Lender of prior
written notice from the insurers of such cancellation, change or lapse.
12.5 RENEWAL OF OBLIGATORY INSURANCES. The Borrower shall:
22
(a) at least 14 days before the expiry of any obligatory insurance effected
by it:
(i) notify the Lender of the brokers (or other insurers) and any
protection and indemnity or war risks association through or
with whom the Borrower proposes to renew that insurance and of
the proposed terms of renewal; and
(ii) obtain the Lender's approval to the matters referred to in
paragraph (i) above;
(b) at least 7 days before the expiry of any obligatory insurance effected
by it, renew the insurance in accordance with the Lender's approval
pursuant to paragraph (a) above; and
(c) procure that the approved brokers and/or the war risks and protection
and indemnity associations with which such a renewal is effected shall
promptly after the renewal notify the Lender in writing of the terms
and conditions of the renewal.
12.6 COPIES OF POLICIES; LETTERS OF UNDERTAKING. The Borrower shall ensure
that all approved brokers provide the Lender with pro forma copies of
all policies relating to the obligatory insurances which they are to
effect or renew and of a letter or letters of undertaking in a form
required by the Lender and including undertakings by the approved
brokers that:
(a) they will have endorsed on each policy, immediately upon issue, a loss
payable clause and a notice of assignment complying with the provisions
of Clause 12.4;
(b) they will hold such policies, and the benefit of such insurances, to
the order of the Lender in accordance with the said loss payable
clause;
(c) they will advise the Lender immediately of any material change to the
terms of the obligatory insurances;
(d) they will notify the Lender, not less than 14 days before the expiry of
the obligatory insurances, in the event of their not having received
notice of renewal instructions from the Borrower or its agents and, in
the event of their receiving instructions to renew, they will promptly
notify the Lender of the terms of the instructions; and
(e) they will not set off against any sum recoverable in respect of a claim
relating to the Ship under such obligatory insurances any premiums or
other amounts due to them or any other person whether in respect of the
Ship or otherwise, they waive any lien on the policies or, any sums
received under them, which they might have in respect of such premiums
or other amounts, and they will not cancel such obligatory insurances
by reason of non-payment of such premiums or other amounts, and will
arrange for a separate policy to be issued in respect of the Ship
forthwith upon being so requested by the Lender.
12.7 COPIES OF CERTIFICATES OF ENTRY. The Borrower shall ensure that any
protection and indemnity and/or war risks associations in which the
Ship is entered provides the Lender with:
(a) a certified copy of the certificate of entry for the Ship;
(b) a letter or letters of undertaking in such form as may be required by
the Lender; and
(c) where required to be issued under the terms of insurance/indemnity
provided by the Borrower's protection and indemnity association, a
certified copy of each United States of America voyage quarterly
declaration (or other similar document or documents) made by the
Borrower in relation to the Ship in accordance with the requirements of
such protection and indemnity association; and
23
(d) a certified copy of each certificate of financial responsibility for
pollution by oil or other Environmentally Sensitive Material issued by
the relevant certifying authority in relation to the Ship.
12.8 DEPOSIT OF ORIGINAL POLICIES. The Borrower shall ensure that all
policies relating to obligatory insurances effected by it are deposited
with the approved brokers through which the insurances are effected or
renewed.
12.9 PAYMENT OF PREMIUMS. The Borrower shall punctually pay all premiums or
other sums payable in respect of the obligatory insurances effected by
it and produce all relevant receipts when so required by the Lender.
12.10 GUARANTEES. The Borrower shall ensure that any guarantees required by a
protection and indemnity or war risks association are promptly issued
and remain in full force and effect.
12.11 RESTRICTIONS ON EMPLOYMENT. The Borrower shall not employ the Ship, nor
permit the Ship to be employed, outside the cover provided by any
obligatory insurances.
12.12 COMPLIANCE WITH TERMS OF INSURANCES. The Borrower shall not do nor omit
to do (nor permit to be done or not to be done) any act or thing which
would or might render any obligatory insurance invalid, void, voidable
or unenforceable or render any sum payable thereunder repayable in
whole or in part; and, in particular:
(a) the Borrower shall take all necessary action and comply with all
requirements which may from time to time be applicable to the
obligatory insurances, and (without limiting the obligation contained
in Clause 12.7(c) above) ensure that the obligatory insurances are not
made subject to any exclusions or qualifications to which the Lender
has not given its prior approval;
(b) the Borrower shall not make any changes relating to the classification
or classification society or manager or operator of the Ship unless
approved by the underwriters of the obligatory insurances;
(c) the Borrower shall make (and promptly supply copies to the Lender of)
all quarterly or other voyage declarations which may be required by the
protection and indemnity risks association in which the Ship is entered
to maintain cover for trading to the United States of America and
Exclusive Economic Zone (as defined in the United States Oil Pollution
Act 1990 or any other applicable legislation); and
(d) the Borrower shall not employ the Ship, nor allow it to be employed,
otherwise than in conformity with the terms and conditions of the
obligatory insurances, without first obtaining the consent of the
insurers and complying with any requirements (as to extra premium or
otherwise) which the insurers specify.
12.13 ALTERATION TO TERMS OF INSURANCES. The Borrower shall neither make or
agree to any alteration to the terms of any obligatory insurance nor
waive any right relating to any obligatory insurance.
12.14 SETTLEMENT OF CLAIMS. The Borrower shall not settle, compromise or
abandon any claim under any obligatory insurance for Total Loss or for
a Major Casualty, and shall do all things necessary and provide all
documents, evidence and information to enable the Lender to collect or
recover any moneys which at any time become payable in respect of the
obligatory insurances.
12.15 PROVISION OF COPIES OF COMMUNICATIONS. The Borrower shall provide the
Lender, at the time of each such communication, copies of all major
written communications between itself and:
24
(a) the approved brokers; and
(b) the approved protection and indemnity and/or war risks associations;
and
(c) the approved insurance companies and/or underwriters, which relate
directly or indirectly to:
(i) the Borrower's obligations relating to the obligatory
insurances including, without limitation, all requisite
declarations and payments of additional premiums or calls; and
(ii) any credit arrangements made between the Borrower and any of
the persons referred to in paragraphs (a) or (b) above
relating wholly or partly to the effecting or maintenance of
the obligatory insurances.
12.16 PROVISION OF INFORMATION. In addition, the Borrower shall promptly
provide the Lender (or any persons which it may designate) with any
information which the Lender (or any such designated person) requests
for the purpose of:
(a) obtaining or preparing any report from an independent marine insurance
broker as to the adequacy of the obligatory insurances effected or
proposed to be effected; and/or
(b) effecting, maintaining or renewing any such insurances as are referred
to in Clause 12.17 below or dealing with or considering any matters
relating to any such insurances,
and the Borrower shall, forthwith upon demand, indemnify the Lender in
respect of all fees and other expenses incurred by or for the account
of the Lender in connection with any such report as is referred to in
paragraph (a) above.
12.17 MORTGAGEE'S INTEREST AND ADDITIONAL PERILS INSURANCES. The Lender shall
be entitled from time to time to effect, maintain and renew a
mortgagee's interest insurance policy and, at the discretion of the
Lender,a mortgagee's interest additional perils policy in respect of
the Ship, each in such amount and otherwise on such terms, through such
insurers and generally in such manner as the Lender may from time to
time consider appropriate and the Borrower shall upon demand fully
indemnify the Lender in respect of all premiums and other expenses
which are incurred in connection with or with a view to effecting,
maintaining or renewing such insurance or dealing with, or considering,
any matter arising out of such insurance.
12.18 REVIEW OF INSURANCE REQUIREMENTS. The Lender shall be entitled to
review the requirements of this Clause 12 from time to time in order to
take account of any changes in circumstances after the date of this
Agreement which are, in the opinion of the Lender, significant and
capable of affecting the Borrower or the Ship and its insurance
(including, without limitation, changes in the availability or the cost
of insurance coverage or the risks to which the Borrower may be
subject.) and may appoint insurance consultants in relation to this
review at the cost of the Borrower.
12.19 MODIFICATION OF INSURANCE REQUIREMENTS. The Lender shall notify the
Borrower of any proposed modification under Clause 12.18 to the
requirements of this Clause 12 which the Lender considers appropriate
in the circumstances, and such modification shall take effect on and
from the date it is notified in writing to the Borrower as an amendment
to this Clause 12 and shall bind the Borrower accordingly.
12.20 COMPLIANCE WITH MORTGAGEE'S INSTRUCTIONS. The Lender shall be entitled
(without prejudice to or limitation of any other rights which it may
have or acquire under any Finance Document) to require the Ship to
remain at any safe port or to proceed to and remain at any safe port
designated by the Lender until the Borrower implements any
25
amendments to the terms of the obligatory insurances and any
operational changes required as a result of a notice served under
Clause 12.19.
13 SHIP COVENANTS
13.1 GENERAL. The Borrower also undertakes with the Lender to comply with
the following provisions of this Clause 13 at all times during the
Security Period except as the Lender may otherwise permit.
13.2 SHIP'S NAME AND REGISTRATION. The Borrower shall keep the Ship
registered in its name as a ▇▇▇▇▇▇▇▇ Islands flag ship at the port of
Majuro; shall not do or allow to be done anything as a result of which
such registration might be cancelled or imperilled; and shall not
change the name or port of registry of the Ship.
13.3 REPAIR AND CLASSIFICATION. The Borrower shall keep the Ship in a good
and safe condition and state of repair:
(a) consistent with first-class ship ownership and management practice;
(b) so as to maintain the Ship's present class (namely, the highest class
available for vessels of the same type, age and specification as the
Ship with Bureau Veritas) (or the equivalent with another
classification society which is a member of the International
Association of Classification Societies acceptable to the Lender) free
of all overdue recommendations and conditions affecting the Ship's
class; and
(c) so as to comply with all laws and regulations applicable to vessels
registered at ports in the ▇▇▇▇▇▇▇▇ Islands or to vessels trading to
any jurisdiction to which the Ship may trade from time to time,
including but not limited to the ISM Code and the ISPS Code.
13.4 MODIFICATION. The Borrower shall not make any modification or repairs
to, or replacement of, the Ship or equipment installed on the Ship
which would or might materially alter its structure, type or
performance characteristics or materially reduce the Ship's value.
13.5 REMOVAL OF PARTS. The Borrower shall not remove any material part of
the Ship, or any item of equipment installed on it, unless the part or
item so removed is forthwith replaced by a suitable part or item which
is in the same condition as or better condition than the part or item
removed, is free from any Security Interest or any right in favour of
any person other than the Lender and becomes on installation on the
Ship the property of the Borrower and subject to the security
constituted by the Mortgage PROVIDED THAT the Borrower may install
equipment owned by a third party if the equipment can be removed
without any risk of damage to the Ship.
13.6 SURVEYS. The Borrower shall submit the Ship regularly to all periodical
or other surveys which may be required for classification purposes and,
if so required by the Lender provide the Lender, with copies of all
survey reports.
13.7 INSPECTION. The Borrower shall permit the Lender (by surveyors or other
persons appointed by it for that purpose at the Borrower's expense) to
board the Ship at all reasonable times to inspect its condition or to
satisfy themselves about proposed or executed repairs and shall afford
all proper facilities for such inspections.
13.8 PREVENTION OF AND RELEASE FROM ARREST. The Borrower shall promptly
discharge:
(a) all liabilities which give or may give rise to maritime or possessory
liens on or claims enforceable against the Ship, the Earnings or the
Insurances;
26
(b) all taxes, dues and other amounts charged in respect of the Ship, the
Earnings or the Insurances; and
(c) all other outgoings whatsoever in respect of the Ship, the Earnings or
the Insurances,
and, forthwith upon receiving notice of the arrest of the Ship, or of
its detention in exercise or purported exercise of any lien or claim,
the Borrower shall procure the Ship's release by providing bail or
otherwise as the circumstances may require.
13.9 COMPLIANCE WITH LAWS ETC. The Borrower shall:
(a) comply, or procure compliance with the ISM Code, the ISPS Code, all
Environmental Laws and all other laws or regulations relating to the
Ship, its ownership, operation and management or to the business of the
Borrower;
(b) not employ the Ship nor allow its employment in any manner contrary to
any law or regulation in any relevant jurisdiction including but not
limited to the ISM Code and the ISPS Code; and
(c) in the event of hostilities in any part of the world (whether war is
declared or not), not cause or permit the Ship to enter or trade to any
zone which is declared a war zone by any government or by the Ship's
war risks insurers unless the prior written consent of the Lender has
been given and the Borrower has (at its expense) effected any special,
additional or modified insurance cover which the Lender may require.
13.10 PROVISION OF INFORMATION. The Borrower shall promptly provide the
Lender with any information which it requests regarding:
(a) the Ship, its employment, position and engagements;
(b) the Earnings and payments and amounts due to the master and crew of the
Ship;
(c) any expenses incurred, or likely to be incurred, in connection with the
operation, maintenance or repair of the Ship and any payments made in
respect of the Ship;
(d) any towages and salvages;
(e) its compliance, the Approved Manager's compliance or the compliance of
the Ship with the ISM Code and the ISPS Code,
and, upon the Lender's request, provide copies of any current charter
relating to the Ship, of any current charter guarantee and of the ISM
Code Documentation and the ISPS Code Documentation in relation to the
Ship.
13.11 NOTIFICATION OF CERTAIN EVENTS. The Borrower shall immediately notify
the Lender by fax, confirmed forthwith by letter of:
(a) any casualty which is or is likely to be or to become a Major Casualty;
(b) any occurrence as a result of which the Ship has become or is, by the
passing of time or otherwise, likely to become a Total Loss;
(c) any requirement or recommendation made by any insurer or classification
society or by any competent authority which is not immediately complied
with;
(d) any arrest or detention of the Ship, any exercise or purported exercise
of any lien on the Ship or its Earnings or any requisition of the Ship
for hire;
27
(e) any intended dry docking of the Ship;
(f) any Environmental Claim made against the Borrower or in connection with
the Ship, or any Environmental Incident;
(g) any claim for breach of the ISM Code or the ISPS Code being made
against the Borrower, either of the Approved Managers or otherwise in
connection with the Ship; or
(h) any other matter, event or incident, actual or threatened, the effect
of which will or could lead to the ISM Code or the ISPS Code not being
complied with,
and the Borrower shall keep the Lender advised in writing on a regular
basis and in such detail as the Lender shall require of the Borrower's
and the Approved Managers' or any other person's response to any of
those events or matters.
13.12 RESTRICTIONS ON CHARTERING, APPOINTMENT OF MANAGERS ETC. The Borrower
shall not:
(a) let the Ship on demise charter for any period;
(b) enter into any time or consecutive voyage charter (other than the
Initial Charter) in respect of the Ship for a term which exceeds, or
which by virtue of any optional extensions may exceed, 13 months;
(c) enter into any charter in relation to the Ship under which more than 2
months' hire (or the equivalent) is payable in advance;
(d) charter the Ship otherwise than on bona fide arm's length terms at the
time when the Ship is fixed;
(e) appoint a manager of the Ship other than the Approved Manager's or
agree to any alteration to the terms of each of the Approved Managers'
respective appointments;
(f) de-activate or lay up that Ship; or
(g) put the Ship into the possession of any person for the purpose of work
being done upon the Ship in an amount exceeding or likely to exceed
$350,000 (or the equivalent in any other currency) unless that person
has first given to the Lender and in terms satisfactory to it a written
undertaking not to exercise any lien on the Ship or its Earnings for
the cost of such work or any other reason.
13.13 NOTICE OF MORTGAGE. The Borrower shall keep the Mortgage registered
against the Ship as a valid first priority mortgage, carry on board the
Ship a certified copy of the Mortgage and place and maintain in a
conspicuous place in the navigation room and the Master's cabin of that
Ship a framed printed notice stating that the Ship is mortgaged by the
Borrower to the Lender.
13.14 TIME CHARTER ASSIGNMENT. If the Borrower enters into any Future Charter
(subject to (if applicable) obtaining the consent of the Lender in
accordance with Clause 13.12(b)), the Borrower shall, at the request of
the Lender, execute in favour of the Lender a Charter Assignment in
relation to such Future Charter, and shall deliver to the Lender such
other documents equivalent to those referred to at paragraphs 3, 4 and
5 of Part A of Schedule 2 as the Lender may require.
14 SECURITY COVER
14.1 MINIMUM REQUIRED SECURITY COVER. Clause 14.2 applies if the Lender
notifies the Borrower that:
28
(a) the Market Value of the Ship; plus
(b) the net realisable value of any additional security previously provided
under this Clause 14,
is below the Relevant Percentage of the aggregate of the Loan and the
Swap Exposure less any monies at any relevant time standing to the
credit of the Retention Account which have been transferred to that
account pursuant to Clause 17.2(a).
In this Clause 14.1 and in Clause 14.2 "RELEVANT PERCENTAGE" means:
(i) if the Ship is operating under a charter (including, without
limitation, the Initial Charter) or any other contract of
employment the unexpired term of which is longer than 6
months, 110 per cent.; and
(ii) at all other times, 125 per cent.
14.2 PROVISION OF ADDITIONAL SECURITY COVER; PREPAYMENT OF LOAN. The
Borrower undertakes with the Lender that, if the Lender notifies the
Borrower that the aggregate of:
(a) the Market Value; plus
(b) the net realisable value of any additional security previously provided
under this Clause 14,
is below the Relevant Percentage of the aggregate of the Loan and the
Swap Exposure less any monies at any relevant time standing to the
credit of the Retention Account which have been transferred to that
account pursuant to Clause 17.2(a), the Borrower will, within 1 month
after the date on which the Lender's notice is served, either:
(i) provide, or ensure that a third party provides, additional
security which, in the opinion of the Lender, has a net
realisable value at least equal to the shortfall and which, if
it consists of or includes a Security Interest, covers such
asset or assets and is documented in such terms as the Lender
may approve or require; or
(ii) prepay in accordance with Clause 7 such part (at least) of the
Loan as will eliminate the shortfall.
14.3 MEANING OF ADDITIONAL SECURITY. In Clause 14.2 "SECURITY" means a
Security Interest over an asset or assets (whether securing the
Borrower's liabilities under the Finance Documents or a guarantee in
respect of those liabilities), or a guarantee, letter of credit or
other security in respect of the Borrower's liabilities under the
Finance Documents.
14.4 REQUIREMENT FOR ADDITIONAL DOCUMENTS. The Borrower shall not be deemed
to have complied with sub-paragraph (i) of Clause 14.2 above until the
Lender has received in connection with the additional security
certified copies of documents of the kinds referred to in paragraphs 3,
4 and 5 of Schedule 2, Part A below and such legal opinions in terms
acceptable to the Lender from such lawyers as it may select.
14.5 VALUATION OF SHIP. The Market Value of the Ship at any date is that
shown by the valuation prepared:
(a) as at a date not more than 14 days previously;
(b) by one independent sale and purchase shipbroker which the Lender has
approved or appointed for the purpose;
29
(c) with or without physical inspection of the Ship (as the Lender may
require);
(d) on the basis of a sale for prompt delivery for cash on normal arm's
length commercial terms as between a willing seller and a willing buyer
(after taking account of any charter (including, without limitation,
the Initial Charter) or any other contract of employment in respect of
the Shipthe unexpired term of which is longer than 6 months); and
(e) after deducting the estimated amount of the usual and reasonable
expenses which would be incurred in connection with the sale.
14.6 VALUATION OF ADDITIONAL SECURITY. The net realisable value of any
additional security which is provided under Clause 14.2 and which
consists of a Security Interest over a vessel shall be that shown by a
valuation complying with the requirements of Clause 14.5.
14.7 VALUATIONS BINDING. Any valuation under Clause 14.2, 14.5 or 14.6 shall
be binding and conclusive as regards the Borrower, as shall be any
valuation which the Lender makes of a security which does not consist
of or include a Security Interest.
14.8 PROVISION OF INFORMATION. The Borrower shall promptly provide the
Lender and any shipbroker or expert acting under Clause 14.5 or 14.6
with any information which the Lender or the shipbroker or expert may
request for the purposes of the valuation; and, if the Borrower fails
to provide the information by the date specified in the request, the
valuation may be made on any basis and assumptions which the shipbroker
or the Lender (or the expert appointed by it) consider prudent.
14.9 PAYMENT OF VALUATION EXPENSES. Without prejudice to the generality of
the Borrower's obligations under Clauses 19.3 and 20.3, the Borrower
shall, on demand, pay the Lender the amount of the fees and expenses of
any shipbroker or expert instructed by the Lender under this Clause and
all legal and other expenses incurred by the Lender in connection with
any matter arising out of this Clause.
14.10 APPLICATION OF PREPAYMENT. Clause 7 shall apply in relation to any
prepayment pursuant to Clause 14.2(b).
15 PAYMENTS AND CALCULATIONS
15.1 CURRENCY AND METHOD OF PAYMENTS. All payments to be made by the
Borrower to the Lender under a Finance Document shall be made to the
Lender:
(a) by not later than 11.00 a.m. (London time) on the due date;
(b) in same day Dollar funds settled through the New York Clearing House
Interbank Payments System (or in such other Dollar funds and/or settled
in such other manner as the Lender shall specify as being customary at
the time for the settlement of international transactions of the type
contemplated by this Agreement); and
(c) to the account of the Lender at ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇ of the Americas, NY 1019, New York (Account No 0100383000100;
Swift Code ▇▇▇▇▇▇▇▇) or to such other account with such other bank as
the Lender may from time to time notify to the Borrower.
15.2 PAYMENT ON NON-BUSINESS DAY. If any payment by the Borrower under a
Finance Document would otherwise fall due on a day which is not a
Business Day:
(a) the due date shall be extended to the next succeeding Business Day; or
30
(b) if the next succeeding Business Day falls in the next calendar month,
the due date shall be brought forward to the immediately preceding
Business Day,
and interest shall be payable during any extension under paragraph (a)
at the rate payable on the original due date.
15.3 BASIS FOR CALCULATION OF PERIODIC PAYMENTS. All interest and any other
payments under any Finance Document which are of an annual or periodic
nature shall accrue from day to day and shall be calculated on the
basis of the actual number of days elapsed and a 360 day year.
15.4 LENDER ACCOUNTS. The Lender shall maintain an account showing the
amounts advanced by the Lender and all other sums owing to the Lender
from the Borrower and each Security Party under the Finance Documents
and all payments in respect of those amounts made by the Borrower and
any Security Party.
15.5 ACCOUNTS PRIMA FACIE EVIDENCE. If the account maintained under Clauses
15.4 shows an amount to be owing by the Borrower or a Security Party to
the Lender, that account shall be prima facie evidence that that amount
is owing to the Lender.
16 APPLICATION OF RECEIPTS
16.1 NORMAL ORDER OF APPLICATION. Except as any Finance Document may
otherwise provide, any sums which are received or recovered by the
Lender under or by virtue of any Finance Document shall be applied:
FIRST: in or towards satisfaction of any amounts then due and payable
under the Finance Documents (or any of them) in the following order of
application and/or proportions:
(a) first, in or towards satisfaction pro rata of all amounts then due and
payable to the Lender under the Finance Documents other than those
amounts referred to at (b) and (c) below (including, but without
limitation, all amounts payable by the Borrower under Clause 19, 20 and
21 of this Agreement or by the Borrower or any other Security Party
under any corresponding or similar provision in any other Finance
Document);
(b) secondly, in or towards satisfaction pro rata of any and all amounts of
interest or default interest payable to the Lender under the Finance
Documents; and
(c) thirdly, in or towards satisfaction of the Loan;
:
SECONDLY: (if at the relevant time an Event of Default or Potential
Event of Default has occurred) in retention of an amount equal to any
amount not then due and payable under any Finance Document but which
the Lender, by notice to the Borrower and the Security Parties, states
in its opinion will or may become due and payable in the future and,
upon those amounts becoming due and payable, in or towards satisfaction
of them in accordance with the foregoing provisions of this Clause; and
THIRDLY: any surplus shall be paid to the Borrower or to any other
person appearing to be entitled to it.
16.2 VARIATION OF ORDER OF APPLICATION. The Lender may, by notice to the
Borrower and the Security Parties, provide for a different manner of
application from that set out in Clause 16.1 either as regards a
specified sum or sums or as regards sums in a specified category or
categories.
16.3 NOTICE OF VARIATION OF ORDER OF APPLICATION. The Lender may give
notices under Clause 16.2 from time to time; and such a notice may be
stated to apply not only to sums
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which may be received or recovered in the future, but also to any sum
which has been received or recovered on or after the third Business Day
before the date on which the notice is served.
16.4 APPROPRIATION RIGHTS OVERRIDDEN. This Clause 16 and any notice which
the Lender gives under Clause 16.2 shall override any right of
appropriation possessed, and any appropriation made, by the Borrower or
any Security Party.
17 APPLICATION OF EARNINGS
17.1 PAYMENT OF EARNINGS. The Borrower undertakes with the Lender to ensure
that, throughout the Security Period (subject only to the provisions of
this Agreement and the General Assignment) all the Earnings of the Ship
are paid to the Operating Account.
17.2 MONTHLY RETENTIONS. The Borrower undertakes with the Lender to ensure
that, in each calendar month of the Security Period after the Drawdown
Notice is served, on such dates as the Lender may from time to time
specify, there is transferred to the Retention Account out of the
Earnings received in the Operating Account during the preceding
calendar month:
(a) one-sixth of the amount of the repayment instalment falling due under
Clause 7 on the next Repayment Date; and
(b) the relevant fraction of the aggregate amount of interest on the Loan
which is payable on the next due date for payment of interest under
this Agreement.
The "RELEVANT FRACTION" is a fraction of which the numerator is one and
the denominator the number of months comprised in the then current
Interest Period (or, if the current Interest Period ends after the next
date for payment of interest under this Agreement, the number of months
from the later of the commencement of the current Interest Period and
the last due date for payment of interest to the next date for payment
of interest under this Agreement).
17.3 SHORTFALL IN EARNINGS. If the aggregate Earnings received in the
Operating Account are insufficient in any month for the required amount
to be transferred to the Retention Account under Clause 17.2, the
Borrower shall make up the amount of the insufficiency on demand from
the Lender; but, without thereby prejudicing the Lender's right to make
such demand at any time, the Lender may permit the Borrower to make up
all or part of the insufficiency by increasing the amount of any
transfer under Clause 17.2 from the Earnings received in the next or
subsequent months.
17.4 APPLICATION OF RETENTIONS. Until an Event of Default or a Potential
Event of Default occurs, the Lender shall on each Repayment Date and on
each due date for the payment of interest under this Agreement apply in
accordance with Clause 15.1 so much of the balance on the Retention
Account as equals:
(a) the repayment instalment due on that Repayment Date; or
(b) the amount of interest payable on that interest payment date,
in discharge of the Borrower's liability for that repayment instalment
or that interest.
17.5 INTEREST ACCRUED ON THE OPERATING ACCOUNT AND THE RETENTION ACCOUNT.
Any credit balance on both the Operating Account and the Retention
Account shall bear interest at the rate from time to time offered by
the Lender to its customers for Dollar deposits of similar amounts and
for periods similar to those for which such balances appear to the
Lender likely to remain on the Operating Account and the Retention
Account.
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17.6 RELEASE OF ACCRUED INTEREST. Interest accruing under Clause 17.5 shall
be released to the Borrower on each Repayment Date unless an Event of
Default or a Potential Event of Default has occurred or the then credit
balance on the Retention Account is less than what would have been the
balance had the full amount required by Clause 17.2 (and Clause 17.3,
if applicable) been transferred in that and each previous month.
17.7 LOCATION OF ACCOUNTS. The Borrower shall promptly:
(a) comply with any requirement of the Lender as to the location or
re-location of the Operating Account and the Retention Account (or
either of them); and
(b) execute any documents which the Lender specifies to create or maintain
in favour of the Lender a Security Interest over (and/or rights of
set-off, consolidation or other rights in relation to) the Operating
Account and the Retention Account.
17.8 DEBITS FOR EXPENSES ETC. The Lender shall be entitled (but not obliged)
from time to time to debit the Operating Account without prior notice
in order to discharge any amount due and payable to it under Clause 19
or 20 or payment of which it has become entitled to demand under Clause
19 or 20.
17.9 BORROWER'S OBLIGATIONS UNAFFECTED. The provisions of this Clause 17 (as
distinct from a distribution effected under Clause 17.4) do not affect:
(a) the liability of the Borrower to make payments of principal and
interest on the due dates; or
(b) any other liability or obligation of the Borrower or any Security Party
under any Finance Document.
18 EVENTS OF DEFAULT
18.1 EVENTS OF DEFAULT. An Event of Default occurs if:
(a) the Borrower or any Security Party fails to pay when due or (if so
payable) on demand any sum payable under a Finance Document or under
any document relating to a Finance Document; or
(b) any breach occurs of Clause 8.2, 10.2, 10.3, 10.16, 11.2, 11.3 or 14.1;
or
(c) any breach by the Borrower or any Security Party occurs of any
provision of a Finance Document (other than a breach covered by
paragraph (a) or (b) above) if, in the opinion of the Lender, such
default is capable of remedy and such default continues unremedied 10
days after written notice from the Lender requesting action to remedy
the same; or
(d) (subject to any applicable grace period specified in any Finance
Document) any breach by the Borrower or any Security Party occurs of
any provision of a Finance Document (other than a breach caused by
paragraph (a), (b) or (c) above); or
(e) any representation, warranty or statement made by, or by an officer of,
the Borrower or a Security Party in a Finance Document or in the
Drawdown Notice or any other notice or document relating to a Finance
Document is untrue or misleading when it is made; or
(f) any of the following occurs in relation to any Financial Indebtedness
of a Relevant Person:
(i) any Financial Indebtedness of a Relevant Person is not paid
when due or, if so payable, on demand; or
33
(ii) any Financial Indebtedness of a Relevant Person becomes due
and payable or capable of being declared due and payable prior
to its stated maturity date as a consequence of any event of
default; or
(iii) a lease, hire purchase agreement or charter creating any
Financial Indebtedness of a Relevant Person is terminated by
the lessor or owner or becomes capable of being terminated as
a consequence of any termination event; or
(iv) any overdraft, loan, note issuance, acceptance credit, letter
of credit, guarantee, foreign exchange or other facility, or
any swap or other derivative contract or transaction, relating
to any Financial Indebtedness of a Relevant Person ceases to
be available or becomes capable of being terminated as a
result of any event of default, or cash cover is required, or
becomes capable of being required, in respect of such a
facility as a result of any event of default; or
(v) any Security Interest securing any Financial Indebtedness of a
Relevant Person becomes enforceable; or
(g) any of the following occurs in relation to a Relevant Person:
(i) a Relevant Person becomes, in the opinion of the Lender,
unable to pay its debts as they fall due; or
(ii) any assets of a Relevant Person are subject to any form of
execution, attachment, arrest, sequestration or distress in
respect of a sum of, or sums aggregating, $500,000 or more or
the equivalent in another currency; or
(iii) any administrative or other receiver is appointed over any
asset of a Relevant Person; or
(iv) a Relevant Person makes any formal declaration of bankruptcy
or any formal statement to the effect that it is insolvent or
likely to become insolvent, or a winding up or administration
order is made in relation to a Relevant Person, or the members
or directors of a Relevant Person pass a resolution to the
effect that it should be wound up, placed in administration or
cease to carry on business, save that this paragraph does not
apply to a fully solvent winding up of a Relevant Person other
than the Borrower which is, or is to be, effected for the
purposes of an amalgamation or reconstruction previously
approved by the Lender and effected not later than 3 months
after the commencement of the winding up; or
(v) a petition is presented in any Pertinent Jurisdiction for the
winding up or administration, or the appointment of a
provisional liquidator, of a Relevant Person unless the
petition is being contested in good faith and on substantial
grounds and is dismissed or withdrawn within 30 days of the
presentation of the petition; or
(vi) a Relevant Person petitions a court, or presents any proposal
for, any form of judicial or non-judicial suspension or
deferral of payments, reorganisation of its debt (or certain
of its debt) or arrangement with all or a substantial
proportion (by number or value) of its creditors or of any
class of them or any such suspension or deferral of payments,
reorganisation or arrangement is effected by court order,
contract or otherwise; or
34
(vii) any meeting of the members or directors of a Relevant Person
is summoned for the purpose of considering a resolution or
proposal to authorise or take any action of a type described
in paragraphs (iii), (iv), (v) or (vi) above; or
(viii) in a Pertinent Jurisdiction other than England, any event
occurs or any procedure is commenced which, in the opinion of
the Lender, is similar to any of the foregoing; or
(h) the Borrower ceases or suspends carrying on its business or a part of
its business which, in the opinion of the Lender, is material in the
context of this Agreement; or
(i) it becomes unlawful in any Pertinent Jurisdiction or impossible:
(i) for the Borrower or any Security Party to discharge any
liability under a Finance Document or to comply with any other
obligation which the Lender considers material under a Finance
Document; or
(ii) for the Lender to exercise or enforce any right under, or to
enforce any Security Interest created by, a Finance Document;
or
(j) any consent necessary to enable the Borrower to own, operate or charter
the Ship or to enable the Borrower or any Security Party to comply with
any provision which the Lender considers material of a Finance Document
is not granted, expires without being renewed, is revoked or becomes
liable to revocation or any condition of such a consent is not
fulfilled; or
(k) it appears to the Lender that, without its prior consent, a change has
occurred or probably has occurred after the date of this Agreement in
the ultimate beneficial ownership of any of the shares in the Borrower
or the Approved Manager or in the ultimate control of the voting rights
attaching to any of those shares; or
(l) any provision which the Lender considers material of a Finance Document
proves to have been or becomes invalid or unenforceable, or a Security
Interest created by a Finance Document proves to have been or becomes
invalid or unenforceable or such a Security Interest proves to have
ranked after, or loses its priority to, another Security Interest or
any other third party claim or interest; or
(m) the security constituted by a Finance Document is in any way imperilled
or in jeopardy; or
(n) the Ship ceases to be managed by the Approved Manager on the terms of
the Management Agreement, unless prior to such cessation, the Borrower
has appointed a substitute manager or managers acceptable to the Lender
in all respects; or
(o) an Event of Default (as defined in Section 14 of the Master Agreement)
occurs;
(p) the Master Agreement is terminated, cancelled, suspended, rescinded or
revoked or otherwise ceases to remain in full force and effect for any
reason except with the consent of the Lender; or
(q) any other event occurs or any other circumstances arise or develop
including, without limitation:
(i) a change in the financial position, state of affairs or
prospects of the Borrower, the Approved Manager or the
Corporate Guarantor; or
35
(ii) any accident or other event involving the Ship or another
vessel owned, chartered or operated by a Relevant Person,
in the light of which the Lender reasonably considers that there is a
significant risk that any of the Borrower, the Approved Manager or the
Corporate Guarantor is, or will later become, unable to discharge its
liabilities under the Finance Documents as they fall due.
18.2 ACTIONS FOLLOWING AN EVENT OF DEFAULT. On, or at any time after, the
occurrence of an Event of Default the Lender may:
(a) serve on the Borrower a notice stating that all obligations of the
Lender to the Borrower under this Agreement are terminated; and/or
(b) serve on the Borrower a notice stating that the Loan, all accrued
interest and all other amounts accrued or owing under this Agreement
are immediately due and payable or are due and payable on demand;
and/or
(c) take any other action which, as a result of the Event of Default or any
notice served under paragraph (i) or (ii) above, the Lender is entitled
to take under any Finance Document or any applicable law.
18.3 EXISTING RIGHTS UNAFFECTED. The Lender shall not be obliged to exercise
any of its rights under Clause 18.2; and those rights shall be without
prejudice and in addition to any other right or remedy to which the
Lender is entitled (whether under the general law or any document).
18.4 TERMINATION OF LOAN. On the service of a notice under paragraph (a) of
Clause 18.2 all other obligations of the Lender to the Borrower under
this Agreement, shall terminate.
18.5 ACCELERATION OF LOAN. On the service of a notice under paragraph (b) of
Clause 18.2, the Loan, all accrued interest and all other amounts
accrued or owing from the Borrower or any Security Party under this
Agreement and every other Finance Document shall become immediately due
and payable or, as the case may be, payable on demand.
18.6 MULTIPLE NOTICES; ACTION WITHOUT NOTICE. The Lender may serve notices
under paragraphs (a) and (b) of Clause 18.2 simultaneously or on
different dates and it may take any action referred to in that Clause
if no such notice is served or simultaneously with or at any time after
the service of both or either of such notices.
18.7 EXCLUSION OF LENDER LIABILITY. Neither the Lender nor any receiver or
manager appointed by the Lender, shall have any liability to the
Borrower or a Security Party:
(a) for any loss caused by an exercise of rights under, or enforcement of a
Security Interest created by, a Finance Document or by any failure or
delay to exercise such a right or to enforce such a Security Interest;
or
(b) as mortgagee in possession or otherwise, for any income or principal
amount which might have been produced by or realised from any asset
comprised in such a Security Interest or for any reduction (however
caused) in the value of such an asset,
except that this does not exempt the Lender or a receiver or manager
from liability for losses shown to have been by the gross negligence or
the wilful misconduct of the Lender's own officers and employees or (as
the case may be) such receiver's or manager's own partners or
employees.
18.8 RELEVANT PERSONS. In this Clause 18 "A RELEVANT PERSON" means the
Borrower and the Corporate Guarantor.
36
18.9 INTERPRETATION. In Clause 18.1(f) references to an event of default or
a termination event include any event, howsoever described, which is
similar to an event of default in a facility agreement or a termination
event in a finance lease; and in Clause 18.1(g) "PETITION" includes an
application.
19 FEES AND EXPENSES
19.1 MANAGEMENT FEE. The Borrower shall pay to the Lender a non-refundable
management fee of $50,000 on the earlier of (i) the Drawdown Date and
(ii) the last day of the Availability Period.
19.2 COSTS OF NEGOTIATION, PREPARATION ETC. The Borrower shall pay to the
Lender on its demand the amount of all expenses incurred by the Lender
in connection with the negotiation, preparation, execution or
registration of any Finance Document or any related document or with
any transaction contemplated by a Finance Document or a related
document.
19.3 COSTS OF VARIATIONS, AMENDMENTS, ENFORCEMENT ETC. The Borrower shall
pay to the Lender, on the Lender's demand, the amount of all expenses
incurred by the Lender in connection with:
(a) any amendment or supplement to a Finance Document, or any proposal for
such an amendment to be made;
(b) any consent or waiver by the Lender concerned under or in connection
with a Finance Document, or any request for such a consent or waiver;
(c) the valuation of any security provided or offered under Clause 14 or
any other matter relating to such security; or
(d) any step taken by the Lender with a view to the protection, exercise or
enforcement of any right or Security Interest created by a Finance
Document or for any similar purpose.
There shall be recoverable under paragraph (d) the full amount of all
legal expenses, whether or not such as would be allowed under rules of
court or any taxation or other procedure carried out under such rules.
19.4 DOCUMENTARY TAXES. The Borrower shall promptly pay any tax payable on
or by reference to any Finance Document, and shall, on the Lender's
demand, fully indemnify the Lender against any liabilities and expenses
resulting from any failure or delay by the Borrower to pay such a tax.
19.5 CERTIFICATION OF AMOUNTS. A notice which is signed by two officers of
the Lender, which states that a specified amount, or aggregate amount,
is due to the Lender under this Clause 19 and which indicates (without
necessarily specifying a detailed breakdown) the matters in respect of
which the amount, or aggregate amount, is due shall be prima facie
evidence that the amount, or aggregate amount, is due.
20 INDEMNITIES
20.1 INDEMNITIES REGARDING BORROWING AND REPAYMENT OF LOAN. The Borrower
shall fully indemnify the Lender on its demand in respect of all
expenses, liabilities and losses which are incurred by the Lender, or
which the Lender reasonably and with due diligence estimates that it
will incur, as a result of or in connection with:
(a) the Loan not being borrowed on the date specified in the Drawdown
Notice for any reason other than a default by the Lender;
37
(b) the receipt or recovery of all or any part of the Loan or an overdue
sum otherwise than on the last day of an Interest Period or other
relevant period;
(c) any failure (for whatever reason) by the Borrower to make payment of
any amount due under a Finance Document on the due date or, if so
payable, on demand (after giving credit for any default interest paid
by the Borrower on the amount concerned under Clause 6);
(d) the occurrence and/or continuance of an Event of Default or a Potential
Event of Default and/or the acceleration of repayment of the Loan under
Clause 18,
and in respect of any tax (other than tax on its overall net income)
for which the Lender is liable in connection with any amount paid or
payable to the Lender (whether for its own account or otherwise) under
any Finance Document.
20.2 BREAKAGE COSTS. Without limiting its generality, Clause 20.1 covers any
liability, expense or loss, incurred by the Lender:
(a) in liquidating or employing deposits from third parties acquired or
arranged to fund or maintain all or any part of the Loan and/or any
overdue amount (or an aggregate amount which includes the Loan or any
overdue amount); and
(b) in terminating, or otherwise in connection with, any interest and/or
currency swap or any other transaction entered into (whether with
another legal entity or with another office or department of the
Lender) to hedge any exposure arising under this Agreement or a number
of transactions of which this Agreement is one.
20.3 MISCELLANEOUS INDEMNITIES. The Borrower shall fully indemnify the
Lender on its demand in respect of all claims, demands, proceedings,
liabilities, taxes, losses and expenses of every kind ("LIABILITY
ITEMS") which may be made or brought against, or incurred by, the
Lender, in any country, in relation to:
(a) any action taken, or omitted or neglected to be taken, under or in
connection with any Finance Document by the Lender or by any receiver
appointed under a Finance Document; and
(b) any other event, matter or question which occurs or arises at any time
during the Security Period and which has any connection with, or any
bearing on, any Finance Document, any payment or other transaction
relating to a Finance Document or any asset covered (or previously
covered) by a Security Interest created (or intended to be created) by
a Finance Document,
other than liability items which are shown to have been caused by the
gross and culpable negligence or the wilful misconduct of the Lender's
own officers or employees.
20.4 ENVIRONMENTAL INDEMNITY. Without prejudice to its generality, Clause
20.3 covers any liability items which arise, or are asserted, under or
in connection with any law relating to safety at sea, the ISM Code or
any Environmental Law.
20.5 CURRENCY INDEMNITY. If any sum due from the Borrower or any Security
Party to the Lender under a Finance Document or under any order or
judgment relating to a Finance Document has to be converted from the
currency in which the Finance Document provided for the sum to be paid
(the "CONTRACTUAL CURRENCY") into another currency (the "PAYMENT
CURRENCY") for the purpose of:
(a) making or lodging any claim or proof against the Borrower or any
Security Party, whether in its liquidation, any arrangement involving
it or otherwise; or
38
(b) obtaining an order or judgment from any court or other tribunal; or
(c) enforcing any such order or judgment,
the Borrower shall indemnify the Lender against the loss arising when
the amount of the payment actually received by the Lender is converted
at the available rate of exchange into the Contractual Currency.
In this Clause 20.5, the "AVAILABLE RATE OF EXCHANGE" means the rate at
which the Lender is able at the opening of business (London time) on
the Business Day after it receives the sum concerned to purchase the
Contractual Currency with the Payment Currency.
This Clause 20.5 creates a separate liability of the Borrower which is
distinct from their other liabilities under the Finance Documents and
which shall not be merged in any judgment or order relating to those
other liabilities.
20.6 CERTIFICATION OF AMOUNTS. A notice which is signed by 2 officers of the
Lender, which states that a specified amount, or aggregate amount, is
due to the Lender under this Clause 20 and which indicates (without
necessarily specifying a detailed breakdown) the matters in respect of
which the amount, or aggregate amount, is due shall be prima facie
evidence that the amount, or aggregate amount, is due.
21 NO SET-OFF OR TAX DEDUCTION
21.1 NO DEDUCTIONS. All amounts due from the Borrower under a Finance
Document shall be paid:
(a) without any form of set-off, cross-claim or condition; and
(b) free and clear of any tax deduction except a tax deduction which the
Borrower is required by law to make.
21.2 GROSSING-UP FOR TAXES. If the Borrower is required by law to make a tax
deduction from any payment:
(a) the Borrower shall notify the Lender as soon as it becomes aware of the
requirement;
(b) the Borrower shall pay the tax deducted to the appropriate taxation
authority promptly, and in any event before any fine or penalty arises;
and
(c) the amount due in respect of the payment shall be increased by the
amount necessary to ensure that the Lender receives and retains (free
from any liability relating to the tax deduction) a net amount which,
after the tax deduction, is equal to the full amount which it would
otherwise have received.
21.3 EVIDENCE OF PAYMENT OF TAXES. Within one month after making any tax
deduction, the Borrower shall deliver to the Lender documentary
evidence satisfactory to the Lender that the tax had been paid to the
appropriate taxation authority.
21.4 EXCLUSION OF TAX ON OVERALL NET INCOME. In this Clause 21 "TAX
DEDUCTION" means any deduction or withholding for or on account of any
present or future tax except tax on the Lender's overall net income.
22 ILLEGALITY, ETC
22.1 ILLEGALITY. This Clause 22 applies if the Lender notifies the Borrower
that it has become, or will with effect from a specified date, become:
39
(a) unlawful or prohibited as a result of the introduction of a new law, an
amendment to an existing law or a change in the manner in which an
existing law is or will be interpreted or applied; or
(b) contrary to, or inconsistent with, any regulation,
for the Lender to maintain or give effect to any of its obligations
under this Agreement in the manner contemplated by this Agreement.
22.2 NOTIFICATION AND EFFECT OF ILLEGALITY. On the Lender notifying the
Borrower under Clause 22.1, the Lender's obligation to make the Loan
available shall terminate; and thereupon or, if later, on the date
specified in the Lender's notice under Clause 22.1 as the date on which
the notified event would become effective the Borrower shall prepay the
Loan in full in accordance with Clause 7.
22.3 MITIGATION. If circumstances arise which would result in a notification
under Clause 22.1 then, without in any way limiting the rights of the
Lender under Clause 22.3, the Lender shall use reasonable endeavours to
transfer its obligations, liabilities and rights under this Agreement
and the Finance Documents to another office or financial institution
not affected by the circumstances but the Lender shall not be under any
obligation to take any such action if, in its opinion, to do would or
might:
(a) have an adverse effect on its business, operations or financial
condition; or
(b) involve it in any activity which is unlawful or prohibited or any
activity that is contrary to, or inconsistent with, any regulation; or
(c) involve it in any expense (unless indemnified to its satisfaction) or
tax disadvantage.
23 INCREASED COSTS
23.1 INCREASED COSTS. This Clause 23 applies if the Lender notifies the
Borrower that it considers that as a result of:
(a) the introduction or alteration after the date of this Agreement of a
law or an alteration after the date of this Agreement in the manner in
which a law is interpreted or applied (disregarding any effect which
relates to the application to payments under this Agreement of a tax on
the Lender's overall net income); or
(b) complying with any regulation (including any which relates to capital
adequacy or liquidity controls or which affects the manner in which the
Lender allocates capital resources to its obligations under this
Agreement) which is introduced, or altered, or the interpretation or
application of which is altered, after the date of this Agreement,
is that the Lender (or a parent company of it) has incurred or will
incur an "INCREASED COST", that is to say:
(i) an additional or increased cost incurred as a result of, or in
connection with, the Lender having entered into, or being a
party to, this Agreement or having taken an assignment of
rights under this Agreement, of funding or maintaining the
Loan or performing its obligations under this Agreement, or of
having outstanding all or any part of the Loan or other unpaid
sums; or
(ii) a reduction in the amount of any payment to the Lender under
this Agreement or in the effective return which such a payment
represents to the Lender or on its capital; or
40
(iii) an additional or increased cost of funding all or maintaining
all or any of the advances comprised in a class of advances
formed by or including the Loan or (as the case may require)
the proportion of that cost attributable to the Loan; or
(iv) a liability to make a payment, or a return foregone, which is
calculated by reference to any amounts received or receivable
by the Lender under this Agreement,
but not an item attributable to a change in the rate of tax on the
overall net income of the Lender (or a parent company of it) or an item
covered by the indemnity for tax in Clause 20.1 or by Clause 21.
For the purposes of this Clause 23.1 the Lender may in good faith
allocate or spread costs and/or losses among its assets and liabilities
(or any class thereof) on such basis as it considers appropriate.
23.2 PAYMENT OF INCREASED COSTS. The Borrower shall pay to the Lender, on
its demand, the amounts which the Lender from time to time notifies the
Borrower that it has specified to be necessary to compensate it for the
increased cost.
23.3 NOTICE OF PREPAYMENT. If the Borrower is not willing to continue to
compensate the Lender for the increased cost under Clause 23.2, the
Borrower may give the Lender not less than 14 days' notice of their
intention to prepay the Loan at the end of an Interest Period.
23.4 PREPAYMENT. A notice under Clause 23.3 shall be irrevocable; and on the
date specified in the Borrower's notice of intended prepayment, the
Loan shall terminate and the Borrower shall prepay (without premium or
penalty) the Loan, together with accrued interest thereon at the
applicable rate plus the Margin.
23.5 APPLICATION OF PREPAYMENT. Clause 7 shall apply in relation to the
prepayment.
24 SET-OFF
24.1 APPLICATION OF CREDIT BALANCES. The Lender may without prior notice:
(a) apply any balance (whether or not then due) which at any time stands to
the credit of any account in the name of the Borrower at any office in
any country of the Lender in or towards satisfaction of any sum then
due from the Borrower to the Lender under any of the Finance Documents;
and
(b) for that purpose:
(i) break, or alter the maturity of, all or any part of a deposit
of the Borrower;
(ii) convert or translate all or any part of a deposit or other
credit balance into Dollars; and
(iii) enter into any other transaction or make any entry with regard
to the credit balance which the Lender considers appropriate.
24.2 EXISTING RIGHTS UNAFFECTED. The Lender shall not be obliged to exercise
any of its rights under Clause 24.1; and those rights shall be without
prejudice and in addition to any right of set-off, combination of
accounts, charge, lien or other right or remedy to which the Lender is
entitled (whether under the general law or any document).
41
24.3 NO SECURITY INTEREST. This Clause 24 give the Lender a contractual
right of set-off only, and does not create any equitable charge or
other Security Interest over any credit balance of the Borrower.
25 TRANSFERS AND CHANGES IN LENDING OFFICE
25.1 TRANSFER BY BORROWER. The Borrower may not, without the consent of the
Lender:
(a) transfer any of its rights or obligations under any Finance Document;
or
(b) enter into any merger, de-merger or other reorganisation, or carry out
any other act, as a result of which any of its rights or liabilities
would vest in, or pass to, another person.
25.2 ASSIGNMENT BY LENDER. The Lender may assign all or any of the rights
and interests which it has under or by virtue of the Finance Documents
without the consent of the Borrower.
25.3 RIGHTS OF ASSIGNEE. In respect of any breach of a warranty,
undertaking, condition or other provision of a Finance Document, or any
misrepresentation made in or in connection with a Finance Document, a
direct or indirect assignee of any of the Lender's rights or interests
under or by virtue of the Finance Documents shall be entitled to
recover damages by reference to the loss incurred by that assignee as a
result of the breach or misrepresentation irrespective of whether the
Lender would have incurred a loss of that kind or amount.
25.4 SUB-PARTICIPATION; SUBROGATION ASSIGNMENT. The Lender may
sub-participate all or any part of its rights and/or obligations under
or in connection with the Finance Documents without the consent of, or
any notice to, the Borrower; and the Lender may assign, in any manner
and terms agreed by it, all or any part of those rights to an insurer
or surety who has become subrogated to them.
25.5 DISCLOSURE OF INFORMATION. The Lender may disclose to a potential
assignee or sub-participant any information which the Lender has
received in relation to the Borrower, any Security Party or their
affairs under or in connection with any Finance Document, unless the
information is clearly of a confidential nature.
25.6 CHANGE OF LENDING OFFICE. The Lender may change its lending office by
giving notice to the Borrower and the change shall become effective on
the later of:
(a) the date on which the Borrower receives the notice; and
(b) the date, if any, specified in the notice as the date on which the
change will come into effect.
26 VARIATIONS AND WAIVERS
26.1 VARIATIONS, WAIVERS ETC. BY LENDER. A document shall be effective to
vary, waive, suspend or limit any provision of a Finance Document, or
the Lender's rights or remedies under such a provision or the general
law, only if the document is signed, or specifically agreed to by fax
by the Borrower and the Lender and, if the document relates to a
Finance Document to which a Security Party is party, by that Security
Party.
26.2 EXCLUSION OF OTHER OR IMPLIED VARIATIONS. Except for a document which
satisfies the requirements of Clause 26.1, no document, and no act,
course of conduct, failure or neglect to act, delay or acquiescence on
the part of the Lender (or any person acting on its behalf) shall
result in the Lender (or any person acting on its behalf) being taken
to have varied, waived, suspended or limited, or being precluded
(permanently or temporarily) from enforcing, relying on or exercising:
42
(a) a provision of this Agreement or another Finance Document; or
(b) an Event of Default; or
(c) a breach by the Borrower or a Security Party of an obligation under a
Finance Document or the general law; or
(d) any right or remedy conferred by any Finance Document or by the general
law,
and there shall not be implied into any Finance Document any term or
condition requiring any such provision to be enforced, or such right or
remedy to be exercised, within a certain or reasonable time.
27 NOTICES
27.1 GENERAL. Unless otherwise specifically provided, any notice under or in
connection with any Finance Document shall be given by letter or fax;
and references in the Finance Documents to written notices, notices in
writing and notices signed by particular persons shall be construed
accordingly.
27.2 ADDRESSES FOR COMMUNICATIONS. A notice shall be sent:
(a) to the Borrower: Eurobulk S.A.
Aethrion Center
40, Ag. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇
Fax No: +30 210 [▇▇▇ ▇▇▇▇]
(b) to the Lender: ▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇
Fax No: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Attn: Shipping Department
or to such other address as the relevant party may notify the other.
27.3 EFFECTIVE DATE OF NOTICES. Subject to Clauses 27.4 and 27.5:
(a) a notice which is delivered personally or posted shall be deemed to be
served, and shall take effect, at the time when it is delivered; and
(b) a notice which is sent by fax shall be deemed to be served, and shall
take effect, 2 hours after its transmission is completed.
27.4 SERVICE OUTSIDE BUSINESS HOURS. However, if under Clause 27.3 a notice
would be deemed to be served:
(a) on a day which is not a business day in the place of receipt; or
(b) on such a business day, but after 5 p.m. local time,
43
the notice shall (subject to Clause 27.5) be deemed to be served, and
shall take effect, at 9 a.m. on the next day which is such a business
day.
27.5 ILLEGIBLE NOTICES. Clauses 27.3 and 27.4 do not apply if the recipient
of a notice notifies the sender within one hour after the time at which
the notice would otherwise be deemed to be served that the notice has
been received in a form which is illegible in a material respect.
27.6 ENGLISH LANGUAGE. Any notice under or in connection with a Finance
Document shall be in English.
27.7 VALID NOTICES. A notice under or in connection with a Finance Document
shall not be invalid by reason that its contents or the manner of
serving it do not comply with the requirements of this Agreement or,
where appropriate, any other Finance Document under which it is served
if:
(a) the failure to serve it in accordance with the requirements of this
Agreement or other Finance Document, as the case may be, has not caused
any party to suffer any significant loss or prejudice; or
(b) in the case of incorrect and/or incomplete contents, it should have
been reasonably clear to the party on which the notice was served what
the correct or missing particulars should have been.
27.8 MEANING OF "NOTICE". In this Clause "NOTICE" includes any demand,
consent, authorisation, approval, instruction, waiver or other
communication.
28 SUPPLEMENTAL
28.1 RIGHTS CUMULATIVE, NON-EXCLUSIVE. The rights and remedies which the
Finance Documents give to the Lender are:
(a) cumulative;
(b) may be exercised as often as appears expedient; and
(c) shall not, unless a Finance Document explicitly and specifically states
so, be taken to exclude or limit any right or remedy conferred by any
law.
28.2 SEVERABILITY OF PROVISIONS. If any provision of a Finance Document is
or subsequently becomes void, unenforceable or illegal, that shall not
affect the validity, enforceability or legality of the other provisions
of that Finance Document or of the provisions of any other Finance
Document.
28.3 COUNTERPARTS. A Finance Document may be executed in any number of
counterparts.
28.4 THIRD PARTY RIGHTS. A person who is not a party to this Agreement has
no right under the Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇ to
enforce or to enjoy the benefit of any term of this Agreement.
29 LAW AND JURISDICTION
29.1 ENGLISH LAW. This Agreement shall be governed by, and construed in
accordance with, English law.
29.2 EXCLUSIVE ENGLISH JURISDICTION. Subject to Clause 29.3, the courts of
England shall have exclusive jurisdiction to settle any disputes which
may arise out of or in connection with this Agreement.
44
29.3 CHOICE OF FORUM FOR THE EXCLUSIVE BENEFIT OF THE LENDER. Clause 29.2 is
for the exclusive benefit of the Lender, which reserves the rights:
(a) to commence proceedings in relation to any matter which arises out of
or in connection with this Agreement in the courts of any country other
than England and which have or claim jurisdiction to that matter; and
(b) to commence such proceedings in the courts of any such country or
countries concurrently with or in addition to proceedings in England or
without commencing proceedings in England. The Borrower shall not
commence any proceedings in any country other than England in relation
to a matter which arises out of or in connection with this Agreement.
29.4 PROCESS AGENT. The Borrower irrevocably appoints HTD Services Limited
at their office for the time being, presently at ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇'▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, to act as its agent to receive and
accept on its behalf any process or other document relating to any
proceedings in the English courts which are connected with this
Agreement.
29.5 LENDER'S RIGHTS UNAFFECTED. Nothing in this Clause 29 shall exclude or
limit any right which the Lender may have (whether under the law of any
country, an international convention or otherwise) with regard to the
bringing of proceedings, the service of process, the recognition or
enforcement of a judgment or any similar or related matter in any
jurisdiction.
29.6 MEANING OF "PROCEEDINGS". In this Clause 29, "PROCEEDINGS" means
proceedings of any kind, including an application for a provisional or
protective measure.
AS WITNESS the hands of the duly authorised officers or attorneys of the parties
the day and year first before written.
45
SCHEDULE 1
DRAWDOWN NOTICE
To: Calyon
9 Quai du President ▇▇▇▇ ▇▇▇▇▇▇
92400 Courbevoie
La Defense
Paris
France
Attention: Shipping Department December 2005
DRAWDOWN NOTICE
1 We refer to the loan agreement (the "LOAN AGREEMENT") dated December
2005 and made between us, as Borrower, and you, as Lender, in
connection with a facility of up to US$15,500,000. Terms defined in the
Loan Agreement have their defined meanings when used in this Drawdown
Notice.
2 We request to borrow as follows:
(a) Amount: US$15,500,000;
(b) Drawdown Date: [ ] December 2005;
(c) Duration of the first Interest Period shall be [ ] months;
(d) Payment instructions : account in our name and numbered [ ] with
[ ] of [ ].
3 We represent and warrant that:
(a) the representations and warranties in Clause 9 of the Loan Agreement
would remain true and not misleading if repeated on the date of this
notice with reference to the circumstances now existing;
(b) no Event of Default or Potential Event of Default has occurred or will
result from the borrowing of the Loan.
4 This notice cannot be revoked without the prior consent of the Lender.
.....................................
Director
for and on behalf of
SALINA SHIPHOLDING CORP.
46
SCHEDULE 2
CONDITION PRECEDENT DOCUMENTS
PART A
The following are the documents referred to in Clause 8.1(a).
1 A duly executed original of each Finance Document (and of each document
required to be delivered by each Finance Document) other than those
referred to in Part B.
2 Copies of the certificate of incorporation and constitutional documents
of each of the Borrower and the Corporate Guarantor.
3 Copies of resolutions of the shareholders and directors of the Borrower
and the Corporate Guarantor authorising the execution of each of the
Finance Documents to which the Borrower or the Corporate Guarantor is a
party and, in the case of the Borrower, authorising named officers or
attorneys-in-fact to give the Drawdown Notice and other notices under
this Agreement.
4 The original of any power of attorney under which any Finance Document
is executed on behalf of the Borrower or the Corporate Guarantor.
5 Copies of all consents which the Borrower or any Security Party
requires to enter into, or make any payment under, any Finance
Document.
6 The originals of any mandates or other documents required in connection
with the opening or operation of the Operating Account and the
Retention Account.
7 A valuation of the Ship, addressed to the Lender, stated to be for the
purposes of this Agreement and dated not earlier than 30 days before
the Drawdown Date, from an independent London sale and purchase
shipbroker selected by the Lender.
8 A copy of the Initial Charter (and any addenda thereto) duly signed by
the parties thereto.
9 Documentary evidence that the agent for service of process named in
Clause 29 has accepted its appointment.
10 Favourable legal opinions from lawyers appointed by the Lender on such
matters concerning the laws of the Republic of ▇▇▇▇▇▇▇▇ Islands and
such other relevant jurisdictions as the Lender may require.
11 If the Lender so requires, in respect of any of the documents referred
to above, a certified English translation prepared by a translator
approved by the Lender.
PART B
The following are the documents referred to in Clause 8.1(b).
5 A duly executed original of the Mortgage, the General Assignment and
the Charter Assignment in respect of the Initial Charter (and of each
document required to be delivered under each such Finance Document).
47
6 Documentary evidence that:
(a) the Ship is definitively and permanently registered in the name of the
Borrower under ▇▇▇▇▇▇▇▇ Islands flag;
(b) the Ship is in the absolute and unencumbered ownership of the Borrower
save as contemplated by the Finance Documents;
(c) the Ship maintains the highest classification available for vessels of
the same age, type and specification as the Ship with Bureau Veritas
free of all recommendations and conditions of such classification
society affecting class;
(d) the Mortgage has been duly registered against the Ship as a valid first
preferred ▇▇▇▇▇▇▇▇ Islands ship mortgage in accordance with the laws of
the Republic of the ▇▇▇▇▇▇▇▇ Islands; and
(e) the Ship is insured in accordance with the provisions of this Agreement
and all requirements therein in respect of insurances have been
complied with.
3 Documents establishing that the Ship will, as from the Drawdown Date,
be managed by the Approved Manager on terms acceptable to the Lender,
together with:
(a) the Manager's Undertaking;
(b) a copy of the Management Agreement;
(c) copies of the Approved Manager's Document of Compliance and the Safety
Management Certificate for the Ship; and
(d) copies of the ISPS Code Documentation in respect of the Ship.
4 A favourable opinion from an independent insurance consultant
acceptable to the Lender on such matters relating to the insurances for
the Ship as the Lender may require.
Each copy document delivered under this Schedule shall be certified as
a true and up to date copy by a director or the secretary (or
equivalent officer) of the Borrower and the Approved Managers where
relevant.
48
EXECUTION PAGE
THE BORROWER
SIGNED by )
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ) /s/ ▇▇▇▇▇▇▇▇▇ Karmir
for and on behalf of )
SALINA SHIPHOLDING CORP. )
in the presence of: )
THE LENDER
SIGNED by )
▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ) /s/ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
attorney-in-fact )
for and on behalf of )
CALYON )
in the presence of: )
49